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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period for ____________ to ____________
COMMISSION FILE NO. 0-21496
WESTPOINT STEVENS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3498354
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
507 WEST TENTH STREET, WEST POINT, GEORGIA 31833
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(706) 645-4000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Name of each exchange
Title of each class on which registered
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Common Stock, $.01 par value NASDAQ
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
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 be the best of the Registrant's knowledge, in definitive proxy or information
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of voting stock held by nonaffiliates of the
registrant was approximately $607,550,895 at February 3, 1997. The number of
shares of Common Stock outstanding at February 3, 1997, was 30,916,288.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN A
BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS:
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. Yes X No
--- ---
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement to be mailed to
stockholders in connection with the registrant's May 14, 1997 Annual Meeting of
Stockholders are incorporated by reference into Part III hereof.
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TABLE OF CONTENTS
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Page No.
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Item 1. Business....................................................................................... 1
Item 2. Properties..................................................................................... 8
Item 3. Legal Proceedings.............................................................................. 9
Item 4. Submission of Matters to a Vote of Security Holders............................................ 10
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters........................... 10
Item 6. Selected Financial Data........................................................................ 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 13
Item 8. Financial Statements and Supplementary Data.................................................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 38
Item 10. Directors and Executive Officers of the Registrant............................................. 38
Item 11. Executive Compensation......................................................................... 38
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 38
Item 13. Certain Relationships and Related Transactions................................................. 38
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................... 38
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ITEM 1. BUSINESS
WestPoint Stevens Inc., a Delaware corporation organized in 1987 (the
"Company"), is engaged directly and indirectly through its subsidiaries in the
manufacture, marketing and distribution of products in two industry segments:
bed and bath home fashions products ("Home Fashions") and knitted fabrics for
the apparel industry.
See "Reorganization," "Recent Developments," and "Item 8. Financial Statements
and Supplementary Data" included elsewhere herein for information regarding
certain matters concerning the bankruptcy reorganization of the Company (the
"Reorganization") consummated on September 16, 1992 under Chapter 11 of Title 11
of the United States Code (the "Bankruptcy Code"), the Company's
recapitalization consummated in May 1993 (the "Recapitalization"), the Company's
refinancings consummated in December 1993 (the "Refinancing") and November 1994
which resulted in the Company's present secured credit facility (the "Senior
Credit Facility"), the public offering of trade receivables participation
certificates by the Company's receivables subsidiary in May 1994 under a trade
receivables program (the "Trade Receivables Program"), and the adoption by the
Company of a second stock repurchase program in May 1995, which was expanded in
November 1995, and further expanded in August 1996.
GENERAL
The Company manufactures and markets Home Fashions products for distribution to
chain and department stores, mass merchants and specialty stores. Home Fashions
products are manufactured and distributed under owned trademarks and pursuant to
various licensing agreements. See "- Home Fashions - Trademarks and Licenses."
The Company's wholly-owned subsidiary, Alamac Knits Fabrics, Inc. ("Alamac"),
produces knitted fabrics supplied primarily to manufacturers of men's, women's
and children's apparel.
HOME FASHIONS
The Company is the largest producer in the domestic bed and bath towel market.
The Company's management estimates that it has the largest market share
(approximately 36%) in the domestic sheet and pillowcase market and the second
largest market share (approximately 35%) in the domestic bath towel market. Such
estimates are calculated by the Company based on United States government data
(source: United States Census Bureau Current Industrial Report dated January 14,
1997), publicly available information about the Company's competitors and
information in trade publications. In addition, according to such United States
government data, each of these markets had over $1 billion in annual sales
during each of the past five years. Home Fashions accounted for approximately
87% of the Company's consolidated net sales for the fiscal year ended December
31, 1996.
See Note 10 "Segment and Major Customer Information" in the Notes to
Consolidated Financial Statements of the Company elsewhere herein for a summary
of certain operating information for the Home Fashions segment. For a discussion
of the Company's overall financial condition, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."
PRODUCTS
The Company manufactures and markets a broad range of bed and bath products,
including decorative sheets and towels, designer sheets and accessories, sheets
and towels for institutions, blankets, private label sheets and towels,
bedskirts, bedspreads, comforters, duvet covers, drapes, valances, throw
pillows, shower curtains and table covers. Such products are made from a variety
of fabrics, such as chambray, twill, sateen, flannel, linen, cotton and cotton
blends and are available in a wide assortment of colors and patterns. The
Company has positioned itself as a single-source supplier to retailers of bed
and bath products, offering a broad assortment of products across multiple price
points. Such product and price point breadth allows the Company to provide a
comprehensive product offering for each major distribution channel.
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TRADEMARKS AND LICENSES
The Company's products are marketed under well-known and firmly established
trademarks, brand names and private labels. The Company uses trademarks, trade
names and private labels as merchandising tools to assist its customers in
coordinating their product offerings and differentiating their products from
those of their competitors. Home Fashions' trademarks include ATELIER MARTEX(R),
MARTEX(R), UTICA(R), STEVENS(TM), LADY PEPPERELL(R) and VELLUX(R). In addition,
certain Home Fashions' products are manufactured and sold pursuant to licensing
agreements under designer names that include, among others, Ralph Lauren,
Sanderson, Larry Laslo, Julie Ingleman and Halston.
A portion of the Company's sales are derived from licensed designer brands. The
license agreements for the Company's designer brands generally are for a term of
two or three years; some of the licenses are automatically renewable for
additional periods, provided that certain sales thresholds set forth in the
license agreements are met. No single license has accounted for more than 9% of
the Company's total sales volume during any of the last five fiscal years.
Although the Company has no reason to believe that it will lose any of its
licenses, the loss of a significant license could have an adverse effect upon
the Company's business, which could be material. The following are the
expiration dates for the licensing agreements discussed above: Ralph Lauren,
December 31, 1997; Sanderson, March 31, 1998; Larry Laslo, March 31, 1998; Julie
Ingleman, December 31, 1997; and Halston, December 31, 1998.
MARKETING
The Company is committed to developing and maintaining integral relationships
with its customers through "Strategic Partnering," a program designed to improve
customers' operating results by leveraging the Company's merchandising,
manufacturing and inventory management skills. Strategic Partnering includes
Electronic Data Interchange ("EDI") direct electronic entry systems, "Quick
Response" and "Vendor Managed Inventory" customer delivery programs and
point-of-sale processing. The Company incorporates Strategic Partnering into its
planning, manufacturing and shipping systems, in order to enable it to
efficiently and economically anticipate and respond to customers' inventory
requirements. As a result, the Company is better able to plan and forecast its
own production and inventory requirements. Sales of the Company's Home Fashions
products in the United States are conducted by business units consisting of
marketing, merchandising, management information systems, finance and sales
staff members under the supervision of an account executive. Business units are
linked by a centralized manufacturing logistics and planning group and designer
and administration groups. Each business unit focuses on one of the following
channels of distribution: mass merchants; department and specialty stores;
custom brands; Ralph Lauren; health and hospitality institutions; international
and other. This organization allows the Company to tailor its services and
resources to the different requirements of each channel of distribution and
customer.
The Company works closely with its major customers to assist them in
merchandising and promoting its products to the consumer. In addition, the
Company periodically meets with its customers in an effort to maximize product
exposure and sales and to jointly develop merchandise assortments and plan
promotional events specifically tailored to the customer. The Company provides
merchandising assistance with store layouts, fixture designs, advertising and
point-of-sale displays. The Company also provides its customers with suggested
customized advertising materials designed to increase its product sales.
Approximately 90% of the Home Fashions' sales are made to retail establishments
in the United States, including chain and department stores, mass merchants, and
specialty bed and bath stores. Finished products are distributed to retailers
directly from the Company's plants. Distribution to hospitals and other
healthcare establishments accounts for most of the remaining portion of the Home
Fashions' sales. Certain institutional products also are sold directly and
through distributors to major hotel and motel chains, and to laundry supply
businesses. In addition to domestic sales, the Company distributes its Home
Fashions products for eventual sale to certain foreign markets, principally
Canada, Mexico, the United Kingdom, continental Europe, the Middle East and the
Far East. International operations accounted for less than 5% of the total
revenues of Home Fashions in 1996. In January 1997, the Company purchased P.J.
Flower & Co. Limited ("Flower") through a recently formed English subsidiary.
Flower is an English
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company that manufactures, markets and distributes home fashions products in
Europe and had approximately $20 million in annual sales for 1996. The Company
intends to continue its efforts to increase its foreign sales.
In addition, certain products of the Company are sold through WestPoint Stevens
Stores Inc., a wholly-owned subsidiary of the Company ("WestPoint Stores").
WestPoint Stores currently consists of 36 geographically dispersed, value-priced
outlets, some of which are located in factory outlet shopping centers. The
products sold in WestPoint Stores are first quality (including overstocks),
seconds, discontinued items and other products.
INVENTORY MANAGEMENT, ELECTRONIC COMMUNICATION AND DELIVERY
The Company uses EDI, Quick Response and Vendor Managed Inventory replenishment
programs, point-of-sale data and the latest available technology in retail
warehouse and shelf space management to minimize inventory and maximize floor
stock turnover for its customers. The Company's EDI system allows customers to
place orders, and allows the Company to fill, track and bill orders, all by
computer. This system enables the Company to ship products on a Quick Response
basis so that customers can maintain lower inventories and react rapidly to
changes in product demand. In addition, the Company is using Vendor Managed
Inventory and dedicating certain manufacturing facilities to servicing key
strategic customers. The Company anticipates that these programs will result in
lower transportation expense and reduced distribution complexities for its
customers. Through the use of the Nielsen Spaceman III space analysis program,
the Company supports its customers' efforts to improve operating results through
efficient inventory and shelf space management. The Company's objective is to
provide its customers with 100% delivery reliability in terms of order
quantities and delivery schedules. The Company believes that the use of in-house
transportation has enabled the Company to maintain a high level of on-time
delivery.
CUSTOMERS
The Company is pursuing strategic relationships with large, high volume
merchandisers. An important component of the Company's strategy is to increase
its share of shelf and floor space by strengthening its partnership with its
customers. The Company is working closely with retailers and is sharing
information and business practices with them to improve service and achieve
higher profitability for both the retailer and the Company.
The Company's Home Fashions products are sold to chain stores, including, among
others, J.C. Penney Company, Inc. ("J.C. Penney"), and Sears Roebuck & Co., Inc.
("Sears"); mass merchants such as Wal-Mart Stores, Inc. ("Wal-Mart"), Kmart
Corporation ("Kmart") and Target Stores (a division of Dayton Hudson
Corporation); and department and specialty stores, including Federated
Department Stores and Mervyn's (also a division of Dayton Hudson Corporation).
The above named customers, which are the Company's six largest customers,
accounted for approximately 54% of the net sales of Home Fashions and 47% of the
net sales of the Company during the fiscal year ended December 31, 1996. Sales
to the Dayton Hudson Corporation and to J.C. Penney each represented
approximately 11% of the net sales of the Company in 1996. Each of such
customers has purchased goods from the Company in each of the last 10 years.
Although the Company has no reason to believe that it will lose the business of
any of its largest customers, a loss of any of the largest accounts (or a
material portion of any thereof) would have an adverse effect upon the Company's
business, which could be material.
ALAMAC
Alamac manufactures and sells knitted fabrics primarily to manufacturers of
men's, women's and children's apparel. Based on United States government data
(source: United States Census Bureau Current Industrial Report dated September
3, 1996), publicly available information about Alamac's competitors and
information in trade publications, management believes that Alamac supplies
approximately 11% of the knitted fabric in the markets it serves. Alamac
accounted for approximately 13% of the Company's net sales for the fiscal year
ended December 31, 1996.
See Note 10 "Segment and Major Customer Information" in the Notes to
Consolidated Financial Statements of the Company elsewhere herein for a summary
of certain operating information for Alamac. For a discussion of the
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Company's overall financial condition, see "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations."
PRODUCTS
Alamac's knitted fabrics are available in a full range of colors, pattern
layouts and weight/width options and are produced in 50/50 poly-cotton, 100%
cotton and cotton-rich blends. Primary fabrications are jersey, interlock,
fleece, double knit and rib. Alamac's current product mix is comprised of
piece-dyed solids and yarn-dyed fancies. These products are sold under the
Alamac name to branded and private label manufacturers. Alamac markets
highly-styled, customized seasonal knit lines. Support services include seasonal
color and fabric direction, conceptual fashion lines, computerized design
capability, rapid sample production, customized delivery schedules, EDI and
customer service programs. Alamac has recently begun to pursue Vendor Managed
Inventory opportunities.
Alamac develops exclusively designed knitted lines to meet the fashion needs of
both apparel manufacturers and retailers. Alamac receives additional fashion
input from its customers who work closely with Alamac throughout the styling
process in developing new fabrics which address the customers' needs in terms of
design, fiber content, texture, weight and price. Alamac manufactures its
products pursuant to each customer's specifications. As a result, risks
associated with maintaining high levels of inventory are reduced at Alamac.
Alamac's product strategy has been to emphasize high quality and
fashion-oriented customized seasonal knitted fabric lines. Alamac pioneered the
use of CAD/CAM (computer aided design/computer aided manufacturing) design
technologies which have reduced product development time and expense and have
enabled Alamac to deliver fabric samples in as little as two weeks.
PATENTS AND TRADEMARKS
The Company and its subsidiaries own other United States trademarks used in
Alamac's operations, including ALAMAC(R) and ALASET(TM). In addition, Alamac
produces a full range of SANITECH(TM) knit fabrics with an antimicrobial
treatment.
MARKETING
Alamac currently sells to branded and private label manufacturers including
Health-Tex, Inc., Osh-Kosh B'Gosh, Inc., and Garan, Inc. Alamac currently sells
35% of its fabrics to the childrenswear manufacturers, 31% to the womenswear
manufacturers, and 34% to the menswear manufacturers. In addition, Alamac is
focusing its efforts to increase sales in speciality markets such as
manufacturers of employee uniforms and golf apparel and on the higher-margin
specialty retailer segment, including manufacturers of coordinated sportswear.
In light of this strategic shift, Alamac has increased its capabilities to
manufacture 100% cotton knits. Alamac has established and maintained credibility
with its customers through Strategic Partnering relationships that employ EDI,
Quick Response and point-of-sale data.
Alamac's sales force, headquartered in New York City with regional offices in
Atlanta, Dallas and Los Angeles, sells to and services approximately 250
accounts primarily throughout the United States market and, to a lesser degree,
the Caribbean basin, Mexico and Europe. The sales force is organized by specific
product lines (childrenswear, womenswear and menswear), with a manager and sales
team responsible for accounts within each product line. In addition, two
separate sales teams cover the retail/chain market and the international market.
The sales force works closely with Alamac's merchandising department to ensure
market exposure and follow-up of ongoing product styling. Costing, order
delivery schedules, product forecasting and specific customer needs also are
addressed by the sales teams.
Alamac distributes its knitted fabrics from a centralized distribution center
located in Lumberton, North Carolina. Alamac believes that the use of Company
transportation has enabled it to maintain a high level of on-time delivery of
fabrics. Alamac also exports knitted fabrics to the Caribbean basin, Mexico and
Europe.
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CUSTOMERS
No single customer of Alamac represented 10% or more of the net sales of the
Company for the fiscal year ended December 31, 1996. Although Alamac's
management has no reason to believe that it will lose the business of any of its
largest customers, a loss of any of Alamac's largest accounts (or a material
portion of any thereof) could have a significant effect on Alamac's business.
Management does not believe, however, that any such loss would have an adverse
effect on the Company's business taken as a whole.
Alamac also supports a close working relationship with major retailers to
provide fabric, fashion and color direction, quality standard specifications and
customer service programs where required. Retail chains and catalog houses that
also are important to Alamac's distribution are: Wal-Mart; J.C. Penney; KMart;
Mervyn's; Target Stores; Lands' End, Inc.; Sears; and L.L. Bean, Inc.
MANUFACTURING
The Company currently uses the latest manufacturing and distribution equipment
and technologies in its mills. Management therefore believes that the Company is
one of the most efficient manufacturers in the home fashions industry. Over the
past five years, the Company has spent approximately $453 million to modernize
its manufacturing and distribution systems and has spent approximately $100
million of that amount during 1996. The capital expenditures have been used to,
among other things, replace shuttle looms with faster, more efficient projectile
and air jet looms, replace ring spinning with open-end and air jet spinning,
purchase new high speed multicolor printing equipment, and further automate the
Company's cut and sew operations. Air jet and projectile looms produce at higher
speeds than shuttle looms, yielding fewer defects, requiring less maintenance
and providing cleaner and safer working environments. Using air jet technology,
compressed air propels the filling yarn at high speeds, with robotics handling
fabric cutting and tucking. The Company's new open-end spinning machines use
computerized monitors and sensors which track and analyze the work, streamline
information gathering and detect defects immediately to improve yarn quality.
The Company intends to invest $125 million in capital improvements in the
aggregate in 1997 which includes the continued conversion of the Company's older
projectile looms to higher speed air jet looms, construction and installation of
dyeing and finishing plant and equipment, and automated fabricating equipment
and distribution management systems which will further eliminate labor-intensive
and costly manufacturing steps and improve distribution efficiency. These
capital programs have resulted, and are expected to continue to result, in
improved product quality, increased efficiency and capacity, lower costs and
quicker response time to customer orders. The Company utilizes 21 manufacturing
facilities, all of which are owned by the Company and located primarily in the
Southeastern United States and with the acquisition of P.J. Flower & Co.
Limited, leases one manufacturing facility in England. See "Item 2. Properties."
Alamac maintains a vertically integrated operation, with five manufacturing
plants located in North Carolina and South Carolina.
RAW MATERIALS
The principal raw materials used in the manufacture of Home Fashions and Alamac
products are cotton of various grades and staple lengths and polyester in staple
and filament form. Cotton and polyester presently are available from several
sources in quantities sufficient to meet the Company's requirements. The Company
is not dependent on any one supplier as a source of raw materials. Since cotton
is an agricultural product, its supply and quality are subject to weather
patterns, disease and other factors. The price of cotton is also influenced by
supply and demand considerations, both domestically and worldwide, and by the
cost of polyester. Although the Company has always been able to acquire
sufficient quantities of cotton for its operations in the past, any shortage in
the cotton supply by reason of weather, disease or other factors could adversely
affect the Company's operations. The price of man-made fibers such as polyester
is influenced by demand, manufacturing capacity and costs, petroleum prices,
cotton prices and the cost of polymers used in producing man-made fibers. Any
significant prolonged petrochemical shortages could significantly affect the
availability of man-made fibers and cause a substantial increase in demand for
cotton,
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resulting in decreased availability and, possibly, increased price. The Company
also purchases substantial quantities of dyes and chemicals. Dyes and chemicals
have been and are expected to continue to be available in sufficient supply from
a wide variety of sources.
SEASONALITY; INVENTORY; CYCLICALITY
Traditionally, the home fashions industry has been seasonal, with peak sales
seasons in the spring and fall. The Company's commitment to EDI, Quick Response,
and Vendor Managed Inventory, however, has facilitated, in the Home Fashions
segment, a more even distribution of products throughout the calendar year.
Alamac's fashion lines are developed for two primary retail selling seasons:
spring and fall. Two supplemental lines are added for the transitional seasons
of summer and the Christmas/winter holiday season. Historically, Alamac's
customer orders are stronger during the first four months of the calendar year,
corresponding to demand for fabrics to be sold (as finished apparel) during the
following fall retail selling season and orders generally increase again from
July through October in anticipation of the spring retail season.
In accordance with industry practice, the Company increases its Home Fashions'
inventory levels during the winter and summer to meet customer demands for the
spring and fall peak seasons. These increases, however, are moderate due to
continued improvements in EDI and Quick Response, which have reduced the need to
stockpile inventory to meet peak season demands. Because Alamac produces fabrics
to meet specific customer orders and specifications, more than 95% of its sales
are made to order. There are no major fluctuations in Alamac's inventory during
the production seasons of the calendar year. Alamac is therefore not generally
subject to risks associated with maintaining high inventory levels.
The home fashions and apparel fabrics industries are also cyclical. While the
Company's performance may be negatively affected by downturns in consumer
spending, management believes the effects thereof are mitigated by the Company's
large market shares and broad distribution base.
BACKLOG ORDERS
The backlog of Home Fashions' unfilled customer orders believed by management to
be firm was approximately $97.9 million at February 1, 1997, as compared with
approximately $74.8 million at February 3, 1996. Alamac's backlog of unfilled
customer orders believed by management to be firm was approximately $29.8
million at February 1, 1997, as compared with approximately $21.6 million at
February 3, 1996. The Company does not believe that its backlogs are a
meaningful indicator of its future business.
COMPETITION
Both the home fashions and the apparel fabrics industries are highly
competitive. In both segments, the Company competes on the basis of price,
quality and customer service, among other factors. In the sheet and towel
markets, the Company competes primarily with Fieldcrest Cannon, Inc.
("Fieldcrest Cannon") and Springs Industries, Inc. ("Springs"). In the other
bedding and accessories markets, the Company competes with many companies, most
of which are much smaller in size than the Company. The Company has pursued a
competitive strategy focused on providing the best fashion, quality, service and
value to its customers and to the ultimate consumer. The Company believes that
competition from foreign manufacturers does not materially impact the current
operations of Home Fashions.
Alamac has built customer loyalty and expanded its competitive edge by focusing
on competitive pricing, product innovation, product quality, on-time delivery,
customized Quick Response programs, EDI, customized fabric design, fashion
direction and individualized customer service programs. Alamac's direct
competitors consist of other domestic and foreign knitting mills, converters,
commission knit package operations and vertically integrated apparel
manufacturers. Major domestic competitors include the Dyersburg Corporation, the
Stevcoknit Division of Delta Woodside Industries, Inc. and the Caro Knit Group
of Dixie Yarns, Inc. While competition from foreign
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manufacturers has not materially impacted the operations of Alamac, competition
from foreign manufacturers of finished knitted fabric and garments are expected
to increase in future years and may impact the markets in which Alamac's
customers compete.
The Company does not believe that there is any significant foreign competition
with its current operations. There can be no assurance, however, if such foreign
competition develops that the Company will effectively compete.
OTHER OPERATIONS
The Company's operations include Grifftex Chemicals ("Grifftex"). Grifftex
formulates chemicals primarily used in the Company's finishing processes.
Grifftex does not represent a material portion of the Company's business.
RESEARCH AND DEVELOPMENT
Management believes that research and development in product innovation and
differentiation is important to maintain the Company's competitive edge. The
Company continually seeks to develop new specialty finishing techniques that
would improve fabric quality and enhance fabric aesthetics. Research also is
conducted to develop new products in response to changing customer demands and
environmental concerns. The Company did not make any material expenditures for
Company sponsored research and development activities during the last three
fiscal years.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and non-hazardous substances and wastes
used in or resulting from its operations, including, but not limited to, the
Water Pollution Control Act, as amended; the Clean Air Act, as amended; the
Resource Conservation and Recovery Act, as amended; the Toxic Substances Control
Act; and the Comprehensive Environmental Response, Compensation and Liability
Act (known as "CERCLA"), as amended.
The Company's operations also are governed by laws and regulations relating to
employee safety and health, principally the Occupational Safety and Health Act
and regulations thereunder which, among other things, establish exposure
limitations for cotton dust, formaldehyde, asbestos and noise, and regulate
chemical and ergonomic hazards in the workplace.
Although the Company does not expect that compliance with any of the
aforementioned laws and regulations will have a material adverse effect on its
capital expenditures, earnings or competitive position in the foreseeable
future, there can be no assurances that environmental requirements will not
become more stringent in the future or that the Company will not incur
significant costs in the future to comply with such requirements.
EMPLOYEES
The Company (including its subsidiaries) employed approximately 16,920 active
employees as of February 1, 1997. Of these employees, approximately 15,500 were
employed in the Company's manufacturing operations, approximately 340 in sales
and approximately 1,080 in administration.
The Company believes that its relations with all of its employees are excellent.
The Company has not experienced a strike or work stoppage by any of its
unionized employees during the past 15 years.
The Company has developed an efficient employee communications system that
includes rules and regulations for employee conduct and procedures for employee
complaints. This long-standing system focuses on and, in the view of management,
has resulted in, strong employee relations practices, good working conditions,
progressive personnel policies and expansive safety programs.
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REORGANIZATION
The Company, through its subsidiaries, acquired approximately 95% of the
outstanding common stock of West Point-Pepperell, Inc. ("WestPoint") pursuant
to a tender offer (the "Tender Offer"), which was consummated on April 5, 1989.
At the time of the Tender Offer, it was anticipated that substantially all of
the Tender Offer financing would be refinanced and the remaining common stock of
WestPoint held by public shareholders would be acquired by the Company in a
merger. Due to the Company's inability to refinance the Tender Offer financing
and to effect the "back end" merger with WestPoint contemplated by the Tender
Offer, the Company defaulted on its obligations with respect to the Tender Offer
financing.
On June 9, 1992, following receipt of pre-petition approval by the requisite
creditors and securityholders, the Company filed a voluntary petition for relief
under Chapter 11, Title 11 of the United States Bankruptcy Code. On September 4,
1992, the bankruptcy court issued an order confirming the Joint Plan of
Reorganization of the Company and certain of its subsidiaries other than
WestPoint (the "Plan"), which was consummated on September 16, 1992.
From April 1989 to October 1992, WestPoint's operating plan called for
concentrating on the Home Fashions Division and, consequently, WestPoint's other
operations, including the operations of Alamac, were treated as discontinued.
WestPoint reinstated Alamac as a continuing operation as of October 1, 1992, and
on June 29, 1993, Alamac was incorporated as a wholly owned subsidiary of
WestPoint and certain assets were transferred to Alamac effective July 5, 1993.
In December 1993, the Company simplified its corporate and capital structures by
(a) refinancing all of its outstanding consolidated bank indebtedness and
certain of its other indebtedness, and (b) effecting a series of mergers (the
"Merger"), with the Company as the ultimate surviving corporation changing its
name to WestPoint Stevens Inc.
RECENT DEVELOPMENTS
In November 1994, the Company adopted a program providing for the repurchase of
up to 1 million shares of Common Stock. On March 22, 1995, the Company announced
it had completed the repurchase of 1 million shares at an average price of
approximately $13.89 per share. In May 1995, the Company adopted a second
program providing for the repurchase of up to 1 million more shares of Common
Stock. This program was expanded to include an additional 2 million shares of
Common Stock in November 1995. In August 1996 this program was further expanded
to include an additional 1 million shares of Common Stock. At December 31, 1996,
approximately 1.6 million shares remained to be purchased under this program.
The repurchase of shares include open market purchases and private transactions.
The repurchased shares are held in the Company's treasury for general corporate
purposes.
OTHER FACTORS
Except for historical information contained herein, certain matters set forth in
this Annual Report on Form 10-K are forward looking statements that involve
certain risks and uncertainties that could cause actual results to differ
materially from those in the forward looking statements. Potential risks and
uncertainties include such factors as the financial strength of the retail
industry, the level of consumer spending, the competitive pricing environment
within the home fashions' industry and the success of planned advertising,
marketing and promotional campaigns. Investors are also directed to consider
other risks and uncertainties discussed in documents filed by the Company with
the Securities and Exchange Commission.
ITEM 2. PROPERTIES
GENERAL
The Company's properties are owned or leased directly and indirectly through its
subsidiaries. Management believes that the Company's facilities and equipment
are in good condition and sufficient for current operations.
8
<PAGE> 11
The Company owns office space in West Point, Georgia and Lanett and Valley,
Alabama, and leases various additional office space, including approximately
332,000 square feet in New York City, of which approximately 169,000 square feet
is subleased to other tenants. The Company also owns or leases various
administrative, storage and office space.
The Company also owns a chemical plant containing approximately 39,000 square
feet of floor space from which Grifftex Chemicals operates.
HOME FASHIONS
The Company owns 21 Home Fashions manufacturing facilities located in Alabama,
Florida, Georgia, Maine, North Carolina, South Carolina and Virginia which
contain in the aggregate approximately 8,565,000 square feet of floor space.
The Company also owns 8 distribution centers and warehouses for Home Fashions
operations which contain approximately 2,499,000 square feet of floor space. In
addition, the Company leases 5 Home Fashions distribution outlets and warehouses
containing approximately 323,000 square feet of floor space.
WestPoint Stores owns 2 retail stores and leases its 34 other retail stores, all
of which are dispersed throughout the United States.
In addition, the Company, through its subsidiary Flower, leases a manufacturing
facility containing approximately 21,000 square feet, a warehouse containing
approximately 56,000 square feet and office space containing approximately
10,000 square feet in England. Also, Flower's U.S. subsidiary leases a warehouse
containing approximately 12,500 square feet in New Jersey.
ALAMAC
Alamac owns 5 manufacturing facilities. These facilities are located in North
Carolina and South Carolina and contain in the aggregate approximately 1,769,000
square feet of floor space. Alamac also leases approximately 36,000 square feet
of warehouse space.
ITEM 3. LEGAL PROCEEDINGS
On July 12, 1995, the United States District Court, Eastern District of North
Carolina, granted final approval of the settlement of a class action lawsuit
against J.P. Stevens & Co., Inc. ("Stevens"). The action involved claims of
racial discrimination in hiring, promotion and placement dating to the late
1960's. West Point-Pepperell, Inc., predecessor to the Company, assumed
liability for this litigation upon its acquisition of Stevens. The settlement
requires payment of $20 million to the class, payable in three equal
installments, plus certain other fees and costs. The final payment was made on
January 2, 1997.
The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and non-hazardous substances and wastes
used in or resulting from its operations and potential remediation obligations
thereunder. Certain of the Company's facilities (including certain facilities no
longer owned or utilized by the Company) have been cited or are being
investigated with respect to alleged violations of such laws and regulations.
The Company believes that it has adequately provided in its financial statements
for any expenses and liabilities that may result from such matters. The Company
also is insured with respect to certain of such matters. The Company's
operations are governed by laws and regulations relating to employee safety and
health which, among other things, establish exposure limitations for cotton
dust, formaldehyde, asbestos and noise, and regulate chemical and ergonomic
hazards in the workplace. Although the Company does not expect that compliance
with any of such laws and regulations will adversely affect the Company's
9
<PAGE> 12
operations, there can be no assurance such regulatory requirements will not
become more stringent in the future or that the Company will not incur
significant costs in the future to comply with such requirements.
The Company and its subsidiaries are involved in various other legal
proceedings, both as plaintiff and as defendant, which are normal to their
business.
It is the opinion of management that the aforementioned actions and claims, if
determined adversely to the Company, will not have a material adverse effect on
the financial condition or operations of the Company taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1996, no matters were submitted by the
Company to a vote of its stockholders.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company is listed on the National Association of
Securities Dealers Automated Quotation System - National Market System
("NASDAQ") under the symbol WPSN. Such listing became effective on August 2,
1993. Prior thereto, the Company's Common Stock was not listed or admitted to
unlisted trading privileges on a national securities exchange or included for
quotation through an inter-dealer quotation system of a registered national
securities association, and there was a limited trading market for the Common
Stock.
