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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1998
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)
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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)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (706) 645-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
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Title of each Class Name of each exchange on which registered
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Common Stock, $.01 par value NASDAQ
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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 (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the Registrant's knowledge, in
definitive proxy or information statement incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.|_|
The aggregate market value of voting stock held by nonaffiliates of the
registrant was approximately $1,033,248,307 at March 19, 1999. The number of
shares of Common Stock outstanding at March 19, 1999, was 55,543,959.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrants
classes of common stock, as of the latest practicable date. 55,543,959 at March
19, 1999
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement to be mailed to
stockholders in connection with the registrant's May 12, 1999 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 ............................................................................ 3
Item 2. Properties .......................................................................... 8
Item 3. Legal Proceedings ................................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders ................................. 9
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters ................ 9
Item 6. Selected Financial Data ............................................................. 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
Item 8. Financial Statements and Supplementary Data ......................................... 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 40
Item 10. Directors and Executive Officers of the Registrant ................................. 40
Item 11. Executive Compensation ............................................................. 40
Item 12. Security Ownership of Certain Beneficial Owners and Management ..................... 40
Item 13. Certain Relationships and Related Transactions ..................................... 40
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ................... 40
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ITEM 1. BUSINESS
WestPoint Stevens Inc., a Delaware corporation organized in 1987 (the
"Company"), is the successor corporation to West Point- Pepperell, Inc. through
a series of mergers occurring in December 1993. The Company is engaged directly
and indirectly through its subsidiaries in the manufacture, marketing and
distribution of bed and bath home fashions ("Home Fashions") products.
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 "- Trademarks and Licenses."
On October 30, 1998, an indirect wholly owned subsidiary of the Company
purchased substantially all of the assets of Liebhardt Mills, Inc., a leading
domestic manufacturer and marketer of bed pillows and related bedding products.
The Company's management estimates that it has the largest market share
(approximately 36%) in the domestic sheet and pillowcase market and the largest
market share (approximately 43%) 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 February 8,
1999), 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.
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,
- bed pillows,
- mattress pads,
- 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.
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, brand
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(R), 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 Home
Collection, Sanderson, Larry Laslo, Joe Boxer, Glynda Turley, Designers Guild,
Esprit and Star Wars.
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A portion of the Company's sales is 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 11% 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 effect could be material. The following are the
expiration dates for the licensing agreements discussed above: Ralph Lauren,
December 31, 2000; Sanderson, March 31, 2000; Larry Laslo, March 31, 2000; Joe
Boxer, January 1, 2002; Glynda Turley, December 31, 2001; Esprit, December 31,
2000; and Star Wars, September 30, 2001.
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 and marketing of the Company's
Home Fashions products are conducted through a recently enhanced organizational
format consisting of divisions for domestic sales, domestic marketing and
international sales and marketing. Distribution specific teams are linked with
product management, operations, customer service and distribution to service
each segment of Retail.
The Domestic Sales Division focuses on the following channels of distribution:
- mass merchants;
- department and specialty stores;
- custom brands;
- Ralph Lauren;
- health and hospitality institutions; and
- specialized areas, including freestanding window treatments
and blankets.
The Domestic Marketing Division is comprised of the following functions which
create products and services in direct response to recognized consumer trends:
- design;
- operating;
- marketing;
- advertising;
- licensing;
- consumer research;
- product innovation; and
- corporate communications.
The International Sales and Marketing Division is organized to tailor its
products and operations to the unique needs of the consumers and retailers in
the world's leading markets. Operating units include:
- Europe - which has manufacturing facilities and sales offices
located in England supplying European department stores for
private label, company brands, and licensed programs such as
Ralph Lauren Home Collection and Designers Guild.
- Americas - which markets to all major stores in Canada,
Mexico, and Latin America with US-made and foreign sourced
products.
- Asia - which obtains foreign sourced goods for the United
States and European markets.
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. A national consumer and trade advertising campaign and
comprehensive internet web site have served to enhance brand recognition. The
Company
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also provides its customers with suggested customized advertising materials
designed to increase its product sales. A heightened focus on consumer research
provides needed products on a continual basis.
Approximately 86% of the Company's 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
Company's sales of Home Fashions products. 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 the Company in 1998.