High (ask) and low (bid) quotations, as reported, each quarterly period within
the two most recent fiscal years were:
<TABLE>
<CAPTION>
Quarter Ended Quotations
------------- ------------------------
1996 1995
-------------- -------------
High/Ask Low/Bid High/Ask Low/Bid
-------- ------- -------- -------
<S> <C> <C> <C> <C>
March 31............... 21-5/8 17-1/2 15 13-1/8
June 30................ 25 19-1/4 19 15
September 30........... 29-1/2 22-3/8 23-1/2 17-1/2
December 31............ 30-1/4 26-1/4 22-1/2 17-3/4
</TABLE>
The Company has not declared any cash dividends on its Common Stock during the
past two fiscal years. Under its existing credit facility the Company is
permitted to pay dividends from excess cash flow as defined in the credit
facility. The Company does not expect to pay dividends to its stockholders in
the near future.
As of February 3, 1997, there were approximately 13,628 holders of the Company's
Common Stock. Of that total, approximately 177 were stockholders of record and
approximately 13,451 held their stock in nominee name.
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial data presented below for 1996, 1995 and 1994
were derived from the Audited Consolidated Financial Statements of the Company
and its subsidiaries for the years ended December 31, 1996, 1995 and 1994 (the
"Consolidated Financial Statements"), and should be read in conjunction
therewith, including the notes thereto and the other financial information
included elsewhere herein. Information for periods subsequent to September 30,
1992 was prepared under the principles of "Fresh Start" reporting and is not
comparable to the information for prior periods. Accordingly, a bold vertical
line has been used to separate such information. The statement of operations
data reflect the discontinuance of all operations other than Home Fashions and
the Alamac Knits Subsidiary. The balance sheet data prior to September 30, 1992
have not been reclassified for management's decision in October 1992 to
reinstate the Alamac Knits Subsidiary as a continuing operation.
10
<PAGE> 13
<TABLE>
<CAPTION>
YEAR ENDED THREE || NINE
DECEMBER 31, MONTHS ENDED || MONTHS ENDED
---------------------------------------------- DECEMBER 31, || SEPTEMBER 30,
1996 1995 1994 1993(1) 1992 || 1992(2)
---------------------------------------------- ------------- || -------------
<S> <C> <C> <C> <C> <C> || <C>
(IN MILLIONS, EXCEPT PER SHARE DATA) ||
||
STATEMENT OF ||
OPERATIONS DATA: ||
Net sales $1,723.8 $1,649.9 $1,596.8 $1,501.0 $394.0 || $1,102.1
Gross earnings 397.9 384.0 368.0 355.3 90.0 || 255.6
Operating earnings (loss)(3) 195.6 5.0 (65.8) (258.4) 9.3 || 87.5
Interest expense 102.4 101.3 102.1 98.2 30.7 || 177.9
Income (loss) from ||
operations before income ||
tax expense (benefit) and ||
extraordinary items 90.4 (99.4) (180.8) (372.8) (21.7) || (704.7)
Income (loss) from ||
operations before ||
extraordinary items 57.7 (129.8) (203.4) (321.6) (25.2) || (728.9)
||
Net income (loss) 57.7 (129.8) (203.4) (402.3) (25.2) || 422.6
||
Net income (loss) per common share(4) 1.81 (3.97) (6.02) (12.55) (0.87) || -
||
Weighted average shares outstanding 31.8 32.7 33.8 32.1 29.1 ||
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992(2)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
BALANCE SHEET DATA:
Total assets $ 1,157.0 $ 1,143.0 $ 1,270.2 $ 1,512.9 $ 1,979.9
Working capital (deficiency)(5) 140.9 115.7 122.7 159.7 (646.4)
Total debt 1,099.0 1,148.0 1,083.0 1,112.5 1,088.5
Stockholders' equity (deficit) (450.4) (505.9) (337.2) (140.3) 232.0
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THREE || NINE
DECEMBER 31, MONTHS ENDED || MONTHS ENDED
------------------------------------ DECEMBER 31, || SEPTEMBER 30,
(IN MILLIONS, EXCEPT RATIOS) 1996 1995 1994 1993(1) 1992 || 1992(2)
-------- -------- -------- -------- ------------- || -------------
<S> <C> <C> <C> <C> <C> || <C>
OTHER DATA: ||
Depreciation and amortization(6) $ 77.0 $ 80.4 $ 86.2 $ 82.8 $ 22.7 || $ 84.5
Amortization of excess reorganization ||
value (2) - 177.7 236.9 221.6 31.9 || -
Restructuring expense - - - 200.0 - || -
Reorganization expense - - - - - || 612.5
Capital expenditures 99.9 102.2 109.0 89.0 16.2 || 36.3
Operating earnings before amortization ||
of excess reorganization value, ||
goodwill amortization and ||
restructuring expense(7) 195.6 182.7 171.1 163.2 41.1 || 107.6
Operating margin before amortization ||
of excess reorganization value, ||
goodwill amortization and ||
restructuring expense(8) 11.3% 11.1% 10.7% 10.9% 10.4% || 9.8%
</TABLE>
See footnotes on following page.
11
<PAGE> 14
(1)The results for the year ended December 31, 1993 include restructuring
expense of $200 million ($117.8 million after minority interest and income
taxes). The charge related to (a) the closing and consolidation of certain
facilities; (b) the write-off of certain equipment; and (C) severance,
outplacement and other costs associated with plant closures and overhead
reductions.
(2)Upon the consummation of a "prepackaged" plan of reorganization, the Company
established a new basis of accounting ("Fresh Start"). In Fresh Start reporting,
the Company's assets and liabilities were evaluated and stated at their fair
values as of September 30, 1992. The resulting adjustments to the Company's
consolidated assets and liabilities, primarily reflecting reorganization
expenses of approximately $612.5 million and an extraordinary gain on debt
discharge of approximately $1,142 million, increased the Company's stockholders'
equity by approximately $1,800 million. The total reorganization value of the
Company was based on management's estimate of the fair value of the Company's
debt and Common Stock. These estimates resulted in management's estimated
reorganization value of approximately $1 billion, of which the Excess
Reorganization Value was $637.5 million.
(3)Operating earnings (loss) for the year ended December 31, 1995 includes
amortization of excess reorganization value of $177.7 million, for the year
ended December 31, 1994 includes amortization of excess reorganization value of
$236.9 million, for the year ended December 31, 1993 includes restructuring
expense of $200 million, amortization of excess reorganization value of $221.6
million and, for the three months ended December 31, 1992 includes amortization
of excess reorganization value of $31.9 million.
(4)Per share amounts for periods prior to October 1, 1992, have not been
presented because they are not meaningful due to the implementation of "Fresh
Start" reporting.
(5)Working capital (deficiency) for the years ended December 31, 1996, 1995,
1994, 1993 and 1992 includes the current portion of bank indebtedness and other
long-term debt of $24.0 million, $73.0 million, $48.0 million, $18.0, and $998.1
million, respectively.
(6)Excludes amortization of excess reorganization value.
(7)Such amounts are presented to facilitate comparisons between periods since
there were no charges in the 1996 period for amortization of excess
reorganization value, goodwill amortization or restructuring expense.
(8)Operating margin before amortization of excess reorganization value, goodwill
amortization and restructuring expense represents operating earnings before
amortization of excess reorganization value, goodwill amortization and
restructuring expense as a percentage of net sales for the periods presented.
12
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The table below sets forth net sales, gross earnings, operating earnings (loss),
interest expense and net income (loss) of the Company for the years ended
December 31, 1996, 1995, and 1994 (in millions of dollars and as percentages of
net sales).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales:
Home Fashions .............................................. $ 1,501.8 $ 1,418.2 $ 1,346.9
Alamac Knits Subsidiary .................................... 222.0 231.7 249.9
---------- ---------- ----------
Total ...................................................... $ 1,723.8 $ 1,649.9 $ 1,596.8
Gross earnings ....................................................... $ 397.9 $ 384.0 $ 368.0
Operating earnings (loss) ............................................ $ 195.6 $ 5.0 $ (65.8)
Interest expense ..................................................... $ 102.4 $ 101.3 $ 102.1
Net income (loss) .................................................... $ 57.7 $ (129.8) $ (203.4)
Gross margins ........................................................ 23.1% 23.3% 23.0%
Operating earnings before amortization of excess reorganization value:
Home Fashions .............................................. $ 188.5 $ 178.7 $ 156.8
Alamac Knits Subsidiary .................................... 7.1 4.0 14.3
---------- ---------- ----------
Total ...................................................... $ 195.6 $ 182.7 $ 171.1
Operating margins before amortization of excess reorganization value:
Home Fashions .............................................. 12.6% 12.6% 11.6%
Alamac Knits Subsidiary .................................... 3.2% 1.7% 5.7%
Total ...................................................... 11.3% 11.1% 10.7%
</TABLE>
13
<PAGE> 16
RESULTS OF OPERATIONS--CONTINUED
1996 COMPARED WITH 1995
NET SALES. Net sales for the year ended December 31, 1996 increased $73.9
million, or 4.5%, to $1,723.8 million compared with net sales of $1,649.9
million for the year ended December 31, 1995. Home Fashions net sales of
$1,501.8 million were $83.6 million, or 5.9%, higher than net sales for the same
period of 1995, and resulted primarily from higher unit volume in the 1996
period compared with the 1995 period. Alamac Knits Subsidiary net sales of $222
million were $9.7 million, or 4.2%, lower than net sales for the same period of
1995, and resulted primarily from lower unit volume in the 1996 period compared
with the 1995 period.
GROSS EARNINGS/MARGINS. Gross earnings for the year ended December 31, 1996 of
$397.9 million increased $13.9 million, or 3.6%, compared with $384 million for
the same period of 1995 and reflect gross margins of 23.1% in the 1996 period
compared with 23.3% in the 1995 period. Gross earnings increased in 1996
primarily as a result of the increase in Home Fashions unit volume and decreases
in operating costs of our Alamac Knits Subsidiary, both offset somewhat by a
wage increase effective the beginning of the second quarter, higher raw material
costs, and production challenges due to high customer demand and capacity
constraints in the last half of 1996. The Company is expanding its sheet and
towel facilities in order to meet the increased customer demand.
OPERATING EARNINGS/MARGINS. Selling, general and administrative expenses
increased by $1 million, or 0.5%, for the year ended December 31, 1996, compared
with the same period of 1995, and as a percentage of net sales represent 11.7%
in 1996 and 12.2% in 1995. The increase in expenses for 1996 was due primarily
to higher warehousing/shipping and advertising expenses, offset somewhat by
lower selling and trade receivables program expenses along with lower
administrative expenses.
Operating earnings were $195.6 million for the year ended December 31, 1996
compared with operating earnings of $5 million for the same period of 1995 which
includes the amortization of excess reorganization value of $177.7 million.
Operating earnings increased as a result of the increase in gross earnings
offset somewhat by the increase in selling, general and administrative expenses,
and the complete amortization of excess reorganization value in 1995 as
discussed herein.
INTEREST EXPENSE. Interest expense for the year ended December 31, 1996 of
$102.4 million increased $1.1 million compared with interest expense for the
year ended December 31, 1995. The increase is due primarily to higher average
debt levels in the 1996 period compared with the corresponding 1995 average debt
levels offset somewhat by lower interest rates on the Company's variable rate
bank debt.
OTHER EXPENSE-NET. Other expense-net for the year ended December 31, 1996
decreased $0.3 million compared with the same period in 1995. Included in other
expense-net for the years ended December 31, 1996 and 1995 are the amortization
of deferred financing fees of $3.9 million in each period less certain
miscellaneous income items.
INCOME TAX EXPENSE. The Company's effective tax rate differed from the federal
statutory rate primarily due to state income taxes, nondeductible items and the
effects of amortization of excess reorganization value in 1995.
NET INCOME. Net income for the year ended December 31, 1996 was $57.7 million,
or $1.81 per share. In the year ended December 31, 1995, the net loss was $129.8
million, or $3.97 per share, including amortization of excess reorganization
value of $177.7 million, or $5.43 per share. Excess reorganization value was
completely amortized in 1995.
Per share amounts are based on 31.8 million and 32.7 million average shares
outstanding for the 1996 and 1995 periods, respectively. The decrease in the
average shares outstanding was primarily the result of the purchase by the
Company of shares under the stock repurchase programs.
OPERATING EARNINGS BEFORE CERTAIN CHARGES. Operating earnings for the year ended
December 31, 1996 were $195.6 million, or 11.3% of sales, and increased $12.9
million, or 7.1%, compared with operating earnings (before the amortization of
excess reorganization value) of $182.7 million, or 11.1% of sales, for the same
period of 1995. The increase resulted from the increase in gross earnings offset
somewhat by the increase in selling, general and administrative expenses
discussed above. Home Fashions operating earnings for 1996 of $188.5 million
increased $9.8 million, or 5.5% compared with the same period of 1995 and
reflect operating margins of 12.6% in both 1996 and 1995. Alamac Knits operating
earnings for 1996 of $7.1 million increased $3.1 million compared with the same
period of 1995 and reflect operating margins of 3.2% in 1996 and 1.7% in 1995.
14
<PAGE> 17
RESULTS OF OPERATIONS--CONTINUED
1995 COMPARED WITH 1994
NET SALES. Net sales for the year ended December 31, 1995 increased $53.1
million, or 3.3%, to $1,649.9 million compared with net sales of $1,596.8
million for the year ended December 31, 1994. Home Fashions net sales of
$1,418.2 million were $71.3 million, or 5.3%, higher than net sales for the same
period of 1994, and resulted primarily from better pricing and higher unit
volume in the 1995 period compared with the 1994 period. Alamac Knits Subsidiary
net sales of $231.7 million were $18.2 million, or 7.3%, lower than net sales
for the same period of 1994, and resulted primarily from lower unit volume in
the 1995 period compared with the 1994 period.
GROSS EARNINGS/MARGINS. Gross earnings for the year ended December 31, 1995 of
$384 million increased $16 million, or 4.3%, compared with $368 million for the
same period of 1994 and reflect gross margins of 23.3% in 1995 compared with 23%
in 1994. Gross earnings and margins increased in 1995 compared with 1994 despite
substantially higher raw material costs, a 4% wage increase effective the
beginning of 1995, and reduced plant operating schedules at our Alamac Knits
Subsidiary (reflecting the retail weakness for apparel fabrics) in 1995 compared
with 1994. The increase in gross margins reflects the substantial cost
reductions implemented through a $300 million modernization program that was
completed in 1995 and price increases in 1995 to offset the continuing rise in
raw material costs.
OPERATING EARNINGS/MARGINS. Selling, general and administrative expenses
increased by $4.4 million, or 2.3%, for the year ended December 31, 1995,
compared with the same period of 1994, and as a percentage of net sales
represent 12.2% in 1995 and 12.3% in 1994. The increase in expenses for 1995 was
due primarily to the higher sales volume (including shipping/warehousing costs
and costs related to the Trade Receivables Program) and a 4% wage increase
effective the beginning of 1995.
The amortization of excess reorganization value, which was completely amortized
as of September 30, 1995, was $177.7 million in 1995, compared with $236.9
million in 1994.
The Company's operating earnings (loss) were $5 million for the year ended
December 31, 1995 and ($65.8) million for the same period of 1994, as a result
of the above.
INTEREST EXPENSE. Interest expense for the year ended December 31, 1995 of
$101.3 million decreased $0.8 million compared with interest expense for the
year ended December 31, 1994. The decrease is due primarily to lower average
debt levels in the 1995 period compared with the corresponding 1994 average debt
levels and lower interest rates on the Company's variable rate bank debt.
OTHER EXPENSE-NET. Other expense-net decreased $9.9 million for the year ended
December 31, 1995 compared with the same period in 1994. Included in other
expense-net for the years ended December 31, 1995 and 1994 are the amortization
and write-off of deferred financing fees of $3.9 million and $13.6 million,
respectively.
INCOME TAX EXPENSE. The Company's effective tax rate differed from the federal
statutory rate primarily due to the effects of amortization of excess
reorganization value, nondeductible items and state income taxes.
NET INCOME. The net loss for the year ended December 31, 1995 was $129.8
million, or $3.97 per share, including amortization of excess reorganization
value of $177.7 million, or $5.43 per share. In the corresponding period of
1994, the net loss was $203.4 million, or $6.02 per share, including
amortization of excess reorganization value of $236.9 million, or $7.01 per
share, the write-off of deferred financing fees of $5.4 million (net of
applicable taxes), or $.16 per share, related to the bank agreement that was
refinanced in the fourth quarter of 1994. Excess reorganization value (a
non-cash charge against earnings) was being amortized on a straight-line basis
and was completely amortized as of September 30, 1995.
Per share amounts are based on 32.7 million and 33.8 million average shares
outstanding for the 1995 and 1994 periods, respectively. The decrease in the
average shares outstanding was primarily the result of the purchase by the
Company of shares under the stock repurchase programs.
15
<PAGE> 18
RESULTS OF OPERATIONS--CONTINUED
1995 COMPARED WITH 1994--CONTINUED
OPERATING EARNINGS BEFORE CERTAIN CHARGES. Operating earnings before
amortization of excess reorganization value for the year ended December 31, 1995
were $182.7 million and increased $11.6 million, or 6.7%, compared with
operating earnings before amortization of excess reorganization value of $171.1
million for the same period of 1994, primarily as a result of the increase in
gross earnings offset somewhat by the increase in selling, general and
administrative expenses discussed above. Home Fashions operating earnings of
$178.7 million increased $21.9 million, or 14% compared with the same period of
1994 and reflect operating margins of 12.6% in 1995 and 11.6% in 1994. Alamac
Knits operating earnings of $4 million decreased $10.3 million compared with the
same period of 1994 and reflect operating margins of 1.7% in 1995 and 5.7% in
1994. The increase in Home Fashions operating earnings more than offset the
decrease in Alamac Knits operating earnings.
EFFECTS OF INFLATION
The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on its sales or profitability.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are expected to be cash from its
operations and funds available under the Senior Credit Facility. At February 5,
1997, the maximum commitment under the Senior Credit Facility was approximately
$350 million and the Company had unused borrowing availability under the Senior
Credit Facility totaling approximately $190 million. The Senior Credit Facility
contains covenants which, among other things, limit indebtedness and require the
maintenance of certain financial ratios and minimum net worth as defined.
The Company's principal uses of cash for the next several years will be
operating expenses, capital expenditures and debt service requirements related
primarily to interest payments. The Company spent approximately $100 million in
1996 on capital expenditures and intends to invest an additional $125 million in
1997.
During 1996 the Company purchased approximately 1.3 million shares under the
various stock repurchase programs, at an average price of $23.59 per share. In
August 1996 the Board of Directors approved the purchase of up to one million
additional shares of the Company's common stock, subject to the Company's debt
limitations, which brings the total shares that have been approved for purchase
to five million shares. At December 31, 1996, approximately 1.6 million shares
remained to be purchased.
Cash contributions in 1997 to the Company's pension plans are estimated to total
approximately $12.1 million, compared with actual contributions in 1996 of $21.3
million, including the effect of the changes in the actuarial assumptions
relating to the Company's pension plans (see Note 3 "Employee Benefit Plans -
Pension Plans" in the Notes to Consolidated Financial Statements included
elsewhere herein).
The Company, through a "bankruptcy remote" receivables subsidiary, has a Trade
Receivables Program which provides for the sale of accounts receivable, on a
revolving basis. At December 31, 1996 and 1995, $133 million and $121 million,
respectively, had been sold under this program and the sale is reflected as a
reduction of accounts receivable in the Company's Consolidated Balance Sheets.
The cost of the Trade Receivables Program in 1997 is estimated to total
approximately $8 million, compared with $7.4 million in 1996, and will be
charged to selling, general and administrative expenses.
Debt service requirements for interest payments in 1997 are estimated to total
approximately $103 million (excluding amounts related to the Trade Receivables
Program) compared with payments of $102.6 million in 1996. There are no debt
service requirements in 1997 related to required principal amortization.
Management believes that cash from the Company's operations and borrowings under
its credit agreements will provide the funding necessary to meet the Company's
anticipated requirements for capital expenditures and operating expenses and to
enable it to meet its anticipated debt service requirements.
16
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements for the years ended December 31, 1996, 1995
and 1994
<TABLE>
<S> <C>
Report of Ernst & Young, Independent Auditors.......................... 18
Consolidated Balance Sheets............................................ 19-20
Consolidated Statements of Operations.................................. 21
Consolidated Statements of Stockholders' Equity (Deficit).............. 22
Consolidated Statements of Cash Flows.................................. 23
Notes to Consolidated Financial Statements............................. 24-37
</TABLE>
17
<PAGE> 20
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND STOCKHOLDERS
WESTPOINT STEVENS INC.
We have audited the accompanying consolidated balance sheets of WestPoint
Stevens Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the index at Item 14 (a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
WestPoint Stevens Inc. at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
/s/Ernst & Young LLP
Columbus, Georgia
February 5, 1997
18
<PAGE> 21
WESTPOINT STEVENS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ....................... $ 14,029 $ 7,987
Accounts receivable (less allowances of $22,861
and $22,895, respectively) ................. 66,949 82,933
Inventories ..................................... 299,651 320,468
Prepaid expenses and other current assets ....... 14,939 19,506
---------- ----------
Total current assets .................. 395,568 430,894
Property, Plant and Equipment
Land ............................................ 8,271 8,431
Buildings and improvements ...................... 276,935 258,257
Machinery and equipment ......................... 737,253 666,284
Leasehold improvements .......................... 13,902 13,325
---------- ----------
1,036,361 946,297
Less accumulated depreciation and amortization (330,393) (262,112)
---------- ----------
Net property, plant and equipment ..... 705,968 684,185
Other Assets
Deferred financing fees ......................... 23,108 26,987
Prepaid pension and other assets ................ 32,355 902
---------- ----------
Total other assets .................... 55,463 27,889
---------- ----------
$1,156,999 $1,142,968
========== ==========
</TABLE>
See accompanying notes.
19
<PAGE> 22
WESTPOINT STEVENS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Senior Credit Facility ............................. $ 24,000 $ 73,000
Accrued interest payable ........................... 6,525 6,643
Accounts payable ................................... 73,475 75,020
Other accrued liabilities .......................... 150,715 160,532
----------- -----------
Total current liabilities .......... 254,715 315,195
Long-Term Debt .............................................. 1,075,000 1,075,000
Noncurrent Liabilities
Deferred income taxes .............................. 179,057 136,755
Other liabilities .................................. 98,625 121,955
----------- -----------
Total noncurrent liabilities ....... 277,682 258,710
Stockholders' Equity (Deficit)
Common Stock and capital in excess of par value:
Common Stock, $.01 par value; 75,000,000
shares authorized; 34,707,250 and
34,597,050 shares issued, respectively ... 329,394 327,850
Accumulated deficit ................................ (703,068) (760,733)
Treasury stock; 3,855,549 and 2,621,150 shares
at cost, respectively .................... (70,316) (41,051)
Minimum pension liability adjustment, net of taxes
of $3,763 and $20,034, respectively ...... (6,408) (32,003)
----------- -----------
Total stockholders' equity (deficit) (450,398) (505,937)
----------- -----------
$ 1,156,999 $ 1,142,968
=========== ===========
</TABLE>
See accompanying notes.
20
<PAGE> 23
WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net sales .................................. $ 1,723,814 $ 1,649,878 $ 1,596,792
Cost of goods sold ......................... 1,325,904 1,265,886 1,228,801
----------- ----------- -----------
Gross earnings ....................... 397,910 383,992 367,991
Selling, general and administrative expenses 202,341 201,308 196,852
Amortization of excess reorganization value - 177,675 236,892
----------- ----------- -----------
Operating earnings (loss) ............ 195,569 5,009 (65,753)
Interest expense ........................... 102,447 101,308 102,052
Other expense-net .......................... 2,757 3 ,099 12,959
----------- ----------- -----------
Income (loss) from operations before
income tax expense ................ 90,365 (99,398) (180,764)
Income tax expense ......................... 32,700 30,450 22,600
----------- ----------- -----------
Net income (loss) .................... $ 57,665 $ (129,848) $ (203,364)
=========== =========== ===========
Net income (loss) per common share ......... $ 1.81 $ (3.97) $ (6.02)
=========== =========== ===========
Average number of common and common
equivalent shares outstanding .......... 31,783 32,699 33,775
=========== =========== ===========
</TABLE>
See accompanying notes.
21
<PAGE> 24
WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK
AND CAPITAL
IN MINIMUM
EXCESS OF TREASURY STOCK PENSION
COMMON PAR ------------------- ACCUMULATED LIABILITY
SHARES VALUE SHARES AMOUNT DEFICIT ADJUSTMENT TOTAL
------ --------- ------ ------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 ..................... 34,266 $ 323,727 (491) $(4,417) $(427,521) $ (32,072) $(140,283)
Exercise of management stock options .... 53 666 - - - - 666
Purchase of treasury shares ............. - - (172) (2,377) - - (2,377)
Net loss ................................ - - - - (203,364) - (203,364)
Change in minimum pension liability
adjustment ......................... - - - - - 8,158 8,158
------ --------- ------ -------- --------- --------- ---------
Balance, December 31, 1994 ................... 34,319 324,393 (663) (6,794) (630,885) (23,914) (337,200)
Exercise of management stock options
including tax benefit .............. 278 3,490 - - - - 3,490
Purchase of treasury shares ............. - - (1,958) (34,257) - - (34,257)
Redemption of purchase rights ........... - (33) - - - - (33)
Net loss ................................ - - - - (129,848) - (129,848)
Change in minimum pension liability
adjustment ......................... - - - - - (8,089) (8,089)
------ --------- ------ -------- --------- --------- ---------
Balance, December 31, 1995 ................... 34,597 327,850 (2,621) (41,051) (760,733) (32,003) (505,937)
Exercise of management stock options
including tax benefit .............. 110 1,532 - - - - 1,532
Issuance of stock pursuant to Stock Bonus
Plan including tax benefit ......... - 12 58 1,226 - - 1,238
Purchase of treasury shares ............. - - (1,293) (30,491) - - (30,491)
Net income .............................. - - - - 57,665 - 57,665
Change in minimum pension liability
adjustment .......................... - - - - - 25,595 25,595
------ --------- ------ -------- --------- --------- ---------
Balance, December 31, 1996 ................... 34,707 $ 329,394 (3,856) $(70,316) $(703,068) $ (6,408) $(450,398)
====== ========= ==== ======= ========= ========= =========
</TABLE>
See accompanying notes.
22
<PAGE> 25
WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ....................................................... $ 57,665 $(129,848) $(203,364)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Amortization of excess reorganization value ....................... - 177,675 236,892
Depreciation and other amortization ............................... 76,988 80,379 86,220
Deferred income taxes ............................................. 26,153 26,172 15,492
Changes in assets and liabilities excluding the effect of the Trade
Receivables Program:
Accounts receivable ......................................... 3,939 (2,694) (20,451)
Inventories ................................................. 20,817 (23,105) 2,408
Prepaid expenses and other current assets ................... 4,567 (5,522) (3,808)
Accrued interest payable .................................... (118) 113 (1,184)
Accounts payable and other accrued liabilities .............. (10,046) 15,971 (4,122)
Other-net ................................................... (8,964) (34,398) 5,822
--------- --------- ---------
Total adjustments ....................................................... 113,336 234,591 317,269
--------- --------- ---------
Net cash provided by operating activities ................................... 171,001 104,743 113,905
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................................... (99,943) (102,197) (109,019)
Net proceeds from sale of assets ........................................ 1,098 3,066 11,922
--------- --------- ---------
Net cash used for investing activities ...................................... (98,845) (99,131) (97,097)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Senior Credit Facility:
Borrowings ........................................................... 645,500 564,500 538,500
Repayments ........................................................... (694,500) (499,500) (568,000)
Proceeds from Trade Receivables Program ................................. 12,045 (391) 8,690
Proceeds from issuance of Common Stock .................................. 1,332 2,600 666
Purchase of Common Stock for treasury ................................... (30,491) (34,257) (2,377)
Payment of deferred taxes ............................................... - (32,500) -
Redemption of purchase rights ........................................... - (33) -
Collection of notes receivable .......................................... - - 4,682
Fees associated with refinancing ........................................ - - (4,732)
--------- --------- ---------
Net cash provided by (used for) financing activities ........................ (66,114) 419 (22,571)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ........................ 6,042 6,031 (5,763)
Cash and cash equivalents at beginning of period ............................ 7,987 1,956 7,719
--------- --------- ---------
Cash and cash equivalents at end of period .................................. $ 14,029 $ 7,987 $ 1,956
========= ========= =========
</TABLE>
See accompanying notes
23
<PAGE> 26
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BUSINESS. WestPoint Stevens Inc. (the "Company") is a manufacturer and marketer
of bed and bath products, including sheets, pillowcases, comforters, blankets,
bedspreads, towels and related products and is also a leading domestic
manufacturer of knitted apparel fabrics. The Company conducts its operations in
two principal industry segments: bed and bath products and knitted fabrics for
the apparel industry.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of the
Company include the accounts of the Company and all of its subsidiaries. All
material intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES. The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CONCENTRATIONS OF CREDIT RISK. Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of
cash investments and trade accounts receivable.
The Company maintains cash and cash equivalents and certain other financial
instruments with various financial institutions. The Company performs periodic
evaluations of the relative credit standing of those financial institutions that
are considered in the Company's investment strategy.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base. However, as of December 31, 1996, substantially all of the Company's
receivables were from companies in the retail industry.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
Short-term investments (consisting primarily of commercial paper and
certificates of deposit) totaling approximately $14 million and $8 million are
included in cash and cash equivalents at December 31, 1996 and 1995,
respectively. These investments are carried at cost, which approximates market
value.
INVENTORIES. Inventory costs include material, labor and factory overhead.
Inventories are stated at the lower of cost or market (net realizable value). At
December 31, 1996 and 1995, approximately 85% and 88%, respectively, of the
Company's inventories are valued at the lower of cost or market using the
"dollar value" last-in, first-out ("LIFO") method. The remainder of the
inventories (approximately $44.1 million and $37.3 million at December 31, 1996
and 1995, respectively) are valued at the lower of cost (substantially first-in,
first-out method) or market.
Inventories consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
-------- --------
<S> <C> <C>
Finished goods............................................. $134,690 $145,790
Work in progress........................................... 114,140 123,878
Raw materials and supplies................................. 71,038 68,138
LIFO reserve............................................... (20,217) (17,338)
-------- --------
$299,651 $320,468
======== ========
</TABLE>
PROPERTY, PLANT AND EQUIPMENT. As a result of the adoption of Fresh Start
reporting, as of September 30, 1992, property, plant and equipment were adjusted
to their estimated fair values and historical accumulated depreciation was
eliminated. Additions since September 30, 1992 are stated at cost.
24
<PAGE> 27
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES--CONTINUED
PROPERTY, PLANT AND EQUIPMENT (CONTINUED). Depreciation is computed over
estimated useful lives using the straight-line method for financial reporting
purposes and accelerated methods for income tax reporting. Depreciation expense
was approximately $77.0 million, $80.4 million, and $86.2 million in the years
ended December 31, 1996, 1995 and 1994, respectively.
Estimated useful lives for property and equipment are as follows:
<TABLE>
<S> <C>
Buildings and improvements...................................... 10 to 40 Years
Machinery and equipment......................................... 3 to 18 Years
Leasehold improvements.......................................... Lease Terms
</TABLE>
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCATED TO IDENTIFIABLE ASSETS
("Excess Reorganization Value"). In September 1992, the Company completed a
"prepackaged" plan of reorganization (the "Plan") and in accordance with SOP
90-7 the Company established a new basis of accounting ("Fresh Start"). In Fresh
Start reporting, the Company's assets and liabilities were adjusted to their
fair values as of September 30, 1992. The excess of the reorganization value
over the value of identifiable assets, $637.5 million, was reported as Excess
Reorganization Value at September 30, 1992. Excess Reorganization Value has been
amortized on a straight-line basis over three years and was fully amortized by
September 1995.
HEDGING TRANSACTIONS. The Company engages in hedging activities within the
normal course of its business. Management has been authorized to manage exposure
to price fluctuations relevant to the purchase of cotton through the use of a
variety of derivative nonfinancial instruments. Derivative nonfinancial
instruments require or permit settlement by the delivery of commodities and
include exchange traded commodity futures contracts and options. Gains and
losses on these hedges, which were not material at December 31, 1996 and 1995,
are deferred and subsequently recognized in income as cost of goods sold in the
same period as the hedged item. The Company does not hold or issue derivative
instruments for trading purposes.
INCOME TAXES. The Company accounts for income taxes under FAS 109, Accounting
for Income Taxes. Under FAS 109, deferred income taxes are provided at the
enacted marginal rates on the differences between the financial statement and
income tax bases of assets and liabilities.
PENSION PLANS. The Company has a number of defined benefit pension plans
covering essentially all employees who are not covered by certain collective
bargaining agreements. The benefits are based on years of service and
compensation. The Company's practice is to fund amounts which are required by
the Employee Retirement Income Security Act of 1974.
The Company also sponsors an employee savings plan covering certain employees.
Participants in this plan elect to make contributions as either a percent of
earnings or a basic contribution. For the periods prior to December 31, 1994,
there were no contributions by the Company for this plan. The Company amended
the plan to provide for Company contributions beginning in 1995 (see Note 3
"Employee Benefit Plans - Retirement Savings Plan").
OTHER EMPLOYEE BENEFITS. The Company accounts for post-retirement and
post-employment benefits in accordance with FAS 106, Employer's Accounting for
Post Retirement Benefits Other Than Pensions and FAS 112, Employer's Accounting
for Postemployment Benefits.
STOCK BASED COMPENSATION. The Company grants stock options for a fixed number of
shares in accordance with certain of its benefit plans. The Company accounts for
stock option grants in accordance with APB Opinion No. 25, Accounting for Stock
Issued to Employees, and, accordingly, recognizes no compensation expense for
the stock option grants if the exercise price is equal to or more than the fair
value of the shares at the date of grant.
FAIR VALUE DISCLOSURES. Cash and cash equivalents: The carrying amounts
reported in the balance sheets for cash and cash equivalents approximates its
fair value.
25
<PAGE> 28
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES--CONTINUED
Accounts receivable and accounts payable: The carrying amounts reported in the
balance sheets for accounts receivable and accounts payable approximate their
fair value.
Long-term and short-term debt: The fair value of the Company's outstanding debt
is estimated based on the quoted market prices for the same issues or on the
current rates offered to the Company for debt of similar issues. The fair value
of the $1,099 million and $1,148 million of outstanding debt at December 31,
1996 and 1995 was approximately $1,127 million and $1,142 million, respectively.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS. In March 1995, the FASB issued
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in the first quarter of 1996, and the effect of
adoption was not material.
NET INCOME (LOSS) PER COMMON SHARE. The computation of net income (loss) per
common share is based on the weighted average number of common and common
equivalent shares (stock options) outstanding each period.
2. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS
Indebtedness is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Short-term indebtedness
Senior Credit Facility
Revolver .............................. $ 24,000 $ 73,000
========== ==========
Long-term indebtedness
Senior Credit Facility
Revolver ........................... $ 50,000 $ 50,000
8-3/4% Senior Notes due 2001 ............... 400,000 400,000
9-3/8% Senior Subordinated Debentures
due 2005 ................................ 550,000 550,000
9% Sinking Fund Debentures due 2017 ........ 75,000 75,000
---------- ----------
$1,075,000 $1,075,000
========== ==========
</TABLE>
The Company's Senior Credit Facility with certain lenders (collectively, the
"Banks") consists of a $349.6 million revolving credit facility ("Revolver") due
May 23, 2001. The Company has included $50 million of Revolver in long-term debt
at December 31, 1996 because the Company intends that at least that amount would
remain outstanding during 1997.
At the option of the Company, interest under the Senior Credit Facility will be
payable either at the prime rate or at LIBOR plus 1.25%. Upon the Company
achieving certain ratios of EBITDA (as defined) to cash interest expense,
interest rates can be reduced up to 0.5%. The Company pays a commitment fee in
an amount equal to 0.375% of the unused portion of each Bank's commitment under
the Revolver. The loans under the Senior Credit Facility are secured by the
pledge of all the stock of the Company's material subsidiaries and a first
priority lien on substantially all of the assets of the Company, other than the
Company's accounts receivable.
26
<PAGE> 29
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS--CONTINUED
A subsidiary of the Company has a credit facility with the Banks that provides
$25 million of revolving credit loans. Borrowings under this facility reduce the
amounts available under the Senior Credit Facility. No amounts were outstanding
under this facility at December 31, 1996.
The 8-3/4% Senior Notes due 2001 (the "Notes") are general unsecured obligations
of the Company and rank senior in right of payment to the 9-3/8% Senior
Subordinated Debentures due 2005 (the "Debentures") and pari passu in right of
payment with all indebtedness of the Company under the Senior Credit Facility
and all other existing or future Senior Indebtedness of the Company. The
Debentures are general unsecured obligations of the Company and subordinate in
right of payment to the Notes and all other existing and future Senior
Indebtedness of the Company, including indebtedness under the Senior Credit
Facility, pari passu with any future senior subordinated indebtedness and senior
to any future subordinated indebtedness of the Company.
The Notes bear interest at the rate of 8-3/4% per annum, payable semi-annually
on June 15 and December 15 of each year. The Notes are redeemable, in whole or
in part at any time on or after December 15, 1998, at the option of the Company,
at the redemption prices, as defined, together with accrued and unpaid interest
to the date of redemption. The Debentures bear interest at the rate of 9-3/8%
per annum, payable semi-annually on June 15 and December 15 of each year. The
Debentures are redeemable, in whole or in part at any time on or after December
15, 1998, at the option of the Company, at the redemption prices, as defined,
together with accrued and unpaid interest to the date of the redemption.
In addition, in the event of a Change of Control (as defined), the Company will
be obligated to make an offer to redeem a holder's Notes or Debentures at a
redemption price of 101% of the principal amount thereof plus accrued and unpaid
interest thereon to the date of redemption. The Company may also redeem each of
the Notes or Debentures upon a Change of Control at a redemption price equal to
the greater of 101% of the principal amount thereof, together with accrued
interest thereon to the date of redemption or 100% of the principal amount
thereof, plus a Make-Whole Premium (as defined).
The Company's credit agreements contain a number of customary covenants
including, among others, restrictions on the incurrence of indebtedness,
transactions with affiliates, and certain asset dispositions. Certain provisions
require the Company to maintain certain financial ratios, such as a minimum
current ratio, and a minimum interest coverage ratio. A minimum consolidated net
worth, as defined, is also mandated. At December 31, 1996, the Company could
make restricted payments aggregating approximately $5.7 million.
The Company, through a "bankruptcy remote" receivables subsidiary ("Receivables
Subsidiary"), has a trade receivables program ("Trade Receivables Program")
which provides for the sale of accounts receivable, on a revolving basis. At
December 31, 1996 and 1995, $133 million and $121 million, respectively had been
sold under this program and the sale is reflected as a reduction of accounts
receivable in the accompanying Consolidated Balance Sheets. The Trade
Receivables Program was financed through the issuance of (a) $115 million of
Floating Rate Class A Trade Receivables Participation Certificates ("Class A
Certificates"); (b) $18 million of Floating Rate Class B Trade Receivables
Participation Certificates ("Class B Certificates"); and (c) $27 million of
Investor Revolving Certificates. The Class A Certificates and Class B
Certificates bear interest at LIBOR plus .27% and LIBOR plus .57%, respectively,
and the Investor Revolving Certificates bear interest at LIBOR plus .375%. The
expected final payment date of amounts outstanding under the Trade Receivables
Program is May 18, 1999, but earlier termination could occur upon the occurrence
of certain defined events. The cost of the Trade Receivables Program is charged
to selling and administrative expense.
The Trade Receivables Program requires the Company and Receivables Subsidiary to
perform certain servicing obligations with respect to the existing and future
trade receivables sold by the Company. The Company is not subject to any
financial covenants under the Trade Receivables Program, but the documentation
for the Trade Receivables Program provides for early termination of the Trade
Receivables Program and early payment of the securities issued thereunder upon
certain events, which include the incurrence of losses or delinquencies on the
receivables in excess of certain levels or the bankruptcy or insolvency of the
Company.
27
<PAGE> 30
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS--CONTINUED
Excluding amounts related to the Revolver, maturities of long-term debt for
1998, 1999 and 2000 are $3.75 million per year and $403.75 million in 2001.
In connection with the refinancing of its Senior Credit Facility on November 23,
1994, the Company wrote-off deferred financing fees of $8.9 million ($5.4
million after income taxes).
3. EMPLOYEE BENEFIT PLANS
PENSION PLANS
Pension expense related to the Company's defined benefit plans, is comprised of
the following (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits earned during period ......... $ 8,244 $ 6,174 $ 7,428
Interest cost on projected benefit obligation ...... 24,255 23,757 22,731
Deferred actuarial gains (losses) .................. (1,170) 33,038 (22,285)
-------- -------- --------
Subtotal ........................................... 31,329 62,969 7,874
Actual (returns) losses on plan assets ............. (22,276) (49,969) 5,026
-------- -------- --------
Total defined benefit plan expense ................. $ 9,053 $ 13,000 $ 12,900
======== ======== ========
Actuarial assumptions for pension expense:
Discount rate .............................. 7.25% 8.5% 7%
Average rate of increase in compensation
levels ........................... 4% 4% 4%
Expected long-term rate of return on plan
assets ........................... 10% 8.5% 8.5%
</TABLE>
28
<PAGE> 31
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. EMPLOYEE BENEFIT PLANS
PENSION PLANS--CONTINUED
The following table sets forth the funded status of the Company's pension plans
and amounts recognized in the accompanying Consolidated Balance Sheets at
December 31, 1996 and 1995 (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1996 1995
----------------------------- -----------
ASSETS ACCUMULATED ACCUMULATED
EXCEED BENEFITS BENEFITS
ACCUMULATED EXCEED EXCEED
BENEFITS ASSETS ASSETS
----------- ----------- -----------
<S> <C> <C> <C>
Actuarial present value of projected benefit obligation:
Vested ...................................................... $ 85,620 $ 200,902 $ 312,899
Nonvested ................................................... 3,835 5,706 3,696
--------- --------- ---------
Accumulated benefit obligation ...................................... 89,455 206,608 316,595
Effect of projected future salary increases ......................... - 16,918 23,633
--------- --------- ---------
Projected benefit obligation ........................................ 89,455 223,526 340,228
Plan assets at fair value ........................................... 102,718 197,174 281,443
--------- --------- ---------
Projected benefit obligation less than (in excess of)
plan assets ................................................. 13,263 (26,352) (58,785)
Unrecognized net actuarial losses ................................... 15,458 27,089 75,670
Minimum pension liability adjustment ................................ - (10,171) (52,037)
--------- --------- ---------
Pension related asset (liability) included in
Consolidated Balance Sheets ................................ $ 28,721 $ (9,434) $ (35,152)
========= ========= =========
Actuarial assumptions for funded status information:
Discount rate ............................................... 8.25% 8.25% 7.25%
Average rate of increase in compensation levels ............. - 3.5% 4%
</TABLE>
At December 31, 1996, the Company changed the discount rate to 8.25% from 7.25%
which decreased the projected benefit obligation by approximately $38.5 million.
At December 31, 1995, the Company changed the discount rate to 7.25% from 8.5%
which increased the projected benefit obligation by approximately $43.5 million.
The provisions of Financial Accounting Standards Board Statement No. 87 Employee
Accounting for Pensions (SFAS No. 87) require recognition in the balance sheet
of an additional minimum liability for pension plans with accumulated benefits
in excess of plan assets. At December 31, 1996 and 1995, minimum pension
liability adjustments of $10.2 million ($6.4 million after related income taxes)
and $52.0 million ($32.0 million after related income taxes), respectively, are
included in the accompanying Consolidated Balance Sheets.
Plan assets are primarily invested in United States Government and corporate
debt securities, equity securities and fixed income insurance contracts. At
December 31, 1996 and 1995, the Company's pension plans held Notes and
Debentures of the Company with a market value of $17.0 million and $13.2
million, respectively.
29
<PAGE> 32
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. EMPLOYEE BENEFIT PLANS--CONTINUED
RETIREMENT SAVINGS PLAN
The Company amended its Retirement Savings Value Plan (the "401K Plan")
effective January 1, 1995, to provide that the Company will match 50 percent of
employee's before-tax contributions up to two percent of the employee's
compensation. Company contributions may be made either in cash or in shares of
Common Stock of the Company. During both 1996 and 1995, the Company charged $2.4
million to expense in connection with the 401K Plan.
OTHER POST-RETIREMENT BENEFIT PLANS
In addition to sponsoring defined benefit pension plans, the Company sponsors
various defined benefit post-retirement plans that provide health care and life
insurance benefits to certain current and future retirees. All such
post-retirement benefit plans are unfunded. The following table presents the
status of post-retirement plans (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
------- -------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees ............................................................... $17,815 $20,707
Fully eligible active plan participants ................................ 209 370
Other active plan participants ......................................... 87 168
Unrecognized net gain .................................................. 4,627 1,808
------- -------
Accrued post-retirement benefit obligation ..................................... $22,738 $23,053
======= =======
</TABLE>
Net periodic post-retirement benefit plans expense includes the following
components (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost attributed to service during the period ............................... $ 3 $ 5 $ 6
Interest cost on accumulated post-retirement benefit plan obligations .............. 1,377 1,569 1,433
Amortization of unrecognized gain .................................................. (61) (142) (51)
------- ------- -------
Net periodic post-retirement benefit plans cost .................................... $ 1,319 $ 1,432 $ 1,388
======= ======= =======
</TABLE>
As of December 31, 1996, the actuarial assumptions include a discount rate of
8.25% and a medical care trend rate of 8.7% for 1997, grading down to 6% by
2000. These trend rates reflect the Company's prior experience and management's
expectation of future rates. Increasing the assumed health care cost trend rates
by one percentage point in each year would increase the accumulated
post-retirement benefit plans obligations as of December 31, 1996 by
approximately $0.5 million, and the aggregate service and interest cost
components of net periodic post-retirement benefit cost for the year ended
December 31, 1996 by an immaterial amount.
The Company continues to evaluate post-retirement plan redesign options that may
reduce the ongoing annual expense of post-retirement benefits cost covered by
FAS 106 and FAS 112.
4. OTHER EXPENSE--NET
Included in "Other expense-net" in the accompanying Consolidated Statements of
Operations for the years ended December 31, 1996, 1995 and 1994, are the
amortization and write-off of deferred financing fees of $3.9 million, $3.9
million and $13.6 million, respectively.
30
<PAGE> 33
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES
The Company accounts for income taxes under FAS 109. Under FAS 109, deferred
income taxes are provided at the enacted marginal rates on the difference
between the financial statement and income tax bases of assets and liabilities.
Deferred income tax provisions or benefits are based on the change in the
deferred tax assets and liabilities from period to period.
The total provision (benefit) for income taxes consisted of the following (in
thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current
Federal ..................................... $ 957 $ 2,311 $ 600
State ....................................... 630 2,475 1,819
Foreign ..................................... 621 (145) 273
Deferred ............................................ 30,492 25,809 19,908
-------- -------- --------
$ 32,700 $ 30,450 $ 22,600
======== ======== ========
</TABLE>
Income tax expense from operations differs from the statutory federal income tax
rate of 35% for the following reasons (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Income tax expense (benefit) at federal statutory income
tax rate .............................................................. $ 31,628 $(34,789) $(63,267)
State income taxes (net of effect of federal
income tax) ........................................................... 1,183 1,586 2,185
Interest on prior years' taxes ............................................ - 2,051 3,700
Amortization of Excess Reorganization Value ............................... - 62,187 82,912
Other-net ................................................................. (111) (585) (2,930)
-------- -------- --------
Income tax expense ........................................................ $ 32,700 $ 30,450 $ 22,600
======== ======== ========
</TABLE>
Components of the net deferred income tax liability are as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Basis differences resulting from reorganization ................... $(108,634) $(109,226)
Accelerated depreciation .......................................... (75,930) (73,768)
Income taxes related to prior years, including interest ........... (18,755) (16,122)
Nondeductible expenses ............................................ (42,503) (31,337)
Other ............................................................. (4,715) (5,038)
Deferred tax assets:
Reserves for litigation, environmental, employee benefits and other 62,057 92,043
Other ............................................................. 9,423 6,693
--------- ---------
$(179,057) $(136,755)
========= =========
</TABLE>
31
<PAGE> 34
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES--CONTINUED
At December 31, 1996, the Company has estimated operating loss carryforwards
("NOLs") expiring in 2004-2009 of approximately $443 million available to reduce
future federal taxable income. Due to the ownership change which occurred
September 16, 1992 in connection with a reorganization, the utilization of NOLs
generated prior to this date will be significantly limited.
During prior years, the Internal Revenue Service (the "Service") issued Revenue
Agent's Reports to Cluett, Peabody & Co., Inc., J. P. Stevens & Co., Inc., and
West Point - Pepperell, Inc. asserting income tax deficiencies and additions to
tax totaling approximately $89 million related to tax years 1979 and 1982
through 1989. This amount did not include interest which accrues from the dates
the taxes were due until the dates of the payments. During 1995, the Company
reached agreements with the Service concerning all of the Revenue Agent's
Reports. As a result, the Company made payments in December, 1995, totaling
approximately $33 million, which includes interest of approximately $19 million
that was tax deductible. This liability had been accrued in previous periods
and, accordingly, no additional income tax expense has been recognized in 1995
related to the agreements.
6. STOCKHOLDERS' EQUITY
STOCK OPTIONS
The Company has granted stock options in accordance with (a) the 1993 Management
Stock Option Plan (the "1993 Stock Option Plan") and, (b) the 1994 Non-Employee
Directors Stock Option Plan (the "1994 Directors Stock Option Plan") and also
has granted certain other stock options which were contractual options not
granted pursuant to any plan. The 1993 Stock Option Plan covers approximately
1.9 million shares of Common Stock (approximately 700,000 shares of which are
subject to further shareholder approval at the Company's May 14, 1997 Annual
Meeting of Stockholders) and the 1994 Directors Stock Option Plan covers 150,000
shares of Common Stock. Key employees are granted options under the 1993 Stock
Option Plan at terms (purchase price, expiration date and vesting schedule)
established by a committee of the Board of Directors. Options granted either in
accordance with contractual arrangements or pursuant to the 1993 Stock Option
Plan have been at a price which is approximately equal to fair market value on
the date of grant. Non-employee directors are granted options under the 1994
Directors Stock Option Plan at a price which is approximately equal to fair
market value on the date of grant and such options are exercisable on the date
of grant for a period of ten years. The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related Interpretations in accounting for its employee stock options
because, as discussed below, the alternative fair value accounting provided for
under FASB Statement No. 123, "Accounting for Stock-Based Compensation,"
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1996
and 1995, respectively: risk-free interest rates of 6.2% and 7%; no dividend
yield; volatility factors of the expected market price of the Company's common
stock of .29 and .29; and a weighted-average expected life of the option of 8
years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
32
<PAGE> 35
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. STOCKHOLDERS' EQUITY--CONTINUED
STOCK OPTIONS--CONTINUED
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Pro forma stock based
compensation costs resulted in 1996 pro forma net income of $57.2 million (or
pro forma net income per share of $1.80) and 1995 pro forma net loss of $130.2
million (or pro forma net loss per share of $3.98).
Changes in outstanding options were as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
(IN THOUSANDS) WEIGHTED AVERAGE
---------------------------------------------- OPTION PRICE
QUALIFIED PLANS CONTRACTUAL TOTAL PER SHARE
--------------- ----------- ------ ---------
<S> <C> <C> <C> <C>
Options outstanding at December 31, 1994 813 510 1,323 $12.22
Granted 94 - 94 $14.96
Exercised and terminated (38) (250) (288) $ 9.46
------ ------ ------ ------
Options outstanding at December 31, 1995 869 260 1,129 $13.14
Granted 888 - 888 $26.68
Exercised and terminated (67) (55) (122) $12.13
------ ------ ------ ------
Options outstanding at December 31, 1996 1,690 205 1,895 $19.56
====== ====== ====== ======
</TABLE>
At December 31, 1996, options for 883,600 shares were exercisable.
STOCK BONUS PLAN
During 1995, the Company's Board of Directors approved the WestPoint Stevens
Inc. 1995 Key Employee Stock Bonus Plan (the "Stock Bonus Plan") covering
500,000 shares of the Company's Common Stock. Under the Stock Bonus Plan, the
Company may grant bonus awards of shares of Common Stock to key employees based
on the Company's achievement of targeted earnings levels during the Company's
fiscal year. For 1996 and 1995, respectively, bonus awards were deemed earned by
fifty-three and thirty-nine employees covering an aggregate of 321,732 and
338,468 shares of Common Stock. The Stock Bonus Plan provides for vesting of the
bonus awards of 20 percent in the year of award and 20 percent in each of the
next four years if the employee continues employment with the Company. The
Company charged $3.4 million and $1.4 million to expense in 1996 and 1995,
respectively, in connection with the Stock Bonus Plan.
7. LEASE COMMITMENTS
The Company's operating leases, including sublease arrangements with divested
operations, consist of land, sales offices, manufacturing equipment, warehouses
and data processing equipment with expiration dates at various times during the
next thirteen years. Some of the operating leases stipulate that the Company can
(a) purchase the properties at their then fair market values or (b) renew the
leases at their then fair rental values. Some of the Company's leases,
principally sales office space and manufacturing equipment, are sublet to others
under leases expiring over the next four years.
33
<PAGE> 36
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LEASE COMMITMENTS--CONTINUED
The following is a schedule, by year, of future minimum lease payments as of
December 31, 1996 under operating leases, including sublease arrangements, that
have initial or remaining noncancellable lease terms in excess of one year (in
thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997........................................... $ 26,959
1998........................................... 26,202
1999........................................... 21,865
2000........................................... 16,448
2001........................................... 10,917
Years subsequent to 2001....................... 26,627
--------
Total minimum lease payments................... 129,018
Minimum sublease rentals....................... (5,720)
--------
Net minimum lease payments required for
operating leases........................... $123,298
========
</TABLE>
The following schedule shows the composition of total rental expense for all
operating leases, except those with terms of one month or less that were not
renewed (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Minimum lease payments .................... $ 40,217 $ 42,070 $ 38,616
Less sublease rentals ..................... (4,761) (7,464) (7,028)
-------- -------- --------
Rent expense .............................. $ 35,456 $ 34,606 $ 31,588
======== ======== ========
</TABLE>
8. LITIGATION AND CONTINGENT LIABILITIES
The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and non-hazardous substances and wastes
used in or resulting from its operations and potential remediation obligations
thereunder. Certain of the Company's facilities (including certain facilities no
longer owned or utilized by the Company) have been cited or are being
investigated with respect to alleged violations of such laws and regulations.
The Company is cooperating fully with relevant parties and authorities in all
such matters. The Company believes that it has adequately provided in its
financial statements for any expenses and liabilities that may result from such
matters. The Company also is insured with respect to certain of such matters.
The Company's operations are governed by laws and regulations relating to
employee safety and health which, among other things, establish exposure
limitations for cotton dust, formaldehyde, asbestos and noise, and regulate
chemical and ergonomic hazards in the workplace. Although the Company does not
expect that compliance with any of such laws and regulations will adversely
affect the Company's operations, there can be no assurance such regulatory
requirements will not become more stringent in the future or that the Company
will not incur significant costs in the future to comply with such requirements.
The Company and its subsidiaries are involved in various other legal
proceedings, both as plaintiff and as defendant, which are normal to its
business. It is the opinion of management that the aforementioned actions and
claims, if determined adversely to the Company, will not have a material adverse
effect on the financial condition or operations of the Company taken as a whole.
34
<PAGE> 37
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest ........................................ $102,565 $101,195 $103,236
======== ======== ========
Income taxes .................................... $ 5,733 $ 4,433 $ 5,429
======== ======== ========
</TABLE>
10. SEGMENT AND MAJOR CUSTOMER INFORMATION
The Company is engaged in the manufacturing and marketing of products in two
industry segments, consumer home fashions and knitted apparel fabrics, through
Home Fashions and the Alamac Knits Subsidiary, respectively. Intersegment sales,
export sales and foreign operations each comprise less than 10% of consolidated
totals. "Other assets" consist mainly of prepaid pension costs, deferred
financing fees and other corporate assets.
35
<PAGE> 38
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. SEGMENT AND MAJOR CUSTOMER INFORMATION--CONTINUED
Segment information is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net sales
Home Fashions .................................... $ 1,501,795 $ 1,418,157 $ 1,346,857
Alamac Knits Subsidiary .......................... 222,019 231,721 249,935
----------- ----------- -----------
Total .................................................... $ 1,723,814 $ 1,649,878 $ 1,596,792
=========== =========== ===========
Operating earnings before amortization of excess
reorganization value
Home Fashions .................................... $ 188,518 $ 178,722 $ 156,770
Alamac Knits Subsidiary .......................... 7,051 3,962 14,369
----------- ----------- -----------
Total .................................................... $ 195,569 $ 182,684 $ 171,139
=========== =========== ===========
Operating earnings (loss)
Home Fashions .................................... $ 188,518 $ 26,276 $ (46,498)
Alamac Knits Subsidiary .......................... 7,051 (21,267) (19,255)
----------- ----------- -----------
Total .................................................... $ 195,569 $ 5,009 $ (65,753)
=========== =========== ===========
Assets employed at period end
Home Fashions .................................... $ 957,385 $ 962,456 $ 1,052,359
Alamac Knits Subsidiary .......................... 144,173 147,263 183,975
Other ............................................ 55,441 33,249 33,901
----------- ----------- -----------
Total .................................................... $ 1,156,999 $ 1,142,968 $ 1,270,235
=========== =========== ===========
Capital expenditures, including capital leases
Home Fashions .................................... $ 94,945 $ 92,440 $ 84,544
Alamac Knits Subsidiary .......................... 4,998 9,757 24,475
----------- ----------- -----------
Total .................................................... $ 99,943 $ 102,197 $ 109,019
=========== =========== ===========
Amortization of excess reorganization value
Home Fashions .................................... $ 152,446 $ 203,268
Alamac Knits Subsidiary .......................... 25,229 33,624
----------- -----------
Total .................................................... $ 177,675 $ 236,892
=========== ===========
Depreciation and other amortization
Home Fashions .................................... $ 68,929 $ 69,262 $ 74,244
Alamac Knits Subsidiary .......................... 8,059 11,117 11,976
----------- ----------- -----------
Total .................................................... $ 76,988 $ 80,379 $ 86,220
=========== =========== ===========
</TABLE>
36
<PAGE> 39
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. SEGMENT AND MAJOR CUSTOMER INFORMATION--CONTINUED
Products of Home Fashions are sold primarily to domestic chain stores, mass
merchants, department and specialty stores. Products of Alamac Knits Subsidiary
are sold to branded and private label manufacturers who cover virtually all
segments of the knitted apparel market. Sales to two customers as a percent of
net sales, amounted to approximately 11% each for the year ended December 31,
1996. Sales to two customers as a percent of net sales, amounted to
approximately 10% each for the year ended December 31, 1995. Sales to two
customers as a percent of net sales, amounted to approximately 11% and 10% for
the year ended December 31, 1994. During 1996, the Company's six largest
customers accounted for approximately 47% of the Company's net sales.
11. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
-------------------------------------------
FIRST SECOND THIRD FOURTH
------ ------ ------ ------
<S> <C> <C> <C> <C>
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1996
- ----------------------------
Net sales ............................................. $383.0 $421.0 $464.8 $455.0
Gross earnings ........................................ 89.3 91.4 112.3 104.9
Net income ............................................ 8.0 8.7 21.7 19.3
Net income per common share (1) ....................... .25 .27 .68 .61
YEAR ENDED DECEMBER 31, 1995
- ----------------------------
Net sales ............................................. $376.2 $396.5 $454.4 $422.8
Gross earnings ........................................ 88.0 89.2 108.5 98.3
Net income (loss) ..................................... (52.6) (52.2) (40.9) 15.9
Net income (loss) per common share (1) ................ (1.58) (1.59) (1.26) .49
</TABLE>
(1)Net income (loss) per common share calculations for each of the quarters is
based on the weighted average number of common and common equivalent shares
outstanding for each period and the sum of the quarters may not necessarily be
equal to the full year net income (loss) per common share amount.
37
<PAGE> 40
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
IDENTIFICATION OF DIRECTORS
The information called for in this item is incorporated by reference from the
Company's 1997 definitive proxy statement (under the caption "Board of
Directors") to be filed with the Securities and Exchange Commission by April 11,
1997 (the "1997 Proxy Statement").
IDENTIFICATION OF EXECUTIVE OFFICERS
The information called for in this item is incorporated by reference from the
Company's 1997 Proxy Statement (under the caption "Management").
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this item is incorporated by reference from the
Company's 1997 Proxy Statement (under the caption "Executive Compensation").
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this item is incorporated by reference from the
Company's 1997 Proxy Statement (under the caption "Security Ownership of Certain
Beneficial Owners and Management").
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this item is incorporated by reference from the
Company's 1997 Proxy Statement (under the captions "Security Ownership of
Certain Beneficial Owners and Management" and "Certain Relationships and Related
Transactions").
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS AND SCHEDULES
FINANCIAL STATEMENTS.
Consolidated Financial Statements for the three years ended December 31,
1996.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors .......... 18
Consolidated Balance Sheets ................................ 19-20
Consolidated Statements of Operations ...................... 21
Consolidated Statements of Stockholders' Equity (Deficit)... 22
Consolidated Statements of Cash Flows ...................... 23
Notes to Consolidated Financial Statements ................. 24-37
</TABLE>
All financial statements required to be filed as part of this Annual Report on
Form 10-K are filed under "Item 8. Financial Statements and Supplementary Data."
38
<PAGE> 41
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts............ 44
</TABLE>
Note: All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore, have
been omitted.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1996.
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
2.1 Debtors' Joint Plan of Reorganization, dated June 9, 1992,
proposed by West Point Acquisition Corp. (since renamed
WestPoint Stevens Inc.), West Point Subsidiary Corp. (since
renamed Valley Fashions Subsidiary Corp.) and West Point
Tender Corp. (since renamed Valley Fashions Tender Corp.),
incorporated by reference to the Current Report on Form 8-K
(Commission File No. 1-4990) filed by West Point-Pepperell,
Inc. with the Commission on October 1, 1992.
3.1 Restated Certificate of Incorporation of WestPoint Stevens
Inc., as currently in effect, incorporated by reference to the
Post-Effective Amendment No. 1 Registration Statement on Form
S-1 (Commission File No. 33-77726) filed by the Company with
the Securities and Exchange Commission on May 19, 1994.
3.2 Amended and Restated By-laws of WestPoint Stevens Inc., as
currently in effect, incorporated by reference to the
Post-Effective Amendment No. 1 to Registration Statement on
Form S-1 (Commission File No. 33-77726) filed by the Company
with the Securities and Exchange Commission on May 19, 1994.
4 Form 15 (Commission File No. 0-21496) filed by the Company
with the Commission on May 25, 1995, incorporated by reference
herein.
10.1 Indenture, dated as of December 10, 1993, between the Company
and First Trust National Association, as trustee, for the 8
3/4% Senior Notes due 2001, incorporated by reference to the
Annual Report on Form 10-K for the fiscal year ended December
31, 1993 (Commission File No. 0-21496) filed by the Company
with the Commission.
10.2 Form of 8 3/4% Senior Notes due 2001 (included in the
Indenture filed as Exhibit 10.1), incorporated by reference to
the Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (Commission File No. 0-21496) filed by the
Company with the Commission.
10.3 Indenture, dated as of December 10, 1993, between the Company
and the Bank of New York, as trustee, for the 9 3/8%
Subordinated Debentures due 2005, incorporated by reference to
the Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (Commission File No. 0-21496) filed by the
Company with the Commission.
10.4 Form of 9 3/8% Subordinated Debentures due 2005 (included in
the Indenture filed as Exhibit 10.3), incorporated by
reference to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (Commission File No. 0-21496)
filed by the Company with the Commission.
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.5 Rights Agreement, dated as of September 16, 1992, between the
Company, The Bank of New York, as rights agent, as amended by
Amendment No. 1 to Rights Agreement, dated as of March 12,
1993, and Amendment No. 2 to Rights Agreement, dated as of
December 10, 1993, incorporated by reference to the
Registration Statement on Form 10/A (Commission File No.
0-21496) filed by the Company on January 6, 1994.
10.6 Form of Restated Plan Registration Rights Agreement dated as
of May 7, 1993, among the Company and the Existing Holders (as
defined therein), incorporated by reference to the
Registration Statement on Form 10 (Commission File No.
0-21496) filed by the Company on July 1, 1993.
10.7 Form of Registration Rights Agreement, dated as of May 7,
1993, among the Company and the Purchaser (as defined therein)
incorporated by reference to Exhibit 1 to the Form of
Securities Purchase Agreement filed as Exhibit 10.13 to the
Registration Statement on Form 10 (Commission File No.
0-21496) filed by the Company with the Commission on July 1,
1993.
10.8 Amended and Restated Credit Agreement, dated as of May 7,
1993, by and among West Point-Pepperell, Inc., the banks
listed on the signature pages thereof, Bankers Trust Company,
as administrative agent, and The Chase Manhattan Bank, N.A.,
Citicorp USA, Inc., NationsBank of North Carolina, Inc., The
Bank of New York and The Bank of Nova Scotia, as co-agents,
incorporated by reference to the Registration Statement on
Form 10 (Commission File No. 0-21496) filed by Valley Fashions
Corp. with the Commission on July 1, 1993.
10.9 Employment Agreement, dated as of March 8, 1993, between West
Point-Pepperell, Inc. and Holcombe T. Green, Jr., together
with Letter, dated as of March 8, 1993, from the Company to
Holcombe T. Green, Jr., incorporated by reference to the
Registration Statement on Form 10 (Commission File No.
0-21496) filed by Valley Fashions Corp. (since renamed
WestPoint Stevens Inc.) with the Commission on July 1, 1993.
10.10 Employment Agreement, dated as of April 1, 1993, between West
Point-Pepperell, Inc. and Morgan M. Schuessler, together with
Letter, dated as of April 1, 1993, from the Company to Morgan
M. Schuessler, incorporated by reference to the Registration
Statement on Form 10 (Commission File No. 0-21496) filed by
Valley Fashions Corp. (since renamed WestPoint Stevens Inc.)
with the Commission on July 1, 1993.
10.11 Employment Agreement, dated as of February 1, 1993, between
West Point-Pepperell, Inc. and Joseph L. Jennings, Jr.,
incorporated by reference to the Registration Statement on
Form 10 (Commission File No. 0-21496) filed by the Company
with the Commission on July 1, 1993.
10.12 Employment Agreement, dated as of March 8, 1993, between West
Point-Pepperell, Inc. and Thomas J. Ward, incorporated by
reference to the Registration Statement on Form 10 (Commission
File No. 0-21496) filed by the Company with the Commission on
July 1, 1993.
10.13 Form of directors and officers Indemnification Agreement with
West Point-Pepperell, Inc., incorporated by reference to the
Registration Statement on Form S-1 (Commission File No.
33-69858) filed by the Company with the Commission on October
1, 1993.
10.14 1993 Management Stock Option Plan, incorporated by reference
to the Registration Statement on Form 10 (Commission File No.
0-21496) filed by the Company with the Commission on July 1,
1993.
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.15 Description of 1993 Senior Management Incentive Plan,
incorporated by reference to the Company's 1994 Proxy
Statement (Commission File No. 0-21496) filed by the Company
with the Commission.
10.16 West Point-Pepperell, Inc. Supplemental Retirement Plan for
Eligible Executives, as amended, incorporated by reference to
the Schedule 14D-9 dated November 3, 1988 (Commission File No.
1-4490) filed by West Point-Pepperell, Inc. with the
Commission.
10.17 West Point-Pepperell, Inc. Supplemental Executive Retirement
Plan, as amended, incorporated by reference to the Schedule
14D-9 dated November 3, 1988 (Commission File No. 1-4490)
filed by West Point-Pepperell, Inc. with the Commission.
10.18 Indenture, dated as of March 1, 1987, between J.P. Stevens &
Co., Inc. and The Bank of New York, as trustee, for the 9%
Sinking Fund Debentures due 2017 including the First and
Second Supplemental Indentures thereto, incorporated by
reference to the Registration Statement on Form S-1
(Commission File No. 33-69858) filed by the Company with the
Commission on October 1, 1993.
10.19 Credit Agreement, dated as of December 1, 1993, among Valley
Fashions Corp., Bankers Trust Company as Administrative Agent,
the Co-Agents parties thereto and the other financial
institutions parties thereto as amended on December 10, 1993,
incorporated by reference to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 (Commission File
No. 0-21496) filed by the Company with the Commission.
10.20 Revolving Certificate Purchase Agreement, dated as of December
1, 1993, among WPS Receivables Corporation, the Company, the
Co-Agents and Revolving Purchasers named therein, Bankers
Trust Company, as Administrative Agent, and NationsBank of
North Carolina, N.A., as Agent, incorporated by reference to
the Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (Commission File No. 0-21496) filed by the
Company with the Commission.
10.21 Amendment No. 1 to the Revolving Certificate Purchase
Agreement, dated as of December 10, 1993, among WPS
Receivables Corporation, the Company, the Co-Agents and
Revolving Purchasers named therein, Bankers Trust Company, as
Administrative Agent, and NationsBank of North Carolina, N.A.,
as Agent, incorporated by reference to the Annual Report on
Form 10-K for the fiscal year ended December 31, 1993
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.22 Pooling and Servicing Agreement, dated as of December 10,
1993, among, WPS Receivables Corporation, as transferor, the
Company, as the initial Servicer, and Chemical Bank, as
Trustee, incorporated by reference to the Current Report on
Form 8-K (Commission File No. 0-21496) filed by the Company
with the Commission on December 10, 1993.
10.23 Receivables Purchase Agreement, dated as of December 10, 1993,
among WPS Receivables Corporation, as Purchaser, and the
Company and Alamac Knit Fabrics, Inc., as Sellers,
incorporated by reference to the Current Report on Form 8-K
(Commission File No. 0-21496) filed by the Company with the
Commission on December 10, 1993.
10.24 Form of Securities Purchase Agreement, dated as of March 12,
1993, among the Company, New Street Capital Corporation,
Magten Asset Management Corporation and each Other Holder (as
defined therein), incorporated by reference to the
Registration Statement on Form 10 (Commission File No.
0-21496) filed by the Company with the Commission on July 1,
1993.
</TABLE>
41
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.25 Amended and Restated Credit Agreement dated November 23, 1994,
among the Company, NationsBank of North Carolina, N.A. as
Administrative Agent, the Co-Agents parties thereto and the
other financial institutions parties thereto, incorporated by
reference to the Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1994 (Commission File No. 0-21496)
filed by the Company with the Commission.
10.26 WestPoint Stevens Inc. 1994 Non-Employee Directors Stock
Option Plan, incorporated by reference to the Annual Report on
Form 10-K/A for the fiscal year ended December 31, 1994
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.27 Amended and Restated Pooling and Servicing Agreement, dated
as of May 27, 1994, among WPS Receivables Corporation, the
Company and Chemical Bank, incorporated by reference to the
Registration Statement on Form S-1, Amendment No. 2
(Commission File No. 33- 76956) filed by WPS Receivables
Corporation with the Commission on May 24, 1994.
10.28 Revolving Certificate Purchase Agreement, dated as of May 27,
1994, among WPS Receivables Corporation, the Company, the
Co-Agents and Revolving Purchasers named therein, Bankers
Trust Company, as Administrative Agent, and NationsBank of
North Carolina, N.A., as Agent, incorporated by reference to
the Registration Statement on Form S-1, Amendment No. 3
(Commission File No. 33-76956) filed by WPS Receivables
Corporation with the Commission on May 16, 1994.
10.29 Amended and Restated Receivables Purchase Agreement, dated as
of May 27, 1994, among WPS Receivables Corporation, as
Purchaser, and the Company and Alamac Knit Fabrics, Inc., as
Sellers, incorporated by reference to the Registration
Statement on Form S-1, Amendment No. 3 (Commission File No.
33-76956) filed by WPS Receivables Corporation with the
Commission on May 16, 1994.
10.30 Series 1994-1 Supplement, dated as of May 27, 1994, to the
Amended and Restated Pooling and Servicing Agreement, among
WPS Receivables Corporation, the Company and Chemical Bank,
incorporated by reference to the Registration Statement on
Form S-1, Amendment No. 3 (Commission File 33-76956) filed by
WPS Receivables Corporation with the Commission on May 16,
1994.
10.31 Series 1994-R Supplement, dated as of May 27, 1994, to the
Amended and Restated Pooling and Servicing Agreement, among
WPS Receivables Corporation, the company and Chemical Bank,
incorporated by reference to the Registration Statement on
Form S-1, Amendment No. 3 (Commission File No. 33-76956) filed
by WPS Receivables Corporation with the Commission on May 16,
1994.
10.32 WestPoint Stevens Inc. Amended and Restated 1994 Non-Employee
Directors Stock Option Plan, incorporated by reference to the
Form 10-Q for the quarterly period ended June 30, 1995
(Commission File No. 0-21496) filed by the Company with the
Commission on August 9, 1995.
10.33 Description of Senior Management Incentive Plan, incorporated
by reference to the Company's 1995 Proxy Statement (Commission
File No. 0-21496) filed by the Company with the Commission on
April 7, 1995.
10.34 WestPoint Stevens Inc. 1995 Key Employee Stock Bonus Plan,
incorporated by reference to the Registration Statement Form
S-8 (Registration No. 33-95580) filed by the Company on August
11, 1995.
</TABLE>
42
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.36 Amendment Agreement dated December 4, 1995 among the Company,
NationsBank, N.A., The Bank of New York, The First National
Bank of Boston, The First National Bank of Chicago, The Nippon
Credit Bank, Ltd., Wachovia Bank of Georgia, N.A., Trust
Company Bank, AmSouth Bank of Alabama and ABN AMRO Bank, N.V.,
incorporated by reference to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 (Commission File
No. 0-21496) filed by the Company with the Commission.
10.37 Form of directors and officers Indemnification Agreement with
the Company, incorporated by reference to the Annual Report on
Form 10-K for the fiscal year ended December 31, 1995
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.38 WestPoint Stevens Inc. 1995 Key Employee Stock Bonus Plan (As
Amended), incorporated by reference to the Annual Report on
Form 10-K for the fiscal year ended December 31, 1995
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.39 Tax Settlement Form 870-AD between WestPoint Stevens Inc.
(successor-in-interest to Cluett, Peabody & Co., Inc.) and the
Internal Revenue Service dated December 11, 1995, incorporated
by reference to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 (Commission File No. 0-21496)
filed by the Company with the Commission.
10.40 Tax Settlement Form 870-AD between WestPoint Stevens Inc.
(successor-in-interest to West Point-Pepperell, Inc.) and the
Internal Revenue Service dated August 29, 1995, incorporated
by reference to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 (Commission File No. 0-21496)
filed by the Company with the Commission.
10.41 Tax Settlement Form 870-AD between J.P. Stevens & Co., Inc.
and the Internal Revenue Service dated August 29, 1995,
incorporated by reference to the Annual Report on Form 10- K
for the fiscal year ended December 31, 1995 (Commission File
No. 0-21496) filed by the Company with the Commission.
10.42 Second Amendment and Waiver Agreement dated as of January 23,
1997, among the Company, NationsBank, N.A. (formerly known as
NationsBank of North Carolina, N.A., the Bank of New York, The
First National Bank of Boston, The First National Bank of
Chicago, The Nippon Credit Bank, Ltd., Wachovia Bank of
Georgia, N.A., SunTrust Bank, Atlanta (formerly known as Trust
Company Bank), AmSouth Bank of Alabama, and ABN AMRO Bank,
N.V.
10.43 Credit Agreement dated as of January 23, 1997, among WestPoint
Stevens (UK) Limited, P.J. Flower & Co. Limited, as the
Borrowers, the Company as Guarantor, the several lenders
identified on the signature pages thereto and such other
lenders as may from time to time become a party thereto and
NationsBank, N.A., as agent for the Lenders
10.44 First Amendment to the WestPoint Stevens Inc. Supplemental
Retirement Plan dated as of September 6, 1996
10.45 Employment Agreement effective January 1, 1997 between the
Company and Joseph L. Jennings superseding the Employment
Agreement of February 1, 1993.
11 Statement re: Computation of earnings per share
21 List of Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP, independent auditors.
27 Financial Data Schedule (for SEC use only)
</TABLE>
43
<PAGE> 46
WESTPOINT STEVENS INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
PERIOD EXPENSES DEDUCTIONS ADJUSTMENTS PERIOD(3)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Accounts receivable allowances:
Doubtful accounts....................... $ 16,357 $ 1,913 $ 1,174(1) $ - $ 17,096
Cash and/or trade discounts
and returns and allowances.......... 6,538 (773)(2) - - 5,765
-------- -------- -------- -------- --------
$ 22,895 $ 1,140 $ 1,174 $ - $ 22,861
======== ======== ======== ======== ========
Year Ended December 31, 1995
Accounts receivable allowances:
Doubtful accounts....................... $ 12,015 $ 6,486 $ 2,144(1) $ - $ 16,357
Cash and/or trade discounts
and returns and allowances.......... 5,638 900(2) - - 6,538
-------- -------- -------- -------- --------
$ 17,653 $ 7,386 $ 2,144 $ - $ 22,895
======== ======== ======== ======== ========
Year Ended December 31, 1994
Accounts receivable allowances:
Doubtful accounts....................... $ 10,496 $ 2,596 $ 920(1) $ (157) $ 12,015
Cash and/or trade discounts
and returns and allowances.......... 6,885 (1,247)(2) - - 5,638
-------- -------- -------- -------- --------
$ 17,381 $ 1,349 $ 920 $ (157) $ 17,653
======== ======== ======== ======== ========
</TABLE>
(1)Accounts written off, less recoveries of accounts previously written off.
(2)Net change.
(3)Reserves are deducted from assets to which they apply.
44
<PAGE> 47
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.
WESTPOINT STEVENS INC.
(Registrant)
By: /s/ Holcombe T. Green, Jr.
------------------------------------
Holcombe T. Green, Jr.
Chairman of the Board and Chief
Executive Officer
February 13, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
By: /s/ Holcombe T. Green, Jr. By: /s/ Morgan M. Schuessler
------------------------------------------ ---------------------------------------
Holcombe T. Green, Jr. Morgan M. Schuessler
Chairman of the Board and Chief Executive Executive Vice President/Finance
Officer (principal executive officer) and Chief Financial Officer
(principal financial officer)
February 13, 1997 February 13, 1997
By: /s/ Joseph L. Jennings, Jr. By: /s/ J. Nelson Griffith
------------------------------------------ ---------------------------------------
Joseph L. Jennings, Jr. J. Nelson Griffith
Vice Chairman of the Board Controller
(principal accounting officer)
February 13, 1997 February 13, 1997
By: /s/ M. Katherine Dwyer By: /s/ John G. Hudson
------------------------------------------ ---------------------------------------
M. Katherine Dwyer John G. Hudson
Director Director
February 13, 1997 February 13, 1997
By: /s/ Charles W. McCall By: /s/ Douglas T. McClure
------------------------------------------ ---------------------------------------
Charles W. McCall Douglas T. McClure
Director Director
February 13, 1997 February 13, 1997
</TABLE>
45
<PAGE> 48
<TABLE>
<S> <C>
By: /s/ Gerald B. Mitchell By: /s/ Phillip Siegel
------------------------------------------ ---------------------------------------
Gerald B. Mitchell Phillip Siegel
Director Director
February 13, 1997 February 13, 1997
By: /s/ John F. Sorte
------------------------------------------
John F. Sorte
Director
February 13, 1997
</TABLE>
46
<PAGE> 1
EXHIBIT 10.42
SECOND AMENDMENT AND WAIVER AGREEMENT
THIS SECOND AMENDMENT AND WAIVER AGREEMENT (this "Amendment"), dated as
of January 23, 1997, is among WestPoint Stevens Inc., a Delaware corporation
(the "Borrower"), NationsBank, N.A. (formerly known as NationsBank of North
Carolina, N.A. and referred to herein as "NationsBank"), The Bank of New York,
The First National Bank of Boston, The First National Bank of Chicago, The
Nippon Credit Bank, Ltd., Wachovia Bank of Georgia, N.A., SunTrust Bank, Atlanta
(formerly known as Trust Company Bank), AmSouth Bank of Alabama, and ABN AMRO
Bank, N.V. (collectively, the "Banks"), and NationsBank in its capacities as the
administrative agent for the Banks (the "Administrative Agent" or the "Agent")
and as trustee ("Trustee") for the Secured Parties (as hereafter defined).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement, dated as of November 23, 1994, as amended by that certain Amendment
Agreement dated as of December 4, 1995 (the "Existing Credit Agreement"), among
the parties hereto, the Banks have agreed to make loans to the Borrower;
WHEREAS, the Borrower, the Banks and the Agent desire to make certain
additional amendments to the Existing Credit Agreement;
NOW, THEREFORE, based upon the foregoing, and for good and valuable
consideration, the sufficiency and receipt of which is hereby acknowledged, the
parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless otherwise defined herein or
the context otherwise requires, terms used in this Amendment, including its
preamble and recitals, have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof):
"Amended Collateral Trust Agreement" means the Existing Collateral
Trust Agreement as amended hereby.
"Amended Credit Agreement" means the Existing Credit Agreement as
amended hereby.
"Amendment Effective Date" is defined in Subpart 4.1.
"Borrower Subsidiaries" means each of the Subsidiaries of the Borrower.
"Existing Collateral Trust Agreement" means that certain Amended and
Restated Collateral Trust Agreement, dated as of November 23, 1994, by and among
the Borrower, each of the Borrower Subsidiaries, the Trustee, each of the
Lenders, and IBJ Schroder Bank & Trust Company in its capacity as Stevens
Indenture Trustee.
"Trustee" means NationsBank, not in its individual capacity but in its
capacity as trustee for the Secured Parties (as defined in the Existing
Collateral Trust Agreement).
<PAGE> 2
SUBPART 1.2. Other Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Amendment, including its preamble
and recitals, have the meanings provided in the Amended Credit Agreement.
PART II
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment Effective
Date, the Existing Credit Agreement is hereby amended in accordance with this
Part II. Except as so amended, the Existing Credit Agreement shall continue in
full force and effect.
SUBPART 2.1 Amendments to the Introduction. The first paragraph of the
Existing Credit Agreement is amended to read in its entirety as follows:
This Amended and Restated Credit Agreement, dated as of
November 23, 1994, as amended as of December 4, 1995 pursuant to that
certain Amendment Agreement, and as further amended as of January 23,
1997 pursuant to that certain Second Amendment and Waiver Agreement, is
entered into by and among WestPoint Stevens Inc., a Delaware
corporation (the "Borrower"), NationsBank, N.A. (formerly known as
NationsBank of North Carolina, N.A. and referred to herein as
"NationsBank"), The Bank of New York, The First National Bank of
Boston, The First National Bank of Chicago, The Nippon Credit Bank,
Ltd., Wachovia Bank of Georgia, N.A., SunTrust Bank, Atlanta (formerly
known as Trust Company Bank) (collectively, other than NationsBank, the
"Co-Agent Banks"), AmSouth Bank of Alabama, ABN AMRO Bank, N.V. and any
other lending institutions, if any, listed on the signature pages
hereof (together with NationsBank, the Co-Agent Banks and any Assignee
(as hereinafter defined) pursuant to the terms of this Agreement,
collectively, "Banks" and each individually, a "Bank"), and
NationsBank, as the administrative agent for the Banks (the
"Administrative Agent" or the "Agent").
SUBPART 2.2 New Definitions Added to Article I. Article I of the
Existing Credit Agreement is hereby amended by inserting, in the alphabetically
appropriate places, the following definitions:
"Dollar Amount" means (a) with respect to Dollars or an amount
denominated in Dollars, such amount, and (b) with respect to an amount
of Pounds Sterling or an amount denominated in Pounds Sterling, the
Dollar Equivalent of such amount on the date of determination thereof.
"Dollar Equivalent" means, on any date, with respect to an
amount denominated in Pounds Sterling, the amount of Dollars into which
the Agent could, in accordance with its practice from time to time in
the interbank foreign exchange market, convert such amount of Pounds
Sterling at its spot rate of exchange (inclusive of all reasonable
related costs of conversion) applicable to the relevant transaction at
or about 10:00 A.M., Charlotte, North Carolina time, on such date.
"European Borrowers" means collectively WestPoint Stevens UK
and Flower.
"Flower" means P.J. Flower & Co. Limited, an English
corporation and a wholly-owned subsidiary of WestPoint Stevens (UK).
2
<PAGE> 3
"Foreign Currency Committed Amount" has the meaning ascribed
to such term in Section 2.1(a) of the Foreign Currency Credit
Agreement.
"Foreign Currency Credit Agreement" means that certain Credit
Agreement dated as of January 23, 1997 by and among WestPoint Stevens
(UK), Flower, the Borrower as guarantor, NationsBank as agent, and the
Banks, pursuant to which the Banks have agreed to make revolving credit
and letter of credit facilities available to the European Borrowers.
"Foreign Currency Loan Reserve" means, as of the date of any
determination thereof from time to time, an amount equal to the Dollar
Amount of the sum of (i) the outstanding principal balances of Foreign
Currency Loans and (ii) the Foreign Currency LOC Obligations, as such
terms are defined in the Foreign Currency Credit Agreement.
"Second Amendment Agreement" means that Second Amendment and
Waiver Agreement to this Credit Agreement, dated as of January 23,
1997, among the Borrower, the Agent and the Banks, amending this
Agreement as then in effect.
"WestPoint Stevens (UK)" means WestPoint Stevens (UK) Limited,
an English corporation and a wholly-owned subsidiary of the Borrower.
SUBPART 2.3 Amendment of the Definition of "Loan Documents." Article I
is further amended by deleting in its entirety the existing definition of "Loan
Documents" and replacing it, in the appropriate alphabetical place, with the
following new definition:
"Loan Documents" means, collectively this Agreement, the
Notes, the Collateral Trust Agreement, the other Collateral Documents,
the Letters of Credit, the Applications/Notices, and the Foreign
Currency Credit Agreement, as the same may be amended, modified,
supplemented or restated from time to time.
SUBPART 2.4 Amendment of the Definition of "Secondary Borrowing Base".
Article I is further amended by deleting in its entirety the existing definition
of "Secondary Borrowing Base" and replacing it, in the appropriate alphabetical
place, with the following new definition:
"Secondary Borrowing Base" means the amount equal to (i) 50%
of Eligible Inventory less (ii) the sum of (a) the Alamac Reserve and
(b) the Foreign Currency Loan Reserve.
SUBPART 2.5 Amendment to Section 3.4(a). Section 3.4(a) is amended in
its entirety so that such Section now reads as follows:
(a) The Borrower shall pay to the Administrative Agent for pro rata
distribution to each Bank (based on its Revolver Pro Rata Share) a commitment
fee (collectively, the "Commitment Fees") for the period commencing on the
Initial Borrowing Date to and including the Revolver Termination Date computed
at a rate equal to 3/8 of 1% per annum of the difference between (i) the average
daily amount of Revolving Loan Commitments and (ii) the sum of the average daily
outstanding principal amount of the Revolving Loans and the average daily
aggregate amount available for drawing under all outstanding Letters of Credit;
provided, however, for purposes of this subparagraph (ii), Swing Line Loans
shall not be counted as outstanding Revolving Loans. For the avoidance of any
doubt, in the calculation of the amount
3
<PAGE> 4
of Commitment Fees owing by the Borrower to the Banks, the amount of the Alamac
Reserve and the Foreign Currency Loan Reserve shall not be counted as
outstanding Revolving Loans or otherwise affect or reduce the amount of
Commitment Fees owing by the Borrower to the Banks hereunder.
SUBPART 2.6 Amendments to Section 9.8(c). Section 9.8(c) is amended in
its entirety so that such Section now reads as follows:
(c) Subject to paragraph (f) of this Section 9.8, any Bank may
at any time assign to one or more banks or other entities ("Assignees")
all or any part of its Credit Exposure, provided that (i) unless
assigned to an Affiliate of such Bank or another Bank, it assigns all
of its Credit Exposure or a portion of its Credit Exposure in an amount
not less than $10,000,000 (calculated treating Revolving Loans and
participating interests in Letters of Credit as not being in addition
to the Revolving Loan Commitments), (ii) after such assignment, such
Bank and its Affiliates continue to hold at least $10,000,000
(calculated treating Revolving Loans and participating interests in
Letters of Credit as not being in addition to the Revolving Loan
Commitments) of Credit Exposure or have reduced their Credit Exposure
to $0, (iii) each Bank must sell and each Assignee must purchase an
identical percentage interest in the Primary Revolving Loan Credit
Exposure and the Secondary Revolving Loan Credit Exposure, (iv)
simultaneously with the sale of its Credit Exposure or any portion of
its Credit Exposure to any Assignee, each Bank must sell, to the same
such Assignee, the same percentage in its share of the Revolving
Committed Amount under the Alamac Credit Agreement (as such term is
defined therein) as the percentage of its Credit Exposure which it
assigns hereunder, to such Assignee, (v)simultaneously with the sale of
its Credit Exposure or any portion of its Credit Exposure to any
Assignee, each Bank must sell, to the same such Assignee, the same
percentage in its share of the Foreign Currency Committed Amount as the
percentage of its Credit Exposure which it assigns hereunder, to such
Assignee, and (vi) any Assignee, other than an Affiliate of such Bank
or another Bank, must be reasonably acceptable to the Administrative
Agent and the Borrower. Such acceptance shall not be unreasonably
delayed or withheld and, in the case of the Borrower, such acceptance
shall be deemed to have occurred unless the Borrower gives the
Administrative Agent notice of its objection to such Assignee within 24
hours after the Administrative Agent sends the Borrower notice of the
assignment pursuant to the next sentence. In the event of any
assignment, the assignor Bank shall give notice to the Administrative
Agent, the Administrative Agent shall send notice of the same by
telecopy to the Borrower, and the assignor Bank shall deliver to the
Administrative Agent, for its acceptance and recording in its records,
an assignment agreement substantially in the form of Exhibit 9.8
hereto, together with a processing and recordation fee of $3,000 (or if
the Assignee is a Bank, $1,500); provided that in the case of any
assignment pursuant to Section 2.9(e) the Assignee shall pay such
processing and recording fee, and, notwithstanding any provision of
this Agreement to the contrary, the Borrower shall not be required to
pay any such processing and recording fee under any circumstances.
Within five (5) Business Days of receipt thereof, the Administrative
Agent shall, if such assignment agreement has been fully executed by
the Assignee and the assignor Bank and completed and is in
substantially the form of Exhibit 9.8 hereto, execute such assignment
agreement and, as agent for the Borrower for the sole purpose of
maintaining a register (the "Register") on which it enters the Credit
Exposure of each Bank hereunder, record such assignment in the
Register. No assignment shall be effective unless it has been recorded
on the Register as provided in this Section 9.8(c). The Borrower, the
Administrative Agent and the Banks shall treat each Bank for which
Credit Exposure is recorded on the Register as the holder of such
Credit Exposure for all purposes of this Agreement notwithstanding
notice to the contrary. Notwithstanding the foregoing, the failure of
the Administrative Agent to make such recording in
4
<PAGE> 5
respect of an assignment pursuant to this Section 9.8(c) or any
error with respect to such recording shall not limit or otherwise
affect the obligations of the Borrower hereunder nor shall such failure
or error affect the rights of the Borrower hereunder or under
applicable law. The Borrower, the Banks, and the Administrative Agent
agree that to the extent of any assignment, the Assignee shall be
deemed to have the same rights and benefits with respect to the
Borrower under this Agreement and the same rights of set-off and
obligation to share pursuant to Section 9.6 as it would have had if it
were a Bank that was an original signatory to this Agreement, provided
that the Borrower, the Banks and the Administrative Agent shall be
entitled to continue to deal solely and directly with the assignor Bank
in connection with the interests so assigned to the Assignee until the
assignment agreement and any required fee, as described above, shall
have been delivered to the Administrative Agent by the assignor Bank
and the Assignee and the assignment shall have become effective as
described above. Upon the assignment of Credit Exposure provided for
hereby, the assignor Bank shall be relieved of its obligations
hereunder to the extent of such assignment. Upon receipt of any Note
representing Credit Exposure assigned pursuant to this Section 9.8(c),
the Borrower agrees to issue a new Note for such Credit Exposure
payable to the Assignee (or its registered assigns) and a new Note for
any unassigned portion of such Credit Exposure to the assignor Bank (or
its registered assigns).
PART III
AGREEMENTS AFFECTING COLLATERAL TRUST AGREEMENT
SUBPART 3.1. Amendment to Definitions of Collateral Trust Agreement. Effective
on (and subject to the occurrence of ) the Amendment Effective Date, the
Existing Collateral Trust Agreement is hereby amended in accordance with this
Subpart 3.1. Except as so amended, and subject to the waivers contained in
Subpart 3.2 hereof, the Existing Collateral Trust Agreement shall continue in
full force and effect.
SUBPART 3.1.1. Amendment to Definition of "Debt Instruments." Section
1.1(a) of the Existing Collateral Trust Agreement is amended by deleting in its
entirety the existing definition of "Debt Instruments" and replacing it, in the
appropriate alphabetical place, with the following new definition:
"Debt Instruments" means (i) the Restated Credit Agreement, any
notes issued pursuant thereto and the other agreements, documents and
instruments executed in connection therewith, and any amendments,
supplements, or restatements thereof, including, without limitation,
the Restated Guaranties, the Foreign Currency Credit Agreement and the
notes issued pursuant thereto, and liabilities of up to $10,000,000
outstanding at any time under interest rate swap agreements with Banks
permitted by the Restated Credit Agreement, and (ii) the Stevens
Indenture, the Stevens Debentures and the other documents and
instruments executed in connection therewith.
SUBPART 3.2. Limited Waiver of Requirements of Section 2.2(b) and (c)
of Collateral Trust Agreement. Effective on (and subject to the occurrence of )
the Amendment Effective Date, the Banks, which in the aggregate constitute the
Required Secured Parties as defined in the Existing Collateral Trust Agreement,
hereby waive the Borrower's compliance with Section 2.2(b) and (c) of the
Existing Collateral Trust Agreement to the limited extent that such provisions
(i) would otherwise require the Borrower to pledge to the Trustee the capital
stock of WestPoint Stevens (UK); (ii) would otherwise require WestPoint Stevens
(UK) to pledge to the Trustee the capital stock of Flower; (iii) would otherwise
require WestPoint Stevens (UK) and Flower to guaranty the Secured Debt; and (iv)
would otherwise require WestPoint
5
<PAGE> 6
Stevens (UK) and Flower to grant liens and security interests on their
respective assets in favor of the Trustee to secure the Secured Debt. Such
waiver is effective only with respect to Flower and WestPoint Stevens (UK) and
does not relate to any other application, prospective or otherwise, of the
requirements of such Section.
PART IV
CONDITIONS TO EFFECTIVENESS
SUBPART 4.1. Amendment Effective Date. This Amendment shall be and
become effective on such date (the "Amendment Effective Date") when all of the
conditions set forth in this Subpart 4.1 shall have been satisfied, and
thereafter, this Amendment shall be known, and may be referred to, as the
"Amendment Agreement."
SUBPART 4.1.1. Execution of Counterparts. The Agent shall have received
counterparts of this Amendment, each of which shall have been duly executed on
behalf of the Borrower, the Agent and each Bank.
SUBPART 4.1.2. Certified Resolutions. The Agent shall have received
resolutions of the Board of Directors of the Borrower authorizing this
Amendment, such resolutions to be certified by the Secretary or Assistant
Secretary of the Borrower.
SUBPART 4.1.3. Closing Certificate. The Agent shall have received a
certificate from the Borrower certifying that (i) no Default or Event of Default
exists as of the Amendment Effective Date, and (ii) the representations and
warranties of the Borrower made in or pursuant to the Loan Documents are true in
all material respects on and as of the Amendment Effective Date.
SUBPART 4.1.4. Trustee Certificates. In accordance with Section 11.1 of
the Existing Collateral Trust Agreement, the Trustee shall have received a
certificate executed by the president or any vice president of the Borrower to
the effect that the amendments to the Existing Collateral Trust Agreement
effected by this Amendment will not result in a breach of any provision or
covenant contained in the Restated Credit Agreement.
SUBPART 4.1.5. Documentation. All documents executed or submitted
pursuant hereto shall be satisfactory in form and substance to the Agent and its
counsel. The Agent and its counsel shall have received all information, and such
counterpart originals or such certified or other copies of such originals, as
the Agent may reasonably request, and all legal matters incident to the
transactions contemplated by this Amendment shall be satisfactory to the Agent.
In addition, the Agent shall have received such other agreements, documents or
instruments (including legal opinions) as it may from time to time reasonably
request.
SUBPART 4.2 Acknowledgement and Agreement of Borrower Subsidiaries.
Each of the undersigned Borrower Subsidiaries, as parties to the Restated
Guaranties and the Collateral Documents, hereby (a) acknowledge, agree to, and
join in the execution and delivery of this Amendment, including without
limitation the amendment of the Existing Collateral Trust Agreement effected
hereby, and confirm and agree that the Restated Guaranties and the Collateral
Documents are, and shall continue to be, in full force and effect except as
amended hereby; (b) ratify and confirm in all respects their respective
obligations thereunder, except that, upon the effectiveness of, and on and after
the date of, this Amendment, all references in the Collateral Documents and the
Restated Guaranties to the "Restated Credit Agreement,"
6
<PAGE> 7
"thereunder," "thereof" or words of like import referring to the Existing Credit
Agreement (as defined in this Amendment) shall mean the Amended Credit Agreement
(as defined in this Amendment), and all references to the Collateral Trust
Agreement, "thereunder," thereof," or words of like import referring to the
Collateral Trust Agreement shall mean the Amended Collateral Trust Agreement (as
defined in this Amendment).
PART V
MISCELLANEOUS
SUBPART 5.1 Cross-References. References in this Amendment to any Part
or Subpart are, unless otherwise specified, to such Part or Subpart of this
Amendment.
SUBPART 5.2 Instrument Pursuant to Existing Credit Agreement. This
Amendment is a document executed pursuant to the Existing Credit Agreement and
shall (unless otherwise expressly indicated therein) be construed, administered
and applied in accordance with the terms and provisions of the Existing Credit
Agreement.
SUBPART 5.3 Primary Subsidiaries. The Borrower, the Lenders, and the
Agent acknowledge and agree that each of the European Borrowers constitutes a
"Primary Subsidiary" within the meaning of the Amended Credit Agreement.
SUBPART 5.4 Notes and Loan Documents. The Borrower hereby confirms and
agrees that the Notes and the other Loan Documents are, and shall continue to
be, in full force and effect, and hereby ratifies and confirms in all respects
its obligations thereunder, except that, upon the effectiveness of, and on and
after the date of, this Amendment, all references in each Note and each other
Loan Document to the "Credit Agreement", "thereunder", "thereof" or words of
like import referring to the Existing Credit Agreement shall mean the Amended
Credit Agreement.
SUBPART 5.5 Counterparts, Effectiveness, Etc. This Amendment may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
SUBPART 5.6 Governing Law; Entire Agreement. THIS AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SUBPART 5.7 Successors and Assigns. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective duly authorized officers as of the day and year
first above written.
WESTPOINT STEVENS INC.
ATTEST:
By By
----------------------------- -----------------------------------
Title Title
-------------------------- --------------------------------
NATIONSBANK, N.A.,
in its individual capacity, as Agent
and as Trustee
By
----------------------------------
Title
-------------------------------
THE BANK OF NEW YORK
By
----------------------------------
Title
-------------------------------
THE FIRST NATIONAL BANK OF BOSTON
By
----------------------------------
Title
-------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By
----------------------------------
Title
-------------------------------
[Signatures Continue]
<PAGE> 9
THE NIPPON CREDIT BANK, LTD.
By
----------------------------------
Title
-------------------------------
WACHOVIA BANK OF GEORGIA, N.A.
By
----------------------------------
Title
-------------------------------
SUNTRUST BANK, ATLANTA
By
----------------------------------
Title: Vice President
By
----------------------------------
Title
-------------------------------
AMSOUTH BANK OF ALABAMA
By
----------------------------------
Title
-------------------------------
ABN AMRO BANK, N.V.
By
----------------------------------
Title
-------------------------------
[Signatures Continue]
9
<PAGE> 10
BORROWER SUBSIDIARIES: ALAMAC KNIT FABRICS, INC.
By
----------------------------------
Title
-------------------------------
WESTPOINT STEVENS STORES, INC.
(formerly known as WestPoint Pepperell
Stores, Inc.)
By
----------------------------------
Title
-------------------------------
J.P. STEVENS & CO., INC.
By
----------------------------------
Title
-------------------------------
WESTPOINT-PEPPERELL ENTERPRISES, INC.
By
----------------------------------
Title
-------------------------------
J.P. STEVENS ENTERPRISES, INC.
By
----------------------------------
Title
-------------------------------
[Signatures Continue]
<PAGE> 11
WESTPOINT STEVENS (CANADA) LTD.
By
----------------------------------
Title
-------------------------------
ALAMAC HOLDINGS INC.
By
----------------------------------
Title
-------------------------------
AIH INC.
By
----------------------------------
Title
-------------------------------
ALAMAC ENTERPRISES INC.
By
----------------------------------
Title
-------------------------------
ALAMAC SUB HOLDINGS INC.
By
----------------------------------
Title
-------------------------------
<PAGE> 1
EXHIBIT 10.43
CREDIT AGREEMENT
Dated as of January 23, 1997
among
WESTPOINT STEVENS (UK) LIMITED
and
P. J. FLOWER & CO. LIMITED
as Borrowers,
WESTPOINT STEVENS INC.
as Guarantor,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTY HERETO
AND
NATIONSBANK, N.A.,
as Agent
<PAGE> 2
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of January 23, 1997 (the "Credit
Agreement"), is by and among WESTPOINT STEVENS (UK) LIMITED ("UK Holdings"), a
limited liability company incorporated in England, P. J. FLOWER & CO. LIMITED
("Flower"), a limited liability company incorporated in England (Flower and UK
Holdings hereinafter may each be referred to as a "Borrower" or, collectively,
as the "Borrowers"), WESTPOINT STEVENS INC., a Delaware corporation (the
"Guarantor"), the several lenders identified on the signature pages hereto and
such other lenders as may from time to time become a party hereto (the
"Lenders") and NATIONSBANK, N.A., as agent for the Lenders (in such capacity,
the "Agent").
W I T N E S S E T H
WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement, dated as of November 23, 1994, among the Guarantor (as borrower
thereunder), the Lenders, and the Agent, the Lenders have extended to the
Guarantor (as borrower) certain revolving credit and letter of credit facilities
(as amended from time to time, the "WestPoint Credit Agreement");
WHEREAS, UK Holdings is a wholly-owned subsidiary of the Guarantor, and
Flower is a wholly-owned subsidiary of UK Holdings;
WHEREAS, the Guarantor, UK Holdings, and Flower have requested the
Lenders to provide certain foreign currency revolving credit and letter of
credit facilities to UK Holdings and Flower, such facilities to be denominated
in pounds sterling;
WHEREAS, the Lenders and the Agent have agreed to provide such foreign
currency revolving credit and letter of credit facilities to UK Holdings and
Flower upon the terms and conditions contained in this Credit Agreement; and
WHEREAS, it is the express intention of the Lenders, the Agent, the
Guarantor, and the Borrowers that this Credit Agreement shall supplement the
WestPoint Credit Agreement by allowing UK Holdings and Flower to borrow and
obtain letters of credit in pounds sterling, and although this Credit Agreement
supplements the facilities provided to the Guarantor (as a borrower) under the
WestPoint Credit Agreement, no term, condition, or other provision of this
Credit Agreement shall limit, modify, impair or affect any term, condition or
other provision of the WestPoint Credit Agreement;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions. As used in this Credit Agreement, the following terms
shall have the meanings specified below unless the context otherwise requires:
<PAGE> 3
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (i) a
court or governmental agency having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, administrator, sequestrator
(or similar official) of such Person or for any substantial part of its
Property or ordering the winding up or liquidation of its affairs; or
(ii) there shall be commenced against such Person an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or any case, proceeding or other action for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
administrator, sequestrator (or similar official) of such Person or for
any substantial part of its Property or for the winding up or
liquidation of its affairs, and such involuntary case or other case,
proceeding or other action shall remain undismissed, undischarged or
unbonded for a period of sixty (60) consecutive days; or (iii) such
Person shall commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consent
to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, administrator,
sequestrator (or similar official) of such Person general assignment
for the benefit of creditors; or (iv) such Person shall be unable to,
or shall admit in writing its inability to, pay its debts generally as
they become due.
"Borrower" or "Borrowers" has the meaning ascribed to such
terms in the Recitals hereof, together with any successors and
permitted assigns.
"Borrowers' Obligations" means the sum of (i) Foreign Currency
Loans, (ii) Foreign LOC Obligations, and (iii) all other charges, fees,
expenses and liabilities of the Borrowers arising hereunder or in
connection herewith.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina are
authorized or required by law to close, and such day shall also be a
day on which dealings in Pounds Sterling are being carried on between
banks in London, England.
"Closing Date" means January 23, 1997.
"Commitment" means, with respect to each Lender, the
commitment of such Lender to make Foreign Currency Loans up to the
amount of its Foreign Currency Commitment Percentage of the Foreign
Currency Committed Amount (including the commitment of such Lender to
participate in the Foreign Letters of Credit), and "Commitments" means
such commitments of the Lenders collectively.
"Credit Documents" means a collective reference to this Credit
Agreement, the Foreign Currency Notes, the LOC Documents, and all other
related agreements and documents issued or delivered hereunder or
thereunder or pursuant hereto or thereto.
"Credit Party" means any of the Borrowers and the Guarantor.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
2
<PAGE> 4
"Determination Date" means:
(a) the date two Business Days prior to the date any Foreign
Currency Loan is made or any Foreign Letter of Credit is issued;
(b) the date two Business Days prior to the date any Foreign
Currency Loan is continued from the current Interest Period for such
Foreign Currency Loan into a subsequent Interest Period;
(c) the date of any drawing under any Foreign Letter of
Credit;
(d) the last Business Day of each month; or
(e) the date of any reduction of the Foreign Currency
Committed Amount pursuant to the terms of Section 3.4(a).
"Dollar Amount" means (a) with respect to Dollars or an amount
denominated in Dollars, such amount and (b) with respect to an amount
of Pounds Sterling or an amount denominated in Pounds Sterling, the
Dollar Equivalent of such amount on the applicable date contemplated in
this Credit Agreement.
"Dollar Equivalent" means, on any date, with respect to an
amount denominated in Pounds Sterling, the amount of Dollars into which
the Agent could, in accordance with its practice from time to time in
the interbank foreign exchange market, convert such amount of Pounds
Sterling at its spot rate of exchange (inclusive of all reasonable
related costs of conversion) applicable to the relevant transaction at
or about 10:00 A.M., Charlotte, North Carolina time, on such date.
"Eligible Assignee" means any Lender or Affiliate or
subsidiary of a Lender, and any other commercial bank, financial
institution or "accredited investor" (as defined in Regulation D of the
Securities and Exchange Commission) reasonably acceptable to the Agent
and the Borrowers.
"Event of Default" means such term as defined in Section 9.1.
"Eurocurrency Rate" means, for the Interest Period for each
Foreign Currency Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate equal
to the sum of (i) the per annum rate of interest determined by the
Agent on the basis of the offered rates for deposits in Pounds Sterling
(for a period of time corresponding to such Interest Period and
commencing on the first day of such Interest Period) which appear on
Telerate Page 3750 (or such other page as may replace that page on that
service) as of 11:00 a.m. (London time) two Business Days before the
first day of such Interest Period (provided that if at least two such
offered rates appear on Telerate Page 3750 (or such other page as may
replace that page on that service), the rate in respect of such
Interest Period will be the arithmetic mean of such offered rates) plus
(ii) the MLA Cost. If for any reason the foregoing rates are
unavailable from the Telerate service, then the Eurocurrency Rate shall
be equal to the sum of (i) a market rate for the applicable Foreign
Currency Loan for the applicable Interest Period as reasonably
determined by the Agent plus (ii) the MLA Cost.
"Foreign Currency Commitment Percentage" means, for any
Lender, the percentage identified as its Foreign Currency Commitment
Percentage on Schedule 2.1(a), as such percentage
3
<PAGE> 5
may be modified in connection with any assignment made in accordance
with the provisions of Section 11.3.
"Foreign Currency Committed Amount" shall have the meaning
assigned to such term in Section 2.1(a).
"Foreign Currency Equivalent" means, on any date, with respect
to an amount denominated in Dollars, the amount of Pounds Sterling into
which the Agent could, in accordance with its practice from time to
time in the interbank foreign exchange market, convert such amount of
Dollars at its spot rate of exchange (inclusive of all reasonable
related costs of conversion) applicable to the relevant transaction at
or about 10:00 A.M., Charlotte, North Carolina time, on such date.
"Foreign Currency Loans" shall have the meaning assigned to
such term in Section 2.1(a).
"Foreign Currency Note" means a promissory note of a Borrower
in favor of a Lender delivered pursuant to Section 2.1(e) and
evidencing the Foreign Currency Loans of such Lender to such Borrower,
as such promissory note may be amended, modified, restated or replaced
from time to time.
"Foreign Letter of Credit" means any letter of credit issued
by the Issuing Lender for the account of either Borrower in accordance
with the terms of Section 2.2.
"Foreign LOC Commitment" means the commitment of the Issuing
Lender to issue Foreign Letters of Credit in an aggregate face amount
at any time outstanding (together with the amounts of any unreimbursed
drawings thereon) of up to the Foreign LOC Committed Amount.
"Foreign LOC Committed Amount" shall have the meaning assigned
to such term in Section 2.2.
"Foreign LOC Obligations" means, at any time, the sum of (i)
the maximum amount which is, or at any time thereafter may become,
available to be drawn under Foreign Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Foreign Letters of Credit plus (ii) the aggregate amount of all
drawings under Foreign Letters of Credit honored by the Issuing Lender
but not theretofore reimbursed.
"Guarantor" means WestPoint Stevens Inc.
"Interest Payment Date" means, for any Foreign Currency Loan,
the last day of each Interest Period for such Foreign Currency Loan and
the Termination Date, and in addition where the applicable Interest
Period is more than 3 months, then also the date 3 months from the
beginning of the Interest Period, and each 3 months thereafter. If an
Interest Payment Date falls on a date which is not a Business Day, the
Interest Payment Date shall be deemed to be the next succeeding
Business Day, except that where the next succeeding Business Day falls
in the next succeeding calendar month, then on the next preceding
Business Day.
"Interest Period" means a period of one, two, three or six
months' duration, as the applicable Borrower may elect, commencing, in
each case, on the date of the borrowing (including conversions,
extensions and renewals), provided, however, (A) if any Interest Period
would end on
4
<PAGE> 6
a day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day (except that where the
next succeeding Business Day falls in the next succeeding calendar
month, then on the next preceding Business Day), (B) no Interest Period
shall extend beyond the Termination Date, and (C) where an Interest
Period begins on a day for which there is no numerically corresponding
day in the calendar month in which the Interest Period is to end, the
Interest Period shall end on the last Business Day of such calendar
month.
"Interim Foreign Currency Rate" means, for any day, with
respect to any Foreign Currency Loan, any participation in a Foreign
Letter of Credit or any unreimbursed drawing under a Foreign Letter of
Credit, a rate per annum equal to the sum of (i) the average rate at
which overnight deposits in Pounds Sterling and approximately equal in
principal amount to the applicable Foreign Currency Loan or Foreign
Letter of Credit are obtainable by the Agent (or, in the case of any
Foreign Letter of Credit, the Issuing Lender) on such day in the
interbank market, adjusted to reflect any direct or indirect costs of
obtaining such deposits plus (ii) the MLA Cost. The Interim Foreign
Currency Rate shall be determined for each day by the Agent or Issuing
Lender, as appropriate, and such determination shall be conclusive
absent manifest error.
"Issuing Lender" means NationsBank.
"Lenders" means each of the Persons identified as a "Lender"
on the signature pages hereto, and each Person which may become a
Lender by way of assignment in accordance with the terms hereof,
together with their successors and permitted assigns.
"LOC Documents" means, with respect to any Foreign Letter of
Credit, such Foreign Letter of Credit, any amendments thereto, any
documents delivered in connection therewith, any application therefor,
and any agreements, instruments, guarantees or other documents (whether
general in application or applicable only to such Foreign Letter of
Credit) governing or providing for (i) the rights and obligations of
the parties concerned or at risk or (ii) any collateral security for
such obligations.
"MLA Cost" means, with respect to any Foreign Currency Loan
made by any Lender, the cost imputed to such Lender of compliance with
the Mandatory Liquid Assets requirements of the Bank of England during
the Interest Period applicable to such Foreign Currency Loan, expressed
as a rate per annum and determined in accordance with Schedule 1.1A.
"NationsBank" means NationsBank, N.A. and its successors.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Schedule 1.1B, as required by Section
2.1(b)(i).
"Notice of Extension" means the written notice of extension in
substantially the form of Schedule 1.1C as required by Section 3.2.
"Participation Interest" means, the extension of credit by a
Lender by way of a purchase of a participation in any Foreign Letters
of Credit or Foreign LOC Obligations as provided in Section 2.2(c) or
Section 2.2(f), or in any Foreign Currency Loans as provided in Section
3.12.
"Pounds Sterling" means the lawful currency of the United
Kingdom.
5
<PAGE> 7
"Qualifying Lender" means any Lender which (i) as of the
Closing Date, is a bank for the purposes of section 349 Income and
Corporation Taxes Act 1988 of the United Kingdom (which under current
law has the meaning given in Section 840A of such Act) and (ii) as of
the Closing Date, will be within the charge to United Kingdom
corporation tax as respects payments of interest to be received by it
under this Credit Agreement and the Foreign Currency Notes.
"Regulation G, T, U, or X" means Regulation G, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
"Reimbursing Borrower" shall have the meaning assigned to such
term in Section 2.2(d).
"Reimbursement Date" shall have the meaning assigned to such
term in Section 2.2(d).
"Required Lenders" means, as of the date of determination
thereof, the Lenders having 51% or more of the aggregate principal
amount of the Commitments then outstanding.
"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents (including, in the case of the Borrowers, their Memorandum of
Association and Articles of Association) of such Person , and any law,
treaty, rule or regulation or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its material property.
"Termination Date" means the earliest to occur of (i) May 23,
2001, (ii) the date upon which the Foreign Currency Committed Amount
shall have been reduced to $0 pursuant to this Credit Agreement or
(iii) the occurrence of the "Revolver Termination Date" within the
meaning of the WestPoint Credit Agreement.
"WestPoint Credit Agreement" has the meaning ascribed to such
term in the Recitals hereof.
"WestPoint Letters of Credit" means collectively the
Commercial Letters of Credit and Standby Letters of Credit outstanding
pursuant to the terms of the WestPoint Credit Agreement and documents
related thereto.
"WestPoint Loan" means the Revolving Loans outstanding
pursuant to the terms of the WestPoint Credit Agreement.
1.2 Other Capitalized Terms. Any capitalized term which is not
otherwise defined herein shall have the meaning ascribed to such term in the
WestPoint Credit Agreement.
1.3 Computation of Time Periods. For purposes of computation of periods
of time hereunder, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding."
1.4 Accounting Terms. Except as otherwise expressly provided herein,
all accounting terms used herein shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Lenders hereunder shall be prepared, in accordance with GAAP
applied on a consistent basis.
6
<PAGE> 8
SECTION 2
CREDIT FACILITIES
-----------------
2.1 Foreign Currency Loan Facility.
-------------------------------
(a) Foreign Currency Commitment. Subject to the terms and
conditions hereof and in reliance upon the representations and
warranties set forth herein, each Lender severally agrees to make
available to the Borrowers such Lender's Foreign Currency Commitment
Percentage of revolving credit loans in Pounds Sterling ("Foreign
Currency Loans") from time to time from the Closing Date until the
Termination Date, or such earlier date as the Commitments shall have
been terminated as provided herein for the purposes hereinafter set
forth; provided, however, that the Dollar Amount (as determined as of
the most recent Determination Date) of the aggregate amount of Foreign
Currency Loans outstanding at any time shall not exceed TWENTY MILLION
DOLLARS ($20,000,000.00) (the "Foreign Currency Committed Amount");
provided, further, (i) with regard to each Lender individually, the
Dollar Amount of such Lender's outstanding Foreign Currency Loans shall
not exceed such Lender's Foreign Currency Commitment Percentage of the
Foreign Currency Committed Amount, (ii) with regard to the Lenders
collectively, the sum of the Dollar Amount (as determined as of the
most recent Determination Date) of the aggregate principal amount of
outstanding Foreign Currency Loans plus the Dollar Amount (as
determined as of the most recent Determination Date) of Foreign LOC
Obligations outstanding shall not at any time exceed the Foreign
Currency Committed Amount and (iii) with regard to the Lenders
collectively, the aggregate principal amount of outstanding WestPoint
Loans plus WestPoint Letters of Credit plus the Dollar Amount (as
determined as of the most recent Determination Date) of the aggregate
principal amount of outstanding Foreign Currency Loans plus the Dollar
Amount (as determined as of the most recent Determination Date) of
Foreign LOC Obligations outstanding shall not exceed the Total
Commitments. Foreign Currency Loans may be repaid and reborrowed in
accordance with the provisions hereof; provided, however, that no more
than 5 separate Foreign Currency Loans shall be outstanding hereunder
at any time. For purposes hereof, Foreign Currency Loans with different
Interest Periods shall be considered as separate Foreign Currency
Loans, even if they begin on the same date, although borrowings,
extensions and conversions may, in accordance with the provisions
hereof, be combined at the end of existing Interest Periods to
constitute a new Foreign Currency Loan with a single Interest Period.
(b) Foreign Currency Loan Borrowings.
---------------------------------
(i) Notice of Borrowing. Either Borrower shall
request a Foreign Currency Loan borrowing by written notice
(or telephonic notice promptly confirmed in writing) to the
office of the Agent specified in Section 3.13(b) not later
than 12:00 Noon (London. time) on the third Business Day prior
to the date of the requested borrowing. Each such request for
borrowing shall be irrevocable and shall specify (A) that a
Foreign Currency Loan is requested, (B) the date of the
requested borrowing (which shall be a Business Day), (C) the
aggregate principal amount to be borrowed, and (D) the
Interest Period(s) therefor. If the Borrower(s) shall fail to
specify in any such Notice of Borrowing an applicable Interest
Period, then such notice shall be deemed to be a request for
an Interest Period of one month. The Agent shall give notice
to each Lender promptly upon
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<PAGE> 9
receipt of each Notice of Borrowing pursuant to this Section
2.1(b)(i), the contents thereof and each Lender's share of any
borrowing to be made pursuant thereto.
(ii) Minimum Amounts. Each Foreign Currency Loan
shall be in a minimum aggregate amount equal to (A) with
respect to the initial Loans of UK Holdings, the Foreign
Currency Equivalent of $4,000,000 and integral multiples of
$750,000 in excess thereof (or the remaining amount of the
Foreign Currency Committed Amount, if less), and (B) with
respect to all other Loans, the Foreign Currency Equivalent of
$1,500,000 and integral multiples of $750,000 in excess
thereof (or the remaining amount of the Foreign Currency
Committed Amount, if less).
(iii) Advances. Each Lender will make its Foreign
Currency Commitment Percentage of each Foreign Currency Loan
borrowing available to the Agent as specified in Section
3.13(b), or in such other manner as the Agent may specify in
writing, by 1:00 P.M. (London time) on the date specified in
the applicable Notice of Borrowing in Pounds Sterling and in
funds immediately available to the Agent. Such borrowing will
then be made available to the applicable Borrower by the Agent
by crediting the account of such Borrower on the books of the
Agent with the aggregate of the amounts made available to the
Agent by the Lenders and in like funds as received by the
Agent.
(c) Repayment. The principal amount of all Foreign Currency
Loans shall be due and payable in full in Pounds Sterling on the
Termination Date. The obligations of each Borrower to pay or repay any
amounts under this Credit Agreement shall be several.
(d) Interest. Subject to the provisions of Section 3.1,
Foreign Currency Loans shall bear interest at a per annum rate equal to
the Eurocurrency Rate plus the Borrowing Margin applicable to
Eurodollar Rate Loans. Interest on Foreign Currency Loans shall be
payable (in Pounds Sterling) in arrears on each Interest Payment Date.
(e) Foreign Currency Notes. The Foreign Currency Loans made by
each Lender shall be evidenced by a duly executed promissory note of
each Borrower to each Lender in substantially the form of Schedule
2.1(e).
(f) Financial Assistance Prohibition. Flower will use the
proceeds of the Foreign Currency Loans and will use the Foreign Letters
of Credit solely for the working capital purposes of Flower. Flower
will not use any proceeds of the Foreign Currency Loans nor any Foreign
Letter of Credit (i) to lend any sum to UK Holdings, (ii) for any
purpose which may be unlawful financial assistance for the purposes of
Part V, Chapter VI of the Companies Act 1985 or any other applicable
legislation, or (iii) for any other unlawful purpose.
2.2 Foreign Letter of Credit Subfacility.
-------------------------------------
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, and any other terms and conditions which
the Issuing Lender may reasonably require, the Lenders will participate
in the issuance by the Issuing Lender, from time to time and in Pounds
Sterling, of such Foreign Letters of Credit from the date five (5)
Business Days subsequent to the Closing Date until the date five (5)
Business Days prior to the Termination Date as either Borrower may
request, in a form acceptable to the Issuing Lender; provided, however,
that (i) the
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<PAGE> 10
Dollar Amount (as determined as of the most recent Determination Date)
of the Foreign LOC Obligations outstanding shall not at any time exceed
TEN MILLION DOLLARS ($10,000,000) (the "Foreign LOC Committed Amount"),
(ii) the sum of the Dollar Amount (as determined as of the most recent
Determination Date) of the aggregate principal amount of outstanding
Foreign Currency Loans plus the Dollar Amount (as determined as of the
most recent Determination Date) of Foreign LOC Obligations outstanding
shall not at any time exceed the Foreign Currency Committed Amount and
(iii) with regard to the Lenders collectively, the aggregate principal
amount of outstanding WestPoint Loans plus WestPoint Letters of Credit
plus the Dollar Amount (as determined as of the most recent
Determination Date) of the aggregate principal amount of outstanding
Foreign Currency Loans plus the Dollar Amount (as determined as of the
most recent Determination Date) of Foreign LOC Obligations outstanding
shall not exceed the Total Commitments. No Foreign Letter of Credit
shall (x) have an original expiry date more than one year from the date
of issuance or (y) as originally issued or as extended, have an expiry
date extending beyond the Termination Date. Each Foreign Letter of
Credit shall comply with the related LOC Documents. The issuance and
expiry dates of each Foreign Letter of Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a
Foreign Letter of Credit shall be submitted by a Borrower to the
Issuing Lender at least three (3) Business Days prior to the requested
date of issuance. The Issuing Lender will, at least quarterly and more
frequently upon request, disseminate to each of the Lenders and the
Borrowers a detailed report specifying the Foreign Letters of Credit
which are then issued and outstanding and any activity with respect
thereto which may have occurred since the date of the prior report, and
including therein, among other things, the beneficiary, the face amount
and the expiry date as well as any payment or expirations which may
have occurred.
(c) Participation. Each Lender, upon issuance of a Foreign
Letter of Credit, shall be deemed to have purchased without recourse a
risk participation from the Issuing Lender in such Foreign Letter of
Credit and the obligations arising thereunder, in each case in an
amount equal to its pro rata share of the obligations under such
Foreign Letter of Credit (based on the respective Foreign Currency
Commitment Percentages of the Lenders) and shall absolutely,
unconditionally and irrevocably be obligated to pay in Pounds Sterling
to the Issuing Lender and discharge when due, its pro rata share of the
obligations arising under such Foreign Letter of Credit. Without
limiting the scope and nature of each Lender's participation in any
Foreign Letter of Credit, to the extent that the Issuing Lender has not
been reimbursed as required hereunder or under any such Foreign Letter
of Credit, each such Lender shall pay to the Issuing Lender in Pounds
Sterling its pro rata share of such unreimbursed drawing in same day
funds on the date three (3) Business Days after notification by the
Issuing Lender of an unreimbursed drawing pursuant to the provisions of
subsection (d) hereof. The obligation of each Lender to so reimburse
the Issuing Lender shall be absolute and unconditional and shall not be
affected by the occurrence of a Default, an Event of Default or any
other occurrence or event. Any such reimbursement shall not relieve or
otherwise impair the obligation of the Reimbursing Borrower to
reimburse the Issuing Lender under any Foreign Letter of Credit,
together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Foreign Letter of Credit, the Issuing Lender will promptly notify the
Borrowers. The Borrower at whose request such Foreign Letter of Credit
was issued (the "Reimbursing Borrower") promises to reimburse the
Issuing Lender, on or prior to the date that is three Business Days
after any drawing under any Foreign Letter of Credit (the
"Reimbursement Date"), an amount equal to such drawing in same
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<PAGE> 11
day funds (prior to the Reimbursement Date, the unreimbursed amount of
such drawing shall bear interest at a per annum rate equal to the
Interim Foreign Currency Rate plus the Borrowing Margin applicable to
Eurodollar Rate Loans). Unless the Reimbursing Borrower shall
immediately notify the Issuing Lender that it intends to otherwise
reimburse the Issuing Lender for such drawing, the Reimbursing Borrower
shall be deemed to have requested that the Lenders make a Foreign
Currency Loan on the Reimbursement Date in the amount of the drawing as
provided in subsection (f) below on the related Foreign Letter of
Credit, the proceeds of which will be used to satisfy the related
reimbursement obligations. If the applicable Borrower shall fail to
reimburse the Issuing Lender as provided hereinabove, the unreimbursed
amount of such drawing shall bear interest at a per annum rate equal to
the Interim Foreign Currency Rate plus the Borrowing Margin applicable
to Eurodollar Rate Loans plus two percent (2%). Each Borrower's
reimbursement obligations hereunder shall be absolute and unconditional
under all circumstances irrespective of any rights of setoff,
counterclaim or defense to payment such Borrower may claim or have
against the Issuing Lender, the Agent, the Lenders, the beneficiary of
the Foreign Letter of Credit drawn upon or any other Person, including
without limitation any defense based on any failure of such Borrower or
any other Credit Party to receive consideration or the legality,
validity, regularity or unenforceability of the Foreign Letter of
Credit. The Issuing Lender will notify the other Lenders on the
Reimbursement Date of the amount of any unreimbursed drawing and each
Lender shall promptly pay, within three (3) Business Days of the
Reimbursement Date, to the Agent for the account of the Issuing Lender
in Pounds Sterling and in immediately available funds, the amount of
such Lender's pro rata share of such unreimbursed drawing. If such
Lender does not pay such amount to the Issuing Lender in full within
three (3) Business Days of the Reimbursement Date, such Lender shall,
on demand, pay to the Agent for the account of the Issuing Lender
interest on the unpaid amount during the period from the date three (3)
Business Days after the Reimbursement Date until such Lender pays such
amount to the Issuing Lender in full at a rate per annum equal to the
Interim Foreign Currency Rate. Each Lender's obligation to make such
payment to the Issuing Lender, and the right of the Issuing Lender to
receive the same, shall be absolute and unconditional, shall not be
affected by any circumstance whatsoever and without regard to the
termination of this Credit Agreement or the Commitments hereunder or
under the WestPoint Credit Agreement, the existence of a Default or
Event of Default or the acceleration of the obligations of the
Borrowers hereunder and shall be made without any offset, abatement,
withholding or reduction whatsoever. Simultaneously with the making of
each such payment by a Lender to the Issuing Lender, such Lender shall,
automatically and without any further action on the part of the Issuing
Lender or such Lender, acquire a participation in an amount equal to
such payment (excluding the portion of such payment constituting
interest owing to the Issuing Lender) in the related unreimbursed drawn
portion of the Foreign LOC Obligation and in the interest thereon and
in the related LOC Documents, and shall have a claim against the
applicable Borrower with respect thereto.
(e) Interim Interest. In the event of any drawing under any
Foreign Letter of Credit, unless the Reimbursing Borrower shall
reimburse the Issuing Lender for such drawing in full on such date, the
unpaid amount of such drawing shall bear interest for the account of
the Issuing Lender at the Interim Foreign Currency Rate plus the
Borrowing Margin applicable to Eurodollar Rate Loans. Interest shall
accrue for each day from and including the date of any drawing under
any Foreign Letter of Credit to, but excluding, the date of payment in
full of such drawing (including by way of a Foreign Currency Loan
pursuant to subsection (f) hereof).
(f) Repayment with Foreign Currency Loans. On any day on which
a Borrower shall have requested, or been deemed to have requested, a
Foreign Currency Loan advance to reimburse
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<PAGE> 12
a drawing under a Foreign Letter of Credit, the Agent shall give notice
to the Lenders that a Foreign Currency Loan has been requested or
deemed requested by such Borrower to be made in connection with a
drawing under a Foreign Letter of Credit, in which case a Foreign
Currency Loan advance shall be made to such Borrower by all Lenders on
the respective Reimbursement Date (notwithstanding any termination of
the Commitments pursuant to Section 9.2) pro rata based on the
respective Foreign Currency Commitment Percentages of the Lenders
(determined before giving effect to any termination of the Commitments
pursuant to Section 9.2) and the proceeds thereof shall be paid
directly to the Issuing Lender for application to the respective
Foreign LOC Obligations. Each such Lender hereby irrevocably agrees to
make its pro rata share of each such Foreign Currency Loan immediately
upon any such request or deemed request in the amount, in the manner
and on the date specified in the preceding sentence notwithstanding (i)
the amount of such borrowing may not comply with the minimum amount for
advances of Foreign Currency Loans otherwise required hereunder, (ii)
whether any conditions specified in Section 5.2 are then satisfied,
(iii) whether a Default or an Event of Default then exists, (iv)
failure of any such request or deemed request for Foreign Currency
Loans to be made by the time otherwise required hereunder, (v) whether
the date of such borrowing is a date on which Foreign Currency Loans
are otherwise permitted to be made hereunder, (vi) any rights that such
Lender may have in respect of such Foreign Currency Loans under Section
3.7, or (vii) any termination of the Commitments relating thereto
immediately prior to or contemporaneously with such borrowing. In the
event that any Foreign Currency Loan cannot for any reason be made on
the date otherwise required above (including, without limitation, as a
result of a Bankruptcy Event with respect to either Borrower or any
other Credit Party), then each such Lender hereby agrees that it shall
forthwith purchase (as of the date such borrowing would otherwise have
occurred, but adjusted for any payments received from the Borrowers or
the Guarantor on or after such date and prior to such purchase) from
the Issuing Lender in Pounds Sterling such participation in the
outstanding Foreign LOC Obligations as shall be necessary to cause each
such Lender to share in such Foreign LOC Obligations ratably (based
upon the respective Foreign Currency Commitment Percentages of the
Lenders (determined before giving effect to any termination of the
Commitments pursuant to Section 9.2)), provided that at the time any
purchase of participation pursuant to this sentence is actually made,
the purchasing Lender shall be required to pay to the Issuing Lender,
to the extent not paid to the Issuer by the Borrowers or the Guarantor
in accordance with the terms of subsection (d) above, interest on the
principal amount of participation purchased for each day from and
including the day upon which such borrowing would otherwise have
occurred to but excluding the date of payment for such participation,
at the rate equal to the Interim Foreign Currency Rate.
(g) Renewal, Extension. The renewal or extension of any
Foreign Letter of Credit shall, for purposes hereof, be treated in all
respects the same as the issuance of a new Foreign Letter of Credit
hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have
the Foreign Letters of Credit be subject to The Uniform Customs and
Practice for Documentary Credits, as published as of the date of issue
by the International Chamber of Commerce (the "UCP"), in which case the
UCP may be incorporated therein and deemed in all respects to be a part
thereof.
(i) Indemnification; Nature of Issuing Lender's Duties.
---------------------------------------------------
(i) In addition to its other obligations under this
Section 2.2, each Borrower hereby agrees to pay, and protect,
indemnify and save each Lender (including the Issuing Lender)
harmless from and against, any and all claims, demands,
liabilities, damages,
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losses, costs, charges and expenses (including reasonable
attorneys' fees) that such Lender may incur or be subject to
as a consequence, direct or indirect, of (A) the issuance of
any Foreign Letter of Credit or (B) the failure of such Lender
to honor a drawing under a Foreign Letter of Credit as a
result of any act or omission, whether rightful or wrongful,
of any present or future de jure or de facto government or
governmental authority (all such acts or omissions, herein
called "Government Acts").
(ii) As between the Borrowers and the Lenders
(including the Issuing Lender), the Borrowers shall assume all
risks of the acts, omissions or misuse of any Foreign Letter
of Credit by the beneficiary thereof. No Lender (including the
Issuing Lender) shall be responsible: (A) for the form,
validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the
application for and issuance of any Foreign Letter of Credit,
even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (B)
for the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any Foreign
Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be
invalid or ineffective for any reason; (C) for errors,
omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (D) for any loss
or delay in the transmission or otherwise of any document
required in order to make a drawing under a Foreign Letter of
Credit or of the proceeds thereof; and (E) for any
consequences arising from causes beyond the control of such
Lender, including, without limitation, any Government Acts.
None of the above shall affect, impair, or prevent the vesting
of the Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by any Lender (including the
Issuing Lender), under or in connection with any Foreign
Letter of Credit or the related certificates, if taken or
omitted in good faith, shall not put such Lender under any
resulting liability to the Borrowers or any other Credit
Party. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and
indemnify each Lender (including the Issuing Lender) against
any and all risks involved in the issuance of the Foreign
Letters of Credit, all of which risks are hereby assumed by
the Borrowers (on behalf of itself and each of the other
Credit Parties), including, without limitation, any and all
Government Acts. No Lender (including the Issuing Lender)
shall, in any way, be liable for any failure by such Lender or
anyone else to pay any drawing under any Foreign Letter of
Credit as a result of any Government Acts or any other cause
beyond the control of such Lender.
(iv) Nothing in this subsection (i) is intended to
limit the reimbursement obligations of the Borrowers contained
in subsection (d) above. The obligations of the Borrowers
under this subsection (i) shall survive the termination of
this Credit Agreement. No act or omissions of any current or
prior beneficiary of a Foreign Letter of Credit shall in any
way affect or impair the rights of the Lenders (including the
Issuing Lender) to enforce any right, power or benefit under
this Credit Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (i), the Borrowers shall have no
obligation to indemnify any Lender (including the Issuing
Lender) in respect of any liability incurred by such Lender
(A) arising solely out of the
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gross negligence or willful misconduct of such Lender or (B)
caused by such Lender's unlawful failure to pay under any
Foreign Letter of Credit.
(j) Responsibility of Issuing Lender. It is expressly
understood and agreed that the obligations of the Issuing Lender
hereunder to the Lenders are only those expressly set forth in this
Credit Agreement and that the Issuing Lender shall be entitled to
assume that the conditions precedent set forth in Section 5.2 have been
satisfied unless it shall have acquired actual knowledge that any such
condition precedent has not been satisfied; provided, however, that
nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section
2.2 in the event that it is determined by a court of competent
jurisdiction that the payment with respect to a Foreign Letter of
Credit constituted gross negligence or willful misconduct on the part
of the Issuing Lender.
(k) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document, this Credit
Agreement shall control.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
----------------------------------------------
3.1 Default Rate. Upon the occurrence, and during the continuance, of
an Event of Default, the principal of and, to the extent permitted by law,
interest on the Foreign Currency Loans and any other amounts owing hereunder or
under the other Credit Documents shall bear interest, payable on demand, at a
per annum rate 2% plus the rate which would otherwise be applicable.
3.2 Extension. Subject to the terms of Section 5.2, the Borrowers shall
have the option, on any Business Day, to extend existing Foreign Currency Loans
into a subsequent permissible Interest Period; provided, however, that (i)
Foreign Currency Loans may be extended only if no Default or Event of Default is
in existence on the date of extension, (ii) all Foreign Currency Loans shall be
subject to the terms of the definition of "Interest Period" set forth in Section
1.1 and shall be in such minimum amounts as provided in Section 2.1(b)(ii), and
(iii) no more than 5 separate Foreign Currency Loans shall be outstanding
hereunder at any time; provided, that for purposes hereof, Foreign Currency
Loans with different Interest Periods shall be considered as separate Foreign
Currency Loans, even if they begin on the same date, although borrowings and
extensions may, in accordance with the provisions hereof, be combined at the end
of existing Interest Periods to constitute a new Foreign Currency Loan with a
single Interest Period. Each such extension shall be effected by the appropriate
Borrower by giving a Notice of Extension (or telephonic notice promptly
confirmed in writing) to the office of the Agent specified in Section 3.13(b)
prior to 11:00 A.M. (London time) on the third Business Day prior to the date of
the proposed extension, specifying the date of the proposed extension, the
Foreign Currency Loans to be so extended and the applicable Interest Periods
with respect thereto. Each request for extension shall constitute a
representation and warranty by the Borrowers of the matters specified in
subsections (ii), (iii), (iv) and (v) of Section 5.2(a). In the event a Borrower
fails to request extension of any Foreign Currency Loan in accordance with this
Section, or any extension is not permitted or required by this Section, then
such Foreign Currency Loan shall be automatically continued as a Foreign
Currency Loan for an Interest Period of one month. The Agent shall give each
Lender notice as promptly as practicable of any such proposed extension
affecting any Foreign Currency Loan.
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3.3 Prepayments.
------------
(a) Voluntary Prepayments. The Borrowers shall have the right
to prepay Foreign Currency Loans in whole or in part from time to time
without premium or penalty; provided, however, that (i) Foreign
Currency Loans may only be prepaid on three Business Days' prior
written notice to the Agent and specifying the applicable Foreign
Currency Loans to be prepaid; (ii) any prepayment of Foreign Currency
Loans will be subject to Section 3.10; and (iii) each partial
prepayment of Foreign Currency Loans shall be in a minimum principal
amount of $1,000,000 (or the Foreign Currency Equivalent thereof) and
integral multiples of $1,000,000 (or the Foreign Currency Equivalent
thereof) in excess thereof. Subject to the foregoing terms, amounts
prepaid hereunder shall be applied as the prepaying Borrower may elect.
(b) Mandatory Prepayments.
----------------------
(i) If on any Determination Date, the sum of the Dollar
Amount of the aggregate Foreign Currency Loans outstanding plus the
Dollar Amount of Foreign LOC Obligations outstanding exceeds (as the
result of fluctuations in applicable foreign exchange rates or
otherwise) the then Foreign Currency Committed Amount, the Borrowers
promise to make a mandatory prepayment, in Pounds Sterling, of the
Foreign Currency Loans to the Agent in an aggregate Dollar Amount equal
to the excess of
(x) the amount equal to the sum of the Dollar Amount
of the aggregate Foreign Currency Loans outstanding plus the
Dollar Amount of Foreign LOC Obligations outstanding
over
(y) the Foreign Currency Committed Amount.
(c) General. All prepayments made pursuant to this Section 3.3
shall be subject to Section 3.10, shall be applied first to Foreign
Currency Loans in direct order, shortest to longest, of Interest Period
maturities and shall be accompanied by accrued interest on the
principal amount being prepaid to the date of prepayment and all other
amounts due and payable hereunder with respect to such Foreign Currency
Loans. Amounts prepaid may be reborrowed in accordance with the
provisions hereof.
3.4 Termination and Reduction of Foreign Currency Committed Amount.
--------------------------------------------------------------
(a) Voluntary Reductions. The Borrowers may from time to time
permanently reduce or terminate the Foreign Currency Committed Amount
in whole or in part (in minimum aggregate amounts of $1,500,000 or in
integral multiples of $750,000 in excess thereof (or, if less, the full
remaining amount of the then applicable Foreign Currency Committed
Amount)) upon three Business Days' prior written notice to the Agent;
provided, however, no such termination or reduction shall be made which
would reduce the Foreign Currency Committed Amount to an amount less
than the Dollar Amount (as determined as of the most recent
Determination Date) of the aggregate principal amount of outstanding
Foreign Currency Loans plus the Dollar Amount (as determined as of the
most recent Determination Date) of Foreign LOC Obligations outstanding.
The Agent shall promptly notify each of the Lenders of receipt by the
Agent of any notice from the Borrowers pursuant to this Section 3.4(a).
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<PAGE> 16
(b) Termination Date. The Commitments of the Lenders and the
Issuing Lender shall automatically terminate on the Termination Date.
3.5 Letter of Credit Fees. Each Borrower shall pay to the Agent for the
account of the Lenders (based on their respective Pro Rata Shares of the Foreign
Letters of Credit), quarterly in arrears on or prior to the day ten (10) days
after the last day of each calendar quarter, a per annum fee equal to the
applicable Borrowing Margin for Eurodollar Rate Loans (calculated on the basis
of a year of 365 days, for actual days elapsed) of the average daily aggregate
amount available for drawing during the period from and including the first day
of such calendar quarter through the last day of such calendar quarter under all
outstanding commercial Foreign Letters of Credit requested by such Borrower and
a per annum fee equal to the applicable Borrowing Margin for Eurodollar Rate
Loans (calculated on the basis of a year of 365 days, for actual days elapsed)
of the average daily aggregate amount available for drawing during the period
from and including the first day of such calendar quarter through the last day
of such calendar quarter under all outstanding standby Foreign Letters of Credit
requested by such Borrower. In addition, each Borrower shall pay the standard
service charges for Foreign Letters of Credit issued from time to time by the
Issuing Lender including a facing fee of .125% of the face amount of each
Foreign Letter of Credit. Such additional fees shall be paid to the Issuing
Lender for its own account. All such fees shall be payable when due in
immediately available funds and shall be nonrefundable.
3.6 Capital Adequacy. If, after the date hereof, any Lender has
determined that the adoption or the becoming effective of, or any change in, or
any change by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof in the interpretation
or administration of, any applicable law, rule or regulation regarding capital
adequacy, or compliance by such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which such Lender
could have achieved but for such adoption, effectiveness, change or compliance
(taking into consideration such Lender's policies with respect to capital
adequacy), then, upon notice and detailed explanation from such Lender to the
applicable Borrower, such Borrower shall be obligated to pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.
Each determination by any such Lender of amounts owing under this Section shall,
absent manifest error, be conclusive and binding on the parties hereto.
3.7 Unavailability.
---------------
(a) If prior to the first day of any Interest Period, the
Agent shall have determined (which determination shall be conclusive
and binding upon the Borrowers) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not
exist for ascertaining the Eurocurrency Rate for such Interest Period,
the Agent shall give telecopy or telephonic notice thereof to the
Borrowers and the Lenders as soon as practicable thereafter. If such
notice is given, (A) any such Foreign Currency Loans requested to be
made on the first day of such Interest Period shall be deemed rescinded
and (B) any such Foreign Currency Loans shall be repaid in full by the
Borrowers on the first day of such Interest Period. Until such notice
has been withdrawn by the Agent, no further Foreign Currency Loans
shall be made or continued.
(b) If prior to the first day of any Interest Period, any
Lender shall inform the Agent that deposits in Pounds Sterling are not
available in the relevant market to any Lender, the Agent shall give
telecopy or telephonic notice thereof to the Borrowers and the Lenders
as soon as
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practicable thereafter. If such notice is given, (i) any Foreign
Currency Loans requested to be made on the first day of such Interest
Period shall be deemed rescinded and (ii) any outstanding Foreign
Currency Loans shall be repaid in full by the Borrowers on the first
day of such Interest Period. Until such notice has been withdrawn by
the Agent, no further Foreign Currency Loans shall be made or
continued.
(c) If prior to the issuance of any Foreign Letter of Credit,
the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrowers) that, with respect to the
requested Foreign Letter of Credit, Pounds Sterling in the amount of
any Lender's participation interest in such Foreign Letter of Credit is
not, and/or during the term of such Foreign Letter of Credit will not
be, available to any such Lender, then (i) the Agent shall notify the
Borrowers and the Lenders of such circumstances and (ii) the Issuing
Lender shall have no obligation to issue, and the Lenders shall have no
obligation to participate in, such Foreign Letter of Credit.
3.8 Requirements of Law. If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof applicable to
any Lender, or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority, in each case made subsequent to the Closing Date (or, if later, the
date on which such Lender becomes a Lender):
(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Foreign Letter of Credit, any Foreign
Currency Loans made by it or its obligation to make Foreign Currency
Loans, or change the basis of taxation of payments to such Lender in
respect thereof (except for Non-Excluded Taxes covered by Section 3.9
(including Non-Excluded Taxes imposed solely by reason of any failure
of such Lender to comply with its obligations under Section 3.9(b)) and
changes in taxes measured by or imposed upon the overall net income, or
franchise tax (imposed in lieu of such net income tax), of such Lender
or its applicable lending office, branch, or any affiliate thereof);
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurocurrency Rate
hereunder; or
(c) shall impose on such Lender any other condition
(excluding any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, continuing or
maintaining Foreign Currency Loans or issuing or participating in Foreign
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the applicable Borrower from
such Lender, through the Agent, in accordance herewith, the applicable Borrower
shall be obligated to promptly pay such Lender, upon its demand, any additional
amounts necessary to compensate such Lender for such increased cost or reduced
amount receivable. If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection, it shall provide prompt notice thereof to
the applicable Borrower, through the Agent, certifying (x) that one of the
events described in this paragraph (a) has occurred and describing in reasonable
detail the nature of such event, (y) as to the increased cost or reduced amount
resulting from such event and (z) as
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to the additional amount demanded by such Lender and a reasonably detailed
explanation of the calculation thereof. Such a certificate as to any additional
amounts payable pursuant to this subsection submitted by such Lender, through
the Agent, to a Borrower shall be conclusive and binding on the parties hereto
in the absence of manifest error. This covenant shall survive the termination of
this Credit Agreement and the payment of the Foreign Currency Loans and all
other amounts payable hereunder.
3.9 Taxes.
------
(a) Except as provided below in this subsection, all payments
made by a Borrower under this Credit Agreement and any Foreign Currency
Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp
or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any court, or governmental body, agency or other official,
excluding taxes measured by or imposed upon the overall net income of
any Lender or its applicable lending office, or any branch or affiliate
thereof, and all franchise taxes, branch taxes, taxes on doing business
or taxes on the overall capital or net worth of any Lender or its
applicable lending office, or any branch or affiliate thereof, in each
case imposed in lieu of net income taxes, imposed: (i) by the
jurisdiction under the laws of which such Lender, applicable lending
office, branch or affiliate is organized or is located, or in which its
principal executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii)
by reason of any connection between the jurisdiction imposing such tax
and such Lender, applicable lending office, branch or affiliate other
than a connection arising solely from such Lender having executed,
delivered or performed its obligations, or received payment under or
enforced, this Credit Agreement or any Foreign Currency Notes. If any
such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings ("Non-Excluded Taxes") are required to be
withheld from any amounts payable to the Agent or any Lender hereunder
or under any Foreign Currency Notes, (A) the amounts so payable to the
Agent or such Lender shall be increased to the extent necessary to
yield to the Agent or such Lender (after payment of all Non-Excluded
Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Credit Agreement and any
Foreign Currency Notes, provided, however, that each Borrower shall be
entitled to deduct and withhold any Non-Excluded Taxes and shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state
thereof if such Lender fails to comply with the requirements of
paragraph (b) of this subsection whenever any Non-Excluded Taxes are
payable by a Borrower, and (B) as promptly as possible thereafter the
applicable Borrower shall send to the Agent for its own account or for
the account of such Lender, as the case may be, a certified copy of an
original official receipt received by such Borrower showing payment
thereof. If a Borrower fails to pay any Non-Excluded Taxes when due to
the appropriate taxing authority or fails to remit to the Agent the
required receipts or other required documentary evidence, such Borrower
shall indemnify the Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Agent or any
Lender as a result of any such failure. The agreements in this
subsection shall survive the termination of this Credit Agreement and
the payment of the Foreign Currency Loans and all other amounts payable
hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(X)(i) on or before the date of any payment by a
Borrower under this Credit Agreement or Foreign Currency Notes
to such Lender, deliver to the Borrowers and the
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Agent (A) two (2) duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, certifying that it is
entitled to receive payments under this Credit Agreement and
any Foreign Currency Notes without deduction or withholding of
any United States federal income taxes and (B) an Internal
Revenue Service Form W-8 or W-9, or successor applicable form,
as the case may be, certifying that it is entitled to an
exemption from United States backup withholding tax;
(ii) deliver to the Borrowers and the Agent two
(2) further copies of any such form or certification on or
before the date that any such form or certification expires or
becomes obsolete and after the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Borrowers; and
(iii) obtain such extensions of time for filing
and complete such forms or certifications as may reasonably be
requested by the Borrowers or the Agent; or
(Y) in the case of any such Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the
Internal Revenue Code, (i) represent to the Borrowers (for the
benefit of the Borrowers and the Agent) that it is not a bank
within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code, (ii) agree to furnish to the Borrowers on or
before the date of any payment by the Borrowers, with a copy
to the Agent two (2) accurate and complete original signed
copies of Internal Revenue Service Form W-8, or successor
applicable form certifying to such Lender's legal entitlement
at the date of such certificate to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the
Internal Revenue Code with respect to payments to be made
under this Credit Agreement and any Foreign Currency Notes
(and to deliver to the Borrowers and the Agent two (2) further
copies of such form on or before the date it expires or
becomes obsolete and after the occurrence of any event
requiring a change in the most recently provided form and, if
necessary, obtain any extensions of time reasonably requested
by the Borrower or the Agent for filing and completing such
forms), and (iii) agree, to the extent legally entitled to do
so, upon reasonable request by the Borrowers, to provide to
the Borrowers (for the benefit of the Borrowers and the Agent)
such other forms as may be reasonably required in order to
establish the legal entitlement of such Lender to an exemption
from withholding with respect to payments under this Credit
Agreement and any Foreign Currency Notes;
unless in any such case any change in treaty, law or regulation has
occurred after the date such Person becomes a Lender hereunder which
renders all such forms inapplicable or which would prevent such Lender
from duly completing and delivering any such form with respect to it
and such Lender so advises the Borrowers and the Agent.
(c) Each Lender (other than any Qualifying Lender) shall, as
soon as is reasonably practicable after the Closing Date, file a form
FD 13 with the United States Internal Revenue Service in relation to
payments made or to be made by the Borrowers under this Credit
Agreement and any Foreign Currency Notes. If the United States Internal
Revenue Service determines that the form FD 13 filed by such Lender
does not establish that the Lender is entitled to receive payments made
by the Borrowers under this Credit Agreement and the Foreign Currency
Notes as at the date of delivery thereof without deduction or
withholding of United Kingdom withholding taxes, such Lender shall,
within forty-five (45) days after a written request from the Borrowers,
offer such
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reasonable assistance as the Borrowers may request in order to
establish such Lender's entitlement (if any) to receive payments made
by the Borrowers under this Credit Agreement and any Foreign Currency
Notes without deduction or withholding of United Kingdom withholding
taxes. No Borrower shall be required to pay any amounts to any Lender
in respect of any deduction or withholding of United Kingdom
withholding taxes otherwise payable under this Section 3.9 (and a
Borrower, if required by law to do so, shall be entitled to withhold
such amounts and pay such amounts to the government of the United
Kingdom) if the obligation to pay such additional amounts would not
have arisen but for a failure by such Lender to provide the Borrowers
with the requested forms or other reasonable assistance.
(d) Each Person that shall become a Lender or a participant of
a Lender pursuant to Section 11.3 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms,
certifications and statements required pursuant to this Section 3.9,
provided that in the case of a participant of a Lender the obligations
of such participant of a Lender pursuant to this subsection (b) shall
be determined as if the participant of a Lender were a Lender except
that such participant of a Lender shall furnish all such required
forms, certifications and statements to the Lender from which the
related participation shall have been purchased.
3.10 Indemnity. Each Borrower promises to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur (other than through such Lender's gross negligence or willful
misconduct) as a consequence of (a) default by such Borrower in making a
borrowing of, or continuation of, Foreign Currency Loans after such Borrower has
given a notice requesting the same in accordance with the provisions of this
Credit Agreement, (b) default by such Borrower in making any scheduled payment
of a Foreign Currency Loan or any prepayment of a Foreign Currency Loan after
such Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement or (c) the making by such Borrower of a prepayment of
Foreign Currency Loans on a day which is not the last day of an Interest Period
with respect thereto. Such indemnification may include an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
amount so prepaid, or not so borrowed or continued, for the period from the date
of such prepayment or of such failure to borrow or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Foreign
Currency Loans provided for herein (excluding, however, the Borrowing Margin
included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurocurrency market. The covenants of the Borrowers set
forth in this Section 3.10 shall survive the termination of this Credit
Agreement and the payment of the Foreign Currency Loans and all other amounts
payable hereunder.
3.11 Pro Rata Treatment. Except to the extent otherwise provided
herein:
(a) Loans. Each Foreign Currency Loan, each payment or
prepayment of principal of any Foreign Currency Loan or reimbursement
obligations arising from drawings under Foreign Letters of Credit, each
payment of interest on the Foreign Currency Loans or reimbursement
obligations arising from drawings under Foreign Letters of Credit, each
payment of the Foreign Letter of Credit fee (other than the fees
expressly for the own account of the Issuing Lender), each reduction of
the Foreign Currency Committed Amount and each extension of any Foreign
Currency Loan, shall be allocated pro rata among the Lenders in
accordance with the respective principal amounts of their outstanding
Foreign Currency Loans and Participation Interests.
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(b) Advances. Unless the Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not
make the amount that would constitute its Foreign Currency Commitment
Percentage of such borrowing available to the Agent, the Agent may
assume that such Lender is making such amount available to the Agent,
and the Agent may, in reliance upon such assumption, make available to
the appropriate Borrower a corresponding amount. If such amount is not
made available to the Agent by such Lender within the time period
specified therefor hereunder, such Lender shall pay to the Agent, on
demand, such amount with interest thereon at a rate equal to the
Interim Foreign Currency Rate for the period until such Lender makes
such amount immediately available to the Agent. A certificate of the
Agent submitted to any Lender with respect to any amounts owing under
this subsection shall be conclusive in the absence of manifest error.
If such Lender's Foreign Currency Commitment Percentage of such
borrowing is not made available to the Agent by such Lender within two
Business Days of the date of the related borrowing, the Agent shall
notify the Borrowers of the failure of such Lender to make such amount
available to the Agent and the Agent shall also be entitled to recover
such amount with interest thereon at the rate per annum applicable to
Foreign Currency Loans hereunder), on demand, from the appropriate
Borrower.
3.12 Sharing of Payments. The Lenders agree among themselves that, in
the event that any Lender shall obtain payment in respect of any Foreign
Currency Loan, Foreign LOC Obligations or any other obligation owing to such
Lender under this Credit Agreement through the exercise of a right of setoff,
banker's lien or counterclaim, or pursuant to a secured claim under Section 506
of Title 11 of the United States Code or other security or interest arising
from, or in lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, in excess of its pro rata share of such payment as provided for in
this Credit Agreement, such Lender shall promptly purchase from the other
Lenders a participation in such Foreign Currency Loans, Foreign LOC Obligations
and other obligations in such amounts, and make such other adjustments from time
to time, as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by repurchase of a participation theretofore sold, return
its share of that benefit (together with its share of any accrued interest
payable with respect thereto) to each Lender whose payment shall have been
rescinded or otherwise restored. The Borrowers agree that any Lender so
purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including setoff, banker's lien or counterclaim,
with respect to such participation as fully as if such Lender were a holder of
such Foreign Currency Loan, Foreign LOC Obligations or other obligation in the
amount of such participation. Except as otherwise expressly provided in this
Credit Agreement, if any Lender or the Agent shall fail to remit to the Agent or
any other Lender an amount payable by such Lender or the Agent to the Agent or
such other Lender pursuant to this Credit Agreement on the date when such amount
is due, such payments shall be made together with interest thereon for each date
from the date such amount is due until the date such amount is paid to the Agent
or such other Lender at a rate per annum equal to the Interim Foreign Currency
Rate. If under any applicable bankruptcy, insolvency or other similar law, any
Lender receives a secured claim in lieu of a setoff to which this Section 3.12
applies, such Lender shall, to the extent practicable, exercise its rights in
respect of such secured claim in a manner consistent with the rights of the
Lenders under this Section 3.12 to share in the benefits of any recovery on such
secured claim.
3.13 Payments, Computations, Etc.
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(a) Currency of Payments. Each payment on account of an amount
due from any Credit Party hereunder or under any other Credit Document
shall be made by such Credit Party to the Agent for the pro rata
account of the Lenders entitled to receive such payment as provided
herein in the currency in which such amount is denominated. Without
limiting the terms of the preceding sentence, accrued interest on any
Foreign Currency Loans and all fees owing with respect to Foreign
Letters of Credit shall be payable in Pounds Sterling. Upon request,
the Agent will give the Credit Parties a statement showing the
computation used in calculating such amount, which statement shall be
conclusive in the absence of manifest error. The obligation of each
Credit Party to make each payment on account of such amount in the
currency in which such amount is denominated shall not be discharged or
satisfied by any tender, or any recovery pursuant to any judgment,
which is expressed in or converted into any other currency, except to
the extent such tender or recovery shall result in the actual receipt
by the Agent of the full amount in the appropriate currency payable
hereunder. Each Credit Party agrees that its obligation to make each
payment on account of such amount in the currency in which such amount
is denominated shall be enforceable as an additional or alternative
claim for recovery in such currency of the amount (if any) by which
such actual receipt shall fall short of the full amount of such
currency payable hereunder, and shall not be affected by judgment being
obtained for such amount.
(b) Place and Manner of Payments. Except as otherwise
specifically provided herein, all payments hereunder shall be made to
the Agent in immediately available funds, without offset, deduction,
counterclaim or withholding of any kind, prior to 2:00 P.M. (London
time) on the date due at the office of the Agent at 35 New Broad
Street, GB1-001-01-01, London, England EC2M 1NH or at such other place
as may be designated by the Agent to the Borrowers in writing. Payments
received after such time shall be deemed to have been received on the
next succeeding Business Day. The Agent may (but shall not be obligated
to) debit the amount of any such payment which is not made by such time
to any ordinary deposit account of the applicable Borrower maintained
with the Agent (with notice to the Borrowers). Each Borrower shall, at
the time it makes any payment under this Credit Agreement, specify to
the Agent the Foreign Currency Loans, Foreign LOC Obligations, fees,
interest or other amounts payable by such Borrower hereunder to which
such payment is to be applied (and in the event that it fails so to
specify, or if such application would be inconsistent with the terms
hereof, the Agent shall distribute such payment to the Lenders in such
manner as the Agent may determine to be appropriate in respect of
obligations owing by such Borrower hereunder, subject to the terms of
Section 3.11). The Agent will distribute such payments to such Lenders,
if any such payment is received prior to 12:00 Noon (Charlotte, North
Carolina time) on a Business Day in like funds as received prior to the
end of such Business Day and otherwise the Agent will distribute such
payment to such Lenders on the next succeeding Business Day. Whenever
any payment hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and fees for
the period of such extension), except that if the extension would cause
the payment to be made in the next following calendar month, then such
payment shall instead be made on the next preceding Business Day.
Except as expressly provided otherwise herein, all computations of
interest and fees shall be made on the basis of actual number of days
elapsed over a year of 365 days. Interest shall accrue from and include
the date of borrowing, but exclude the date of payment.
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SECTION 4
GUARANTY
--------
4.1 The Guarantee. The Guarantor hereby guarantees to each Lender and
the Agent as hereinafter provided the prompt payment of the Borrowers'
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantor hereby further
agrees that if any of the Borrowers' Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise), the Guarantor will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Borrowers' Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise) in accordance with the terms of such extension
or renewal.
4.2 Obligations Unconditional. The obligations of the Guarantor under
Section 4.1 are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of any of the Credit
Documents, or any other agreement or instrument referred to therein, or any
substitution, release, impairment or exchange of any other guarantee of or
security for any of the Borrowers' Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 4.2 that the
obligations of the Guarantor hereunder shall be absolute and unconditional under
any and all circumstances. The Guarantor agrees that it shall have no right of
subrogation, indemnity, reimbursement or contribution against either Borrower of
the Borrowers' Obligations for amounts paid under this Section 4 until such time
as the Lenders have been paid in full, all Commitments under this Credit
Agreement have been terminated and no Person or Governmental Authority shall
have any right to request any return or reimbursement of funds from the Lenders
in connection with monies received under the Credit Documents. Without limiting
the generality of the foregoing, it is agreed that, to the fullest extent
permitted by law, the occurrence of any one or more of the following shall not
alter or impair the liability of the Guarantor hereunder which shall remain
absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Guarantor, the time for any performance of or compliance with any of
the Borrowers' Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of any
of the Credit Documents or any other agreement or instrument referred
to therein shall be done or omitted;
(iii) the maturity of any of the Borrowers' Obligations shall
be accelerated, or any of the Borrowers' Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents or any other agreement or instrument referred to
therein shall be waived or any other guarantee of any of the Borrowers'
Obligations or any security therefor shall be released, impaired or
exchanged in whole or in part or otherwise dealt with; or
(iv) any of the Borrowers' Obligations shall be determined to
be void or voidable (including, without limitation, for the benefit of
any creditor of the Guarantor) or shall be subordinated to the claims
of any Person (including, without limitation, any creditor of the
Guarantor).
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With respect to its obligations hereunder, the Guarantor hereby expressly waives
diligence, presentment, demand of payment, protest and all notices whatsoever,
and any requirement that the Agent or any Lender exhaust any right, power or
remedy or proceed against any Person under any of the Credit Documents or any
other agreement or instrument referred to therein, or against any other Person
under any other guarantee of, or security for, any of the Borrowers'
Obligations.
4.3 Reinstatement. The obligations of the Guarantor under this Section
4 shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of any Person in respect of the Borrowers' Obligations
is rescinded or must be otherwise restored by any holder of any of the
Borrowers' Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and the Guarantor agrees that it will indemnify the
Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
4.5 Remedies. The Guarantor agrees that, to the fullest extent
permitted by law, as between the Guarantor, on the one hand, and the Agent and
the Lenders, on the other hand, the Borrowers' Obligations may be declared to be
forthwith due and payable as provided in Section 9.2 (and shall be deemed to
have become automatically due and payable in the circumstances provided in said
Section 9.2) for purposes of Section 4.1 notwithstanding any stay, injunction or
other prohibition preventing such declaration (or preventing the Borrowers'
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Borrowers' Obligations
being deemed to have become automatically due and payable), the Borrowers'
Obligations (whether or not due and payable by any other Person) shall forthwith
become due and payable by the Guarantor for purposes of Section 4.1.
4.6 Continuing Guarantee. The guarantee in this Section 4 is a
continuing guarantee, and shall apply to all Borrowers' Obligations whenever
arising.
SECTION 5
CONDITIONS
----------
5.1 Closing Conditions. The obligation of the Lenders to enter into
this Credit Agreement and to make the initial Foreign Currency Loans or the
Issuing Lender to issue the initial Foreign Letter of Credit, whichever shall
occur first, shall be subject to satisfaction of the following conditions (in
form and substance acceptable to the Lenders):
(a) The Agent shall have received original counterparts of
this Credit Agreement executed by each of the parties hereto;
(b) The Agent shall have received appropriate original Foreign
Currency Notes for each Lender, executed by each Borrower;
(c) The Agent shall have received all documents it may
reasonably request relating to the existence and good standing of each
of the Credit Parties, the corporate or other necessary
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authority for and the validity of the Credit Documents, and any other
matters relevant thereto, all in form and substance reasonably
satisfactory to the Agent;
(d) The Agent shall have received a certificate executed by
the chief financial officer of the Borrowers as of the Closing Date
stating that immediately after giving effect to this Credit Agreement
and the other Credit Documents, (i) each Borrower on a consolidated
basis is Solvent, (ii) no Default or Event of Default exists and (iii)
the representations and warranties set forth in Section 6 are true and
correct in all material respects;
(e) The Agent shall have received a legal opinion of Weil,
Gotshal & Manges LLP, counsel for the Credit Parties, dated as of the
Closing Date and substantially in the form of Schedule 5.1(e);
(f) The acquisition of Flowers by UK Holdings shall have been
consummated on terms and conditions reasonably satisfactory to the
Agent; and
(g) The Agent shall have received such other documents,
agreements or information which may be reasonably requested by the
Agent (including, without limitation, an opinion of English counsel for
the Credit Parties, in form and substance reasonably satisfactory to
the Agent).
5.2 Conditions to all Extensions of Credit. The obligations of each
Lender to make or extend any Foreign Currency Loan and of the Issuing Lender to
issue or extend Foreign Letters of Credit (including the initial Foreign
Currency Loans and the initial Foreign Letter of Credit) are subject to
satisfaction of the following conditions in addition to satisfaction on the
Closing Date of the conditions set forth in Section 5.1:
(i) The applicable Borrower shall have delivered (A)
in the case of any Foreign Currency Loan, an appropriate
Notice of Borrowing or Notice of Extension or (B) in the case
of any Foreign Letter of Credit, the Issuing Lender shall have
received an appropriate request for issuance in accordance
with the provisions of Section 2.1(b) or of Section 2.2(b);
(ii) The representations and warranties set forth in
Section 6 shall be, subject to the limitations set forth
therein, true and correct in all material respects as of such
date (except for those which expressly relate to an earlier
date);
(iii) There shall not have been commenced against
either Borrower or the Guarantor an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or any case, proceeding or other action
for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such
Person or for any substantial part of its Property or for the
winding up or liquidation of its affairs, and such involuntary
case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded;
(iv) No Default or Event of Default shall exist and
be continuing either prior to or after giving effect thereto;
and
(v) Immediately after giving effect to the making of
such Foreign Currency Loan (and the application of the
proceeds thereof) or to the issuance of such Foreign Letter
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of Credit, as the case may be, (A) the sum of the Dollar
Amount (as determined as of the most recent Determination
Date) of the aggregate principal amount of outstanding Foreign
Currency Loans plus the Dollar Amount (as determined as of the
most recent Determination Date) of Foreign LOC Obligations
outstanding shall not exceed the aggregate Foreign Currency
Committed Amount and (B) the aggregate principal amount of
outstanding WestPoint Loans plus WestPoint Letters of Credit
plus the Dollar Amount (as determined as of the most recent
Determination Date) of the aggregate principal amount of
outstanding Foreign Currency Loans plus the Dollar Amount (as
determined as of the most recent Determination Date) of
Foreign LOC Obligations outstanding shall not exceed the Total
Commitments.
The delivery of each Notice of Borrowing, each Notice of Extension and each
request for a Foreign Letter of Credit pursuant to Section 2.1(b) or Section
2.2(b) shall constitute a representation and warranty by the requesting Borrower
of the correctness of the matters specified in subsections (ii), (iii), (iv),
and (v) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
------------------------------
The Credit Parties hereby represent to the Agent and each Lender that:
6.1 Organization; Existence; Compliance with Law. Each of the Credit
Parties (a) is a corporation duly organized, validly existing and is in good
standing under the laws of the jurisdiction of its incorporation or
organization, (b) has the corporate or other necessary power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign entity and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification, other than in such
jurisdictions where the failure to be so qualified and in good standing would
not be reasonably expected to have a material adverse effect, and (d) is in
compliance with all material Requirements of Law.
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6.2 Power; Authorization; Enforceable Obligations. Each of the Credit
Parties has the corporate or other necessary power and authority, and the legal
right, to make, deliver and perform the Credit Documents to which it is a party,
and, in the case of the Borrowers, to obtain extensions of credit hereunder.
Each of the Credit Parties has taken all necessary corporate action to authorize
the borrowings and other extensions of credit on the terms and conditions of
this Credit Agreement and to authorize the execution, delivery and performance
of the Credit Documents to which it is a party. No consent or authorization of,
filing with, notice to or other similar act by or in respect of, any
Governmental Authority or any other Person is required to be obtained or made by
or on behalf of any Credit Party in connection with the borrowings or other
extensions of credit hereunder or with the execution, delivery, performance,
validity or enforceability of the Credit Documents to which such Credit Party is
a party, except for consents, authorizations, notices and filings described in
Schedule 6.2, all of which have been obtained or made or have the status
described in such Schedule 6.2. This Credit Agreement has been, and each other
Credit Document to which any Credit Party is a party will be, duly executed and
delivered on behalf of the Credit Parties. This Credit Agreement constitutes,
and each other Credit Document to which any Credit Party is a party when
executed and delivered will constitute, a legal, valid and binding obligation of
such Credit Party enforceable against such party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.3 No Legal Bar. The execution, delivery and performance of the Credit
Documents by the Credit Parties, the borrowings or other extensions of credit
hereunder and the use of the proceeds thereof (a) will not violate any
Requirement of Law or contractual obligation of any Credit Party, (b) will not
result in, or require, the creation or imposition of any Lien on any of the
properties or revenues of any Credit Party pursuant to any such Requirement of
Law or contractual obligation, and (c) will not violate or conflict with any
provision of any Credit Party's articles of incorporation, charter, by-laws or
similar organizational documents (including, in the case of the Borrowers, their
Memorandum of Association and Articles of Association).
6.4 Governmental Regulations, Etc.
(a) No part of the Foreign Letters of Credit or proceeds of
the Foreign Currency Loans will be used, directly or indirectly, for
the purpose of purchasing or carrying any "margin stock" within the
meaning of Regulation G or Regulation U, or for the purpose of
purchasing or carrying or trading in any securities. If requested by
any Lender or the Agent, each of the Borrowers will furnish to the
Agent and each Lender a statement to the foregoing effect in conformity
with the requirements of FR Form U-1 referred to in Regulation U. No
indebtedness being reduced or retired out of the proceeds of the
Foreign Currency Loans was or will be incurred for the purpose of
purchasing or carrying any margin stock within the meaning of
Regulation U or any "margin security" within the meaning of Regulation
T. "Margin stock" within the meaning of Regulation U does not
constitute more than 25% of the value of the consolidated assets of the
Borrowers. None of the transactions contemplated by this Credit
Agreement (including, without limitation, the direct or indirect use of
the proceeds of the Foreign Currency Loans) will violate or result in a
violation of the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, or regulations issued pursuant
thereto, or Regulation G, T, U or X.
(b) Neither Borrower is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or the
Investment Company Act of 1940, each as amended. In addition, neither
Borrower is (i) an "investment company" registered or required to be
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registered under the Investment Company Act of 1940, as amended, and is
not controlled by such a company, or (ii) a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(c) This Credit Agreement and each Foreign Currency Note is in
proper legal form for the enforcement hereof or thereof against the
Borrowers, and to ensure the legality, validity, enforceability,
priority or admissibility in evidence of this Credit Agreement and the
Foreign Currency Notes it is not necessary that this Credit Agreement,
the Foreign Currency Notes or any other Credit Document be filed,
registered or recorded with, or executed or notarized before, any court
or other authority in the United Kingdom or that any registration
charge or stamp or similar tax be paid on or in respect of this Credit
Agreement, the Foreign Currency Notes or any other Credit Document.
6.5 Taxes. There are no income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, imposed, levied, collected,
withheld or assessed by any English court, or governmental body, agency or other
official either (a) on or by virtue of the execution or delivery of this Credit
Agreement, the Foreign Currency Notes or any other Credit Document or (b) on any
payment to be made by the Borrower under this Credit Agreement, the Foreign
Currency Notes or any other Credit Document.
SECTION 7
AFFIRMATIVE COVENANTS
---------------------
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
7.1 Incorporated Affirmative Covenants. Each Credit Party shall, and
the Guarantor shall cause each other Credit Party to, fully honor and perform
each of the affirmative covenants set forth in Section 5.1 of the WestPoint
Credit Agreement, each of which covenants are hereby expressly incorporated
herein by reference.
7.2 Financial Statements. Each Borrower will furnish, or cause to be
furnished, to the Agent:
(a) Annual Financial Statements. As soon as available, and in
any event within 95 days after the close of each fiscal year of UK
Holdings, a consolidated and consolidating balance sheet of UK Holdings
and its Subsidiaries, as of the end of such fiscal year, together with
related consolidated and consolidating statements of income, operations
and retained earnings and of cash flows for such fiscal year, setting
forth in comparative form consolidated and consolidating figures as of
the end of and for the preceding fiscal year, all such financial
information to be in form and detail reasonably satisfactory to the
Agent and such financial statements shall have been prepared in
accordance with GAAP, except as disclosed to the Lenders and accepted
by the Required Lenders. All such statements shall be accompanied by a
certificate of the chief financial officer of UK Holdings to the effect
that such annual financial statements fairly present in all material
respects the financial condition of and results of operations for UK
Holdings and its Subsidiaries and have been prepared in accordance with
GAAP, except as disclosed to the Lenders and accepted by the Required
Lenders.
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(b) Quarterly Financial Statements. As soon as available, and
in any event within 50 days after the close of each fiscal quarter of
each Borrower and its Subsidiaries (other than the fourth fiscal
quarter, in which case 95 days after the end thereof) a consolidated
and consolidating balance sheet of UK Holdings and its Subsidiaries, as
of the end of such fiscal quarter, together with related consolidated
and consolidating statements of income, operations and retained
earnings and of cash flows for such fiscal quarter in each case setting
forth in comparative form consolidated and consolidating figures for
the corresponding date or period of the preceding fiscal year, all such
financial information described above to be in reasonable form and
detail reasonably acceptable to the Agent, and accompanied by a
certificate of the chief financial officer of the UK Holdings to the
effect that such quarterly financial statements fairly present in all
material respects the financial condition of and results of operations
for UK Holdings and its Subsidiaries and have been prepared in
accordance with GAAP, except as disclosed to the Lenders and accepted
by the Required Lenders.
SECTION 8
NEGATIVE COVENANTS
------------------
Each Credit Party hereby covenants and agrees that, so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated, it shall, and the Guarantor shall cause each
other Credit Party to, fully honor and comply with each of the negative
covenants set forth in Section 5.2 of the WestPoint Credit Agreement, each of
which covenants are hereby expressly incorporated herein by reference; provided,
however, that, on or prior to the Closing Date, the Borrowers shall be permitted
to enter into any sale and leaseback transaction related to the acquisition of
Flower by UK Holdings.
SECTION 9
EVENTS OF DEFAULT
-----------------
9.1 Events of Default. An Event of Default shall exist upon the
occurrence of any of the following specified events (each an "Event of
Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal
of any of the Foreign Currency Loans or of any reimbursement
obligations arising from drawings under Foreign Letters of
Credit, or
(ii) default, and such default shall continue for
five (5) or more days, in the payment when due of any interest
on the Foreign Currency Loans or on any reimbursement
obligations arising from drawings under Foreign Letters of
Credit, or of any fees or other amounts owing hereunder, under
any of the other Credit Documents or in connection herewith or
therewith; or
(b) Guaranty. The guaranty given by the Guarantor hereunder or
any provision thereof shall cease to be in full force and effect, or
the Guarantor shall deny or
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disaffirm such Guarantor's obligations under such guaranty, or the
Guarantor shall default in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed
pursuant to any guaranty (including Section 4 hereof); or
(c) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was deemed to have
been made; or
(d) Bankruptcy Event. Any Bankruptcy Event shall occur with
respect to any Credit Party; or
(e) Ownership. The Guarantor shall cease to own directly or
indirectly all of the outstanding capital stock of either of the
Borrowers; or
(f) Incorporated Events of Default. There shall occur and be
continuing any Event of Default under and as defined in the WestPoint
Credit Agreement.
9.2 Acceleration; Remedies. Upon the occurrence of an Event of Default,
and at any time thereafter unless and until such Event of Default has been
waived by the requisite Lenders (pursuant to the voting conditions of Section
11.6) or cured to the satisfaction of the requisite Lenders (pursuant to the
voting procedures in Section 11.6), the Agent shall, upon the request and
direction of the Required Lenders, by written notice to the Credit Parties take
any of the following actions without prejudice to the rights of the Agent or any
Lender to enforce its claims against the Credit Parties, except as otherwise
specifically provided for herein:
(i) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(ii) Acceleration. Declare the unpaid principal of and any
accrued interest in respect of all Foreign Currency Loans, any
reimbursement obligations arising from drawings under Foreign Letters
of Credit and any and all other indebtedness or obligations of any and
every kind owing by the Borrowers to any of the Lenders hereunder to be
due whereupon the same shall be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each of the Borrowers.
(iii) Cash Collateral. Direct (A) the Borrowers to pay to the
Agent additional cash, to be held by the Agent, for the benefit of the
Lenders, in a cash collateral account as additional security for the
Foreign LOC Obligations in respect of subsequent drawings under all
then outstanding Foreign Letters of Credit in an amount equal to the
maximum aggregate amount which may be drawn under all Foreign Letters
of Credits then outstanding.
(iv) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents and all
rights of set-off.
Notwithstanding the foregoing, if a Bankruptcy Event shall occur with
respect to any Credit Party, then the Commitments shall automatically terminate
and all Foreign Currency Loans, all reimbursement obligations arising from
drawings under Foreign Letters of Credit, all accrued interest in respect
thereof, all
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accrued and unpaid fees and other indebtedness or obligations owing to the
Lenders hereunder automatically shall immediately become due and payable without
the giving of any notice or other action by the Agent.
SECTION 10
AGENCY PROVISIONS
-----------------
Each of the terms, conditions, and provisions of Article VIII of the
WestPoint Credit Agreement are hereby expressly incorporated herein by reference
and applied with equal force to this Credit Agreement, including without
limitation the appointment of the Agent, the rights of indemnification,
resignation of the Agent, and the nature of the duties of the Agent. Any
successor Agent appointed pursuant to Article VIII of the WestPoint Credit
Agreement shall automatically replace and succeed the Agent hereunder.
SECTION 11
MISCELLANEOUS
-------------
11.1 Notices. Except as otherwise expressly provided herein, all
notices and other communications shall have been duly given and shall be
effective (i) when delivered, (ii) when transmitted via telecopy (or other
facsimile device) to the number set out below, (iii) the Business Day following
the day on which the same has been delivered prepaid to a reputable national
overnight air courier service, or (iv) the third Business Day following the day
on which the same is sent by certified or registered mail, postage prepaid, in
each case to the respective parties at the address, in the case of the
Borrowers, the Guarantor and the Agent, set forth below, and, in the case of the
Lenders, set forth on Schedule 2.1(a), or at such other address as such party
may specify by written notice to the other parties hereto:
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if to the Borrowers or the Guarantor:
WestPoint Stevens, Inc.
507 W. 10th Street
P.O. Box 71
West Point, Georgia 31833
Attn: Morgan Scheussler
Telephone: (706) 645-4230
Telecopier: (706) 645-4969
with a copy to the Legal Department at the above address.
if to the Agent:
NationsBank, N.A.
NationsBank Corporate Center, 8th Floor
100 North Tryon Street
Charlotte, NC 28255
Attn: J. Timothy Martin
Senior Vice President
Telephone: (704) 386-8385
Telecopy: (704) 386-1270
11.2 Right of Set-Off. Subject to Section 3.12, in addition to any
rights now or hereafter granted under applicable law or otherwise, and not by
way of limitation of any such rights, upon the occurrence of an Event of Default
which is continuing, unremedied and unwaived, each Lender is authorized at any
time and from time to time, without presentment, demand, protest or other notice
of any kind (all of which rights being hereby expressly waived), to set off and
to appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Lender (including, without
limitation branches, agencies or Affiliates of such Lender wherever located) to
or for the credit or the account of any Credit Party against obligations and
liabilities of such Credit Party to such Lender hereunder, under the Foreign
Currency Notes, under the other Credit Documents or otherwise, irrespective of
whether such Lender shall have made any demand hereunder and although such
obligations, liabilities or claims of such Lender to such Credit Party, or any
of them, may be contingent or unmatured, and any such set-off shall be deemed to
have been made immediately upon the occurrence of an Event of Default even
though such charge is made or entered on the books of such Lender subsequent
thereto. Each of the Credit Parties hereby agrees that any Person purchasing a
participation in the Foreign Currency Loans and Commitments hereunder pursuant
to Section 11.3(c) or Section 3.12 may exercise all rights of set-off with
respect to its participation interest as fully as if such Person were a Lender
hereunder.
11.3 Benefit of Agreement.
---------------------
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided that none of the Credit
Parties may assign and transfer any of its interests or obligations
without prior written consent of the Lenders; provided further that the
rights of each Lender to transfer, assign or grant participations in
its rights and/or obligations hereunder shall be limited as set forth
in this Section 11.3, provided however that nothing herein shall
prevent or prohibit any Lender from (i) pledging its Foreign Currency
Loans hereunder to a Federal Reserve Bank in support of
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borrowings made by such Lender from such Federal Reserve Bank, or (ii)
granting assignments or participations in such Lender's Foreign
Currency Loans and/or Commitments hereunder to its parent company
and/or to any affiliate of such Lender which is at least 50% owned by
such Lender or its parent company.
(b) Assignments. Each Lender may, with the prior written
consent of the Borrowers and the Agent, which consent shall not be
unreasonably withheld or delayed (provided that no consent shall be
required during the existence and continuation of an Event of Default),
assign all or a portion of its rights and obligations hereunder
pursuant to an assignment agreement substantially in the form of
Exhibit 11.3(b) to one or more Eligible Assignees; provided that (i)
any such assignment shall be in a minimum aggregate amount of
$2,000,000 (or, if less, the remaining amount of the Commitment being
assigned by such Lender) and in integral multiples of $1,000,000 above
such amount, (ii) each such assignment shall be of a constant, not
varying, percentage of all of the assigning Lender's rights and
obligations under the Commitment being assigned, and (iii) any such
assignment is accompanied by an assignment by such Lender to such
Eligible Assignee(s) of an equal percentage of all of the assigning
Lender's rights, obligations and commitments under the WestPoint Credit
Agreement. Any assignment hereunder shall be effective upon
satisfaction of the conditions set forth above and delivery to the
Agent of a duly executed assignment agreement together with a transfer
fee of $3,500 payable to the Agent for its own account. Upon the
effectiveness of any such assignment, the assignee shall become a
"Lender" for all purposes of this Credit Agreement and the other Credit
Documents and, to the extent of such assignment, the assigning Lender
shall be relieved of its obligations hereunder to the extent of the
Foreign Currency Loans and Commitment components being assigned. Along
such lines each Borrower agrees that upon notice of any such assignment
and surrender of the appropriate Foreign Currency Note or Foreign
Currency Notes, it will promptly provide to the assigning Lender and to
the assignee separate Foreign Currency Notes substantially in the form
of the original Foreign Currency Note or Foreign Currency Notes (but
with notation thereon that it is given in substitution for replacement
notes thereof).
(c) Participations. Each Lender may sell, transfer, grant or
assign participations in all or any part of such Lender's interest and
obligations hereunder; provided that (i) such selling Lender shall
remain a "Lender" for all purposes under this Credit Agreement (such
selling Lender's obligations under the Credit Documents remaining
unchanged) and the participant shall not constitute a Lender hereunder,
(ii) no such participant shall have, or be granted, rights to approve
any amendment or waiver relating to this Credit Agreement or the other
Credit Documents except to the extent any such amendment or waiver
would (A) reduce the principal of or rate of interest on or in respect
of any Foreign Currency Loans or any Foreign LOC Obligations or any
fees in which such participant is participating, (B) postpone the date
fixed for any payment of principal (including extension of the
Termination Date or the date of any mandatory prepayment), interest or
fees in which such participant is participating, or (C) release all or
substantially all of the collateral or guaranties (except as expressly
provided in the Credit Documents) supporting any of the Foreign
Currency Loans, Foreign LOC Obligations or Commitments in which such
participant is participating, (iii) sub-participations by such
participant (except to an Affiliate, parent company or Affiliate of a
parent company of such participant) shall be prohibited and (iv) any
such participations shall be in a minimum aggregate amount of
$1,000,000 (or, if less, the remaining amount of the Commitment being
participated by such Lender) of the Commitments and in integral
multiples of $1,000,000 in excess thereof. In the case of any such
participation, such participant shall not have any rights under this
Credit Agreement or the other Credit Documents (such participant's
rights against the selling Lender in respect of such participation to
be those set forth in
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the participation) and all amounts payable by the Borrower hereunder
shall be determined as if such Lender had not sold such participation.
11.4 No Waiver; Remedies Cumulative. No failure or delay on the part of
the Agent or any Lender in exercising any right, power or privilege hereunder or
under any other Credit Document and no course of dealing between any of the
Credit Parties shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Agent or any Lender would otherwise have. No notice to or
demand on any Credit Party in any case shall entitle the Borrowers or any other
Credit Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or the Lenders
to any other or further action in any circumstances without notice or demand.
11.5 Payment of Expenses, etc. Each Borrower agrees to: (i) pay all
reasonable out-of-pocket costs and expenses of the Agent in connection with the
negotiation, preparation, execution and delivery and administration of this
Credit Agreement and the other Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and expenses of Moore & Van Allen, special counsel to the Agent) and any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Credit Parties under this Credit Agreement and of the Agent and the Lenders in
connection with enforcement of the Credit Documents and the documents and
instruments referred to therein (including, without limitation, in connection
with any such enforcement, the reasonable fees and disbursements of counsel for
the Agent and each of the Lenders); (ii) pay and hold each of the Lenders
harmless from and against any and all present and future stamp and other similar
taxes with respect to the foregoing matters and save each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and (iii) indemnify each Lender, its officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all losses, liabilities, claims, damages or expenses
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation, litigation or other proceeding (whether
or not any Lender is a party thereto) related to the entering into and/or
performance of any Credit Document or the use of proceeds of any Foreign
Currency Loans (including other extensions of credit) hereunder or the
consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified).
11.6 Amendments, Waivers and Consents. Neither this Credit Agreement
nor any other Credit Document nor any of the terms hereof or thereof may be
amended, changed, waived, discharged or terminated unless such amendment,
change, waiver, discharge or termination is in writing entered into by, or
approved in writing by, the Required Lenders, provided that no such amendment,
change, waiver, discharge or termination shall, without the consent of each
Lender, (i) extend the scheduled maturities (including the final maturity and
any mandatory prepayments) of any Foreign Currency Loan, or any portion thereof,
or reduce the rate or extend the time of payment of interest (other than as a
result of waiving the applicability of any post-default increase in interest
rates) thereon or fees hereunder or reduce the principal amount thereof, or
increase the Commitments of the Lenders over the amount thereof in effect (it
being understood and agreed that a waiver of any Default or Event of Default or
of a mandatory
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reduction in the total Commitments shall not constitute a change in the terms of
any Commitment of any Lender), (ii) release the Guarantor from its guaranty
obligations hereunder (except as expressly provided in the Credit Documents),
(iii) amend, modify or waive any provision of this Section or Section 3.6, 3.9,
3.10, 3.11, 3.12, 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 5.1, 5.2, 9.1, 9.2, 11.2, 11.3,
11.5 or 11.9, (iv) reduce any percentage specified in, or otherwise modify, the
definition of "Foreign Currency Equivalent," "Determination Date," "Dollar
Amount," "Dollar Equivalent," or "Required Lenders" or (v) consent to the
assignment or transfer by any Borrower or the Guarantor of any of its rights and
obligations under (or in respect of) this Credit Agreement or any other Credit
Document. No provision of Section 2.2 may be amended without the consent of the
Issuing Lender, and no provision of Section 10 may be amended without the
consent of the Agent.
11.7 Counterparts. This Credit Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Credit Agreement to produce or
account for more than one such counterpart.
11.8 Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Credit Agreement.
11.9 Survival of Indemnification. All indemnities set forth herein,
including, without limitation, in Section 2.2(i), 3.9, 3.10, or 11.5 shall
survive the execution and delivery of this Credit Agreement, and the making of
the Foreign Currency Loans, the issuance of the Foreign Letters of Credit, the
repayment of the Foreign Currency Loans, Foreign LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder.
11.10 Governing Law; Submission to Jurisdiction; Venue; Arbitration.
--------------------------------------------------------------
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with
respect to this Credit Agreement or any other Credit Document may be
brought in the courts of the State of North Carolina in Mecklenburg
County, or of the United States for the Western District of North
Carolina, and, by execution and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the
jurisdiction of such courts. Each of the Credit Parties further
irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to
it at the address set out for notices pursuant to Section 11.1, such
service to become effective 30 days after such mailing. Nothing herein
shall affect the right of the Agent or any Lender to serve process in
any other manner permitted by law or to commence legal proceedings or
to otherwise proceed against any Credit Party in any other
jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with this Credit Agreement or any other Credit Document
brought in the courts referred to in subsection (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
34
<PAGE> 36
(c) TO THE EXTENT PERMITTED BY LAW, THE AGENT, EACH OF THE
LENDERS AND EACH OF THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER
CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(d) (i) Without limiting the generality of subsections (a),
(b) and (c) of this Section 11.10, each Borrower agrees that
any controversy or claim with respect to it arising out of or
relating to this Credit Agreement or any of the other Credit
Documents may, at the option of the Agent and the Lenders, be
settled immediately by submitting the same to binding
arbitration in Charlotte, North Carolina (or such other place
as the parties may agree) in accordance with the Commercial
Arbitration Rules of the American Arbitration Association.
Upon the request and submission of any controversy or claim
for arbitration hereunder, the Agent shall give the Borrowers
not less than 45 days written notice of the request for
arbitration, the nature of the controversy or claim, and the
time and place set for arbitration. Each Borrower agrees that
such notice is reasonable to enable it sufficient time to
prepare and present its case before the arbitration panel.
Judgment on the award rendered by the arbitration panel may be
entered in any court in which any action could have been
brought or maintained, including without limitation any court
of the State of North Carolina in Mecklenburg County, or of
the United States for the Western District of North Carolina.
The expenses of arbitration shall be paid by the Borrowers.
(ii) The provisions of subsection (d)(i) above are
intended to comply with the requirements of the Convention on
the Recognition and Enforcement of Foreign Arbitral Awards
(the "Convention"). To the extent that any provisions of such
subsection (d)(i) are not consistent with or fail to conform
to the requirements set out in the Convention, such subsection
(d)(i) shall be deemed amended to conform to the requirements
of the Convention.
(iii) Each Borrower hereby specifically consents and
submits to the jurisdiction of the courts of the State of
North Carolina in Mecklenburg County, or of the United States
for the Western District of North Carolina, for purposes of
entry of a judgment or arbitration award entered by the
arbitration panel.
(iv) The Borrowers hereby irrevocably appoint
Corporation Service Network, with an address on the date
hereof at 327 Hillsborough Street, Raleigh, NC 27603 (the
"Domestic Process Agent"), as process agent in its name, place
and stead to receive and forward service of any and all writs,
summonses and other legal process in any suit, action or
proceeding brought in the State of North Carolina, agree that
such service in any such suit, action or proceeding may be
made upon the Domestic Process Agent and agree to take all
such action as may be necessary to continue said appointment
in full force and effect or to appoint another agent so that
the Borrowers will at all times have an agent in the State of
North Carolina for service of process for the above purposes.
11.11 Severability. If any provision of any of the Credit Documents is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
35
<PAGE> 37
11.12 Entirety. This Credit Agreement together with the other Credit
Documents represent the entire agreement of the parties hereto and thereto, and
supersede all prior agreements and understandings, oral or written, if any,
including any commitment letters or correspondence relating to the Credit
Documents or the transactions contemplated herein and therein.
11.13 Survival of Representations and Warranties. All representations
and warranties made by the Credit Parties herein shall survive delivery of the
Foreign Currency Notes and the making of the Foreign Currency Loans and the
issuance of the Foreign Letters of Credit hereunder.
11.14 Binding Effect; Termination of Credit Agreement.
------------------------------------------------
(a) This Credit Agreement shall become effective at such time
on or after the Closing Date when it shall have been executed by the
Borrowers, the Guarantor and the Agent, and the Agent shall have
received copies hereof (telefaxed or otherwise) which, when taken
together, bear the signatures of each Lender, and thereafter this
Credit Agreement shall be binding upon and inure to the benefit of the
Borrowers, the Guarantor, the Agent and each Lender and their
respective successors and assigns.
(b) The term of this Credit Agreement shall be until no
Foreign Currency Loans, Foreign LOC Obligations or any other amounts
payable hereunder or under any of the other Credit Documents shall
remain outstanding and until all of the Commitments hereunder shall
have expired or been terminated.
11.15 Judgment Currency.
------------------
(a) Each Credit Party's obligations hereunder to make payments
in Dollars or in Pounds Sterling (the "Obligation Currency") shall not
be discharged or satisfied by any tender or recovery pursuant to any
judgment expressed in or converted into any currency other than the
Obligation Currency, except to the extent that such tender or recovery
results in the effective receipt by the Agent or a Lender of the full
amount of the Obligation Currency expressed to be payable to the Agent
or such Lender under this Credit Agreement. If, for the purpose of
obtaining or enforcing judgment against any Credit Party in any court
or in any jurisdiction, it becomes necessary to convert into or from
any currency other than the Obligation Currency (such other currency
being hereinafter referred to as the "Judgment Currency") an amount due
in the Obligation Currency, the conversion shall be made, at the Dollar
Equivalent or the Foreign Currency Equivalent, as applicable,
determined in each case as of the Business Day immediately preceding
the day on which the judgment is given (such Business Day being
hereinafter referred to as the "Judgment Currency Conversion Date").
(b) If there is a change in the rate of exchange prevailing
between the Judgment Currency Conversion Date and the date of actual
payment of the amount due, such amount payable by the applicable Credit
Party shall be reduced or increased, as applicable, such that the
amount paid in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of payment, will produce the amount of
the Obligation Currency which could have been purchased with the amount
of Judgment Currency stipulated in the judgment or judicial award at
the rate of exchange prevailing on the Judgment Currency Conversion
Date.
36
<PAGE> 38
[Signature Page to Follow]
37
<PAGE> 39
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWERS: WESTPOINT STEVENS (UK) LIMITED
- ---------
By
--------------------------------
Title
-----------------------------
P.J. FLOWER & CO. LIMITED
By
--------------------------------
Title
-----------------------------
GUARANTOR: WESTPOINT STEVENS INC.
- ---------
By
--------------------------------
Title
-----------------------------
[Signatures Continue]
S-1
<PAGE> 40
LENDERS: NATIONSBANK, N.A.,
- ------- individually in its capacity as a
Lender and in its capacity as Agent
Foreign Currency Commitment Percentage: By
13.141631325% ---------------------------------
Name
-------------------------------
Title
------------------------------
Address:
NationsBank, N.A.
100 North Tryon Street
NC 1-007-08-11
Charlotte, N.C. 28255
Attn: J. Timothy Martin
Telephone: (704) 386-8385
Telecopier: (704) 386-1270
THE BANK OF NEW YORK
Foreign Currency Commitment Percentage: By
13.141631342% ---------------------------------
Name
-------------------------------
Title
------------------------------
Address:
The Bank of New York
One Wall Street, 22nd Floor
New York, New York 10286
Attn: Gregory Batson
Telephone: (212) 635-6898
Telecopier: (212) 635-6434
[Signatures Continue]
S-2
<PAGE> 41
THE FIRST NATIONAL BANK OF BOSTON
Foreign Currency Commitment Percentage: By
13.141631342% ---------------------------------
Name
-------------------------------
Title
------------------------------
Address:
The First National Bank of Boston
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Stephen Y. McGehee
Telephone: (770) 390-6524
Telecopier: (770) 393-4166
THE FIRST NATIONAL BANK OF CHICAGO
Foreign Currency Commitment Percentage: By
14.285714288% ---------------------------------
Name
-------------------------------
Title
------------------------------
Address:
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670-0424
Attn: Courtenay R. Wood
Telephone: (312) 732-1563
Telecopier: (312) 732-5435
[Signatures Continue]
S-3
<PAGE> 42
THE NIPPON CREDIT BANK, LTD.
Foreign Currency Commitment Percentage: By
13.141631342% ---------------------------------
Name
-------------------------------
Title
------------------------------
Address:
The Nippon Credit Bank, Ltd.
245 Park Avenue, 30th Floor
New York, New York 10167
Attn: Clifford Abramsky
Telephone: (212) 984-1238
Telecopier: (212) 490-3895
WACHOVIA BANK OF GEORGIA, N.A.
Foreign Currency Commitment Percentage: By
14.285714288% ---------------------------------
Name
-------------------------------
Title
------------------------------
Address:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E., 30th
Floor
Atlanta, GA 30303-1757
Attn: Commercial Group
Telephone: (404) 332-1382
Telecopier: (404) 332-6920
[Signatures Continue]
S-4
<PAGE> 43
SUNTRUST BANK, ATLANTA
Foreign Currency Commitment Percentage: By
9.995403241% ---------------------------------
Name: Wes Burton
Title: Vice President
By
---------------------------------
Name
-------------------------------
Title
------------------------------
Address:
SunTrust Bank, Atlanta
25 Park Place, NE, 23rd Floor
Mail Code 126
Atlanta, Georgia 30302
Attn: Wes Burton
Telephone: (404) 724-3893
Telecopier: (404) 588-8833
AMSOUTH BANK OF ALABAMA
Foreign Currency Commitment Percentage: By
4.290311048% ---------------------------------
Name
-------------------------------
Title
------------------------------
Address:
AmSouth Bank of Alabama
1900 5th Avenue North
Birmingham, Alabama 35203
Attn: Alan Lott
Telephone: (205) 583-4474
Telecopier: (205) 583-4436
[Signatures Continue]
S-5
<PAGE> 44
ABN AMRO BANK, N.V., ATLANTA AGENCY
Foreign Currency Commitment Percentage: By
4.576331784% ---------------------------------
Name
-------------------------------
Title
------------------------------
By
---------------------------------
Name
-------------------------------
Title
------------------------------
Address:
ABN AMRO Bank, N.V.
Atlanta Agency
One Ravinia Drive, Suite 1200
Atlanta, GA 30346
Attn: Mark Clegg
Telephone: (770) 399-7399
Telecopier: (770) 399-7397
S-6
<PAGE> 45
SCHEDULE 1.1A
-------------
CALCULATION OF THE MLA COST
(a) The MLA Cost for any Foreign Currency Loan made by any Lender is
calculated in accordance with the following formula:
BY + L(Y-X) + S(Y-Z) % per annum = MLA Cost
---------------------
100 - (B+S)
where on the day of application of the formula:
B is the percentage of such Lender's eligible liabilities which
the Bank of England requires such Lender to hold on a
non-interest-bearing deposit account in accordance with its
cash ratio requirements;
Y is the interest rate applicable to such Foreign Currency Loan;
L is the percentage of eligible liabilities which the Bank of
England requires such Lender to maintain as secured money with
members of the London Discount Market Association and/or as
secured call money with certain money brokers and gilt-edged
primary market makers;
X is the rate at which secured Pounds Sterling deposits in the
relevant amount may be placed by such Lender with members of
the London Discount Market Association and/or as secured call
money with certain money brokers and gilt-edged primary market
makers at or about 11:00 a.m. on that day for the relevant
period;
S is the percentage of such Lender's eligible liabilities which
the Bank of England requires such Lender to place as a special
deposit; and
Z is the interest rate per annum allowed by the Bank of England
on special deposits.
(b) For the purposes of this Schedule 1.1A:
(i) "eligible liabilities" and "special deposits" have the
meanings given to them at the time of application of the
formula by the Bank of England;
(ii) "relevant period" means:
(A) in relation to any Foreign Currency Loan bearing
interest on the basis of the Eurocurrency Rate, (1)
if its Interest Period is 3 months or less, that
Interest Period and (2) if its Interest Period is
more than three months, each successive period of
three months and any necessary shorter period
comprised in that Interest Period; or
(B) in relation to any Foreign Currency Loan bearing
interest on the basis of the Interim Foreign Currency
Rate, each day that such Foreign Currency Loan is
outstanding.
<PAGE> 46
(c) In application of the formula, B, Y, L, X, S and Z are
included in the formula as figures and not as percentages,
e.g. if B=0.5% and Y=15%, BY is calculated as 0.5 x 15.
(d) (i) The formula is applied (A) in relation to any Foreign
Currency Loan bearing interest on the basis of the
Eurocurrency Rate, on the first day of each Interest
Period of such Foreign Currency Loan and (B) in
relation to any Foreign Currency Loan bearing
interest on the basis of the Interim Foreign Currency
Rate, on each day.
(ii) Each rate calculated in accordance with the formula
is, if necessary, rounded upward to four decimal
places.
(e) If the Agent determines that a change in circumstances has
rendered, or will render, the formula inappropriate, the Agent
shall notify the Borrower of the manner in which the MLA Cost
will subsequently be calculated. The manner of calculation so
notified by the Agent shall, in the absence of manifest error,
be binding on all the parties.
<PAGE> 47
SCHEDULE 1.1B
-------------
FORM OF NOTICE OF BORROWING
NationsBank, N.A.,
as Agent for the Lenders
35 New Broad Street
GB1-001-01-01
London, England EC2M 1NH
Ladies and Gentlemen:
The undersigned, [WestPoint Stevens (U.K.) Limited] or [P.J. Flower &
Co. Limited] refers to the Credit Agreement dated as of January 23, 1997 (as it
may be amended, modified, extended or restated from time to time, the "Credit
Agreement"), among the Borrowers, the other Credit Parties party thereto, the
Lenders party thereto and NationsBank, N.A., as Agent.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
The undersigned hereby gives you notice that it requests a Foreign
Currency Loan advance in accordance with the provisions of Section 2.1 of the
Credit Agreement and in connection therewith sets forth below the terms on which
such Foreign Currency Loan advance is requested to be made:
(A) Date of Borrowing
(which is a Business Day) _______________________
(B) Principal Amount of
Borrowing _______________________
(C) Interest Period and the
last day thereof _______________________
The delivery of this Notice of Borrowing shall constitute a
representation and warranty by the undersigned of the correctness of the matters
specified in subsections (ii), (iii), (iv), and (v) of Sections 5.2.
Very truly yours,
[WESTPOINT STEVENS (U.K.) LIMITED]
[P.J. FLOWER & CO. LIMITED]
By:
Title:
<PAGE> 48
SCHEDULE 1.1C
-------------
FORM OF NOTICE OF EXTENSION
NationsBank, N.A.,
as Agent for the Lenders
35 New Broad Street
GB1-001-01-01
London, England EC2M 1NH
Ladies and Gentlemen:
The undersigned, [WestPoint Stevens (U.K.) Limited] [P.J. Flower & Co.
Limited], refers to the Credit Agreement dated as of January 23, 1997 (as
amended, modified, extended or restated from time to time, the "Credit
Agreement"), among the Borrowers, the other Credit Parties party thereto, the
Lenders and NationsBank, N.A., as Agent.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
The undersigned hereby gives notice pursuant to Section 3.2 of the
Credit Agreement that it requests an extension of a Foreign Currency Loan
outstanding under the Credit Agreement, and in connection herewith sets forth
below the terms on which such extension is requested to be made:
(A) Date of Extension
(which is the last day of the
the applicable Interest Period) _______________________
(B) Principal Amount of
Extension _______________________
(C) Interest Period and the
last day thereof _______________________
The delivery of this Notice of Extension shall constitute a
representation and warranty by the undersigned of the correctness of the matters
specified in subsections (ii), (iii), (iv), and (v) of Sections 5.2.
Very truly yours,
[WESTPOINT STEVENS (U.K.) LIMITED]
[P.J. FLOWER & CO. LIMITED]
By:
Title:
<PAGE> 49
SCHEDULE 2.5(E)
---------------
FORM OF
FOREIGN CURRENCY NOTE
January 23, 1997
FOR VALUE RECEIVED, [WESTPOINT STEVENS (UK) LIMITED] [P.J. FLOWER & CO.
LIMITED], a limited liability company incorporated in England (the "Borrower"),
hereby promises to pay to the order of __________________________, its
successors and assigns (the "Lender"), at the office of NationsBank, N.A., as
Agent (the "Agent"), at 35 New Broad Street, GB1-001-01-01, London, England ECM
12H (or at such other place or places as the holder hereof may designate), at
the times set forth in the Credit Agreement, dated as of January 23, 1997, among
the Borrower, [WestPoint Stevens (UK) Limited/P.J. Flower & Co.], WestPoint
Stevens Inc., the Lenders and the Agent (as it may be amended, modified,
extended or restated from time to time, the "Credit Agreement"; all capitalized
terms not otherwise defined herein shall have the meanings set forth in the
Credit Agreement), but in no event later than the Termination Date, the
aggregate unpaid principal amount of all Foreign Currency Loans made by the
Lender to the Borrower pursuant to the Credit Agreement, and to pay interest
from the date hereof on the unpaid principal amount hereof at said place and
account, on the dates and at the rate in accordance with Section 2.1(d) of the
Credit Agreement. Each payment on account of an amount due from the Borrower
hereunder shall be made in Pounds Sterling at the place and time of payment set
forth in Section 3.13(b) of the Credit Agreement. Without limiting the terms of
the preceding sentence, accrued interest on any Foreign Currency Loan shall be
payable in Pounds Sterling.
Upon the occurrence and during the continuance of an Event of Default
the balance outstanding hereunder shall bear interest as provided in Section 3.1
of the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement, this Foreign
Currency Note, and all other indebtedness of the Borrower to the Lender shall
become immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Borrower.
In the event this Foreign Currency Note is not paid when due at any
stated or accelerated maturity, the Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable attorneys'
fees.
All borrowings evidenced by this Foreign Currency Note and all payments
and prepayments of the principal hereof and interest hereon and the respective
dates thereof shall be endorsed by the holder hereof on Schedule A attached
hereto and incorporated herein by reference, or on a continuation thereof which
shall be attached hereto and made a part hereof; provided, however, that any
failure to endorse such information on such schedule or continuation thereof
shall not in any manner affect the obligation of the Borrower to make payments
of principal and interest in accordance with the terms of this Foreign Currency
Note.
THIS FOREIGN CURRENCY NOTE AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 50
IN WITNESS WHEREOF, the Borrower have caused this Foreign Currency Note
to be duly executed by its duly authorized officer as of the day and year first
above written.
[WESTPOINT STEVENS (UK) LIMITED]
[P.J. FLOWER & CO. LIMITED]
By
-------------------------------------
Title
----------------------------------
<PAGE> 51
SCHEDULE A TO THE
FOREIGN CURRENCY NOTE
DATED JANUARY 23, 1997
<TABLE>
<CAPTION>
Unpaid Name of
Principal Person
Interest Payments Balance Making
Date Period Principal Interest of Note Notation
- ---- ------ --------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
WESTPOINT STEVENS INC.
EXHIBIT (10.44) - FIRST AMENDMENT TO THE WESTPOINT STEVENS INC. SUPPLEMENTAL
RETIREMENT PLAN
THIS FIRST AMENDMENT to the WestPoint Stevens Inc. Supplemental
Retirement Plan (the "Plan") is made on this 6th day of September, 1996, by
WestPoint Stevens Inc. (the "Company")
W I T N E S S E T H:
WHEREAS, the Company maintains the Plan to provide supplemental
retirement benefits to a select group of management or highly compensated
employees of the Company; and
WHEREAS, Section 7.1 of the Plan provides that the Company has the
right to amend the Plan at any time and from time to time in any fashion,
subject to the limitations stated therein; and
WHEREAS, the Board of Directors of the Company on August 15, 1996
approved the amendment of the Plan to limit the amount of compensation that may
be taken into account for purposes of determining a participant's accrued
benefit under the Plan;
NOW, THEREFORE, the Plan is amended as follows:
1. Section 3.1 of the Plan is hereby amended effective January
1, 1996 to read as follows:
3.1 Participation. Each Eligible Employee shall become a
Participant in the Plan as of the date that such Eligible
Employee is approved for participation by the Committee in its
sole discretion.
2. Section 4.1 of the Plan is amended effective January 1, 1996
by adding a new subsection 4.1(c) to read as follows:
(c) Notwithstanding subsection (a)(1) or anything in
the Pension Plan to the contrary, the compensation taken into
account under the Plan for Plan Years beginning on or after
January 1, 1996 shall not exceed the lesser of (i) $300,000 or
(ii) one-hundred twenty percent (120%) of the Participant's
base salary. The provisions of this subsection (c) shall not
reduce any Participant's Accrued Benefit determined as of
August 15, 1996. In addition, the provisions of this
subsection (c) shall not apply to Holcombe T. Green, Jr.,
Joseph L. Jennings, Jr., Thomas J. Ward, Morgan M. Schuessler
and William F. Crumley.
3. Except as specified herein, the Plan shall remain in full
force and effect.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer
to execute this Amendment effective on the date first written above.
WESTPOINT STEVENS INC.
By: /s/ Holcombe T. Green, Jr.
----------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
<PAGE> 1
EXHIBIT 10.45
[LETTERHEAD] WESTPOINT STEVENS
HOLCOMBE T. GREEN, JR.
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
May 28, 1996
Personal and Confidential
Mr. Joseph L. Jennings
WestPoint Stevens Inc.
P.O. Box 71
West Point, GA 31833
Dear Joe:
You have indicated that you would like to avoid the daily
responsibilities associated with your present position as President and Chief
Operating Officer of WestPoint Stevens Inc., and in response thereto, I have
proposed the following arrangement with respect to your employment by the
Company in 1997-98:
1. Effective January 1, 1997, you would serve as Vice-Chairman of the
company, reporting directly to me. As such, you would have no daily
responsibilities but would be available, as your time allowed, to assist me from
time to time with certain special projects. For example, I would like for you
to assist me with the supervision of Alamac, our cotton purchases, and the India
joint venture.
You would also continue to serve as WestPoint's member of the ATMI
Board of Directors and would represent the Company in various community Boards
and functions in the West Point, Georgia area.
You would continue, as your time permitted, to assist the Company with
its sales and customer relations, especially with the larger accounts where you
have personal contacts.
<PAGE> 2
- 2 -
2. You would maintain your present office and secretary and be
eligible for all your current benefits. If you moved from West Point, Georgia,
you would be furnished with an office and secretarial assistance at a Company
location of your choice.
3. You would be paid $120,000 annually as your base salary and would
be eligible to participate in the incentive bonus program and stock bonus
program. You would keep all of your current stock options, subject to their
normal terms.
4. If you decide to sell your home in West Point, Georgia, you would
sell the house to the Company for your cost, including all improvements paid by
you, plus $50,000.
You would, of course, remain a member of the Board of Directors of
WestPoint Stevens Inc.
Please let me know if this arrangement is satisfactory with you. This
agreement supersedes your current employment agreement with the Company
effective as of January 1, 1997.
Sincerely,
/s/ Holcombe T. Green, Jr.
Holcombe T. Green, Jr.
HTGjr:rj
<PAGE> 1
WESTPOINT STEVENS INC.
EXHIBIT (11) - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Primary:
Average shares outstanding .................................... 31,277 32,699 33,775
Shares issuable under 1995
Key Employee Stock Bonus Plan ........................... 50 - -
Net effect of dilutive stock options
- based on the treasury stock
method using average market price ....................... 456 - -
--------- --------- ---------
Total ......................................................... 31,783 32,699 33,775
========= ========= =========
Net income (loss) ............................................. $ 57,665 $(129,848) $(203,364)
========= ========= =========
Per share amount .............................................. $ 1.81 $ (3.97) $ (6.02)
========= ========= =========
</TABLE>
Fully diluted earnings per share calculations are not presented as dilution is
less than 3%.
<PAGE> 1
WESTPOINT STEVENS INC.
EXHIBIT (21) - LIST OF SUBSIDIARIES OF WESTPOINT STEVENS INC.
<TABLE>
<CAPTION>
% OF SECURITIES
OWNED BY
NAME INCORPORATED IMMED. PARENT
- ---- ------------ -------------
<S> <C> <C>
West Point-Pepperell Enterprises, Inc. Delaware 100%
J.P. Stevens & Co., Inc. Delaware 100%
WestPoint Stevens (Canada) Ltd. Canada 100%
(1)J.P. Stevens & Co., Limited England 100%
J.P. Stevens Enterprises, Inc. Delaware 100%
Alamac Holdings Inc. Delaware 100%
Alamac Sub Holdings Inc. Delaware 100%
AIH Inc. Delaware 100%
Alamac Enterprises Inc. Delaware 100%
Alamac Knit Fabrics, Inc. Delaware 100%
WestPoint Stevens Stores Inc. Georgia 100%
WestPoint Stevens (UK) Limited England 100%
P.J. Flower & Co. Limited England 100%
Artway Designs Limited England 100%
Lexward Properties Limited England 100%
P.J. Flower Inc. New Jersey 100%
WPS Receivables Corporation Delaware 100%
WPSI Inc. Delaware 100%
</TABLE>
(1)To be dissolved
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-85718, Form S-8 No. 33-80806 and Form S-8 No. 33-95580)
pertaining to (i) the Retirement Savings Plan for Employees of WestPoint
Stevens Inc., (ii) the WestPoint Stevens Inc. 1993 Management Stock Option Plan
and (iii) the 1995 Key Employee Stock Bonus Plan, respectively, of our
report dated February 5, 1997, with respect to the consolidated financial
statements and schedule of WestPoint Stevens Inc. included in its Annual
Report (Form 10-K) for the year ended December 31, 1996.
Columbus, Georgia /s/ Ernst & Young LLP
February 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE CONSOLIDATED
BALANCE SHEET FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 14,029
<SECURITIES> 0
<RECEIVABLES> 89,810
<ALLOWANCES> 22,861
<INVENTORY> 299,651
<CURRENT-ASSETS> 395,568
<PP&E> 1,036,361
<DEPRECIATION> (330,393)
<TOTAL-ASSETS> 1,156,999
<CURRENT-LIABILITIES> 254,715
<BONDS> 1,075,000
0
0
<COMMON> 346
<OTHER-SE> 450,744
<TOTAL-LIABILITY-AND-EQUITY> 1,156,999
<SALES> 1,723,814
<TOTAL-REVENUES> 1,723,814
<CGS> 1,325,904
<TOTAL-COSTS> 1,325,904
<OTHER-EXPENSES> 2,757
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102,447
<INCOME-PRETAX> 90,365
<INCOME-TAX> 32,700
<INCOME-CONTINUING> 57,665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,665
<EPS-PRIMARY> 1.81
<EPS-DILUTED> 1.81
</TABLE>