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 44 geographically dispersed, value-priced
outlets throughout the United States and in Canada, 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 category management
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. The Company recently formed a supply chain and logistics group
encompassing customer service, replenishment systems planning, sourcing,
distribution and transportation, which it believes will further increase its
capabilities to provide its customers with superior service.
CUSTOMERS
The Company is pursuing strategic relationships with key 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 53% of the net sales of the Company during the
fiscal year ended December 31, 1998. In 1998 sales to Dayton Hudson Corporation
were 13% of the net sales of the Company and sales to Kmart were 11% of the net
sales of the Company. 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.
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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 $588 million to modernize
its manufacturing and distribution systems and has spent approximately $147.5
million of that amount during 1998. In October 1998 the Company also purchased
bed pillow and related bedding product manufacturing facilities from Liebhardt
Mills, Inc. The capital expenditures have been used to, among other things,
replace projectile looms with faster, more efficient air jet looms, replace ring
spinning with open-end and air jet spinning, and further automate the Company's
cut and sew operations. Air jet looms produce at higher speeds than projectile
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 the cutting and tucking
of the filling yarn. The Company's new open-end and air jet 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 1999 which includes the purchase of additional electronic
jacquard head weaving equipment and blanket manufacturing facilities and
equipment, construction of new and expanded distribution centers and
installation of dyeing and finishing equipment, and automated fabricating and
material handling 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
(including its subsidiaries) owns and utilizes 24 manufacturing facilities
located primarily in the Southeastern United States and leases 4 manufacturing
facilities, including one in England. See "Item 2 - Properties."
RAW MATERIALS
The principal raw materials used in the manufacture of Home Fashions products
are cotton of various grades and staple lengths, nylon and polyester in staple
and filament form. Cotton, nylon 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 nylon and
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, 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; CYCLICALITY; INVENTORY
Traditionally, the home fashions industry has been seasonal, with peak sales
seasons in the summer and fall. In accordance with industry practice, the
Company increases its Home Fashions' inventory levels during the first six
months of the year to meet customer demands for the summer and fall peak
seasons. The Company's commitment to EDI, Quick Response, and Vendor Managed
Inventory, however, has facilitated a more even distribution of products
throughout the calendar year and reduced the need to stockpile inventory to meet
peak season demands.
The home fashions industry is 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 the Company's unfilled customer orders believed by management to
be firm was approximately $104.5 million at February 27, 1999, as compared with
approximately $111.5 million at January 31, 1998. The Company does not believe
that its backlogs are a meaningful indicator of its future business.
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COMPETITION
The home fashions industry is highly competitive. 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.,
a wholly-owned subsidiary of Pillowtex Corporation (collectively
"Pillowtex/Fieldcrest"), 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
there has been an increase in the sale of imported Home Fashions in the domestic
market and is actively pursuing its own foreign sourcing opportunities to meet
the demand for such products. The Company does not believe that there is any
significant foreign competition with its current domestic operations. There can
be no assurance that foreign will not grow to a level that could have an adverse
effect upon the Company's ability to compete effectively.
OTHER OPERATIONS
The Company's operations include Grifftex Chemicals ("Grifftex") which
formulates chemicals primarily used in the Company's finishing processes and
WestPoint Stevens Graphics ("Graphics") which prints product packaging and
labeling. Neither Grifftex nor Graphics 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 16,900 active
employees as of February 25, 1999. 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 relations and communications
program that includes rules and regulations for employee conduct and procedures
for employee complaints. This long-standing program 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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RECENT DEVELOPMENTS
During 1998 the Company purchased approximately 3.8 million shares under the
various stock repurchase programs at an average price of $28.43 per share. On
February 11, 1999 the Board of Directors approved the purchase of up to three
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 nineteen million shares. At December 31, 1998,
approximately 4.9 million shares, including the three million share increase
announced in February 1999, remained to be purchased under these programs. The
repurchased 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. Such risks and
uncertainties may be attributable to important factors which include but are not
limited to the following: product margins may vary from those projected; raw
material prices may vary from those assumed; additional reserves may be required
for bad debts, returns, allowances, governmental compliance costs, or
litigation; there may be changes in the performance of financial markets or
fluctuations in foreign currency exchange rates; unanticipated natural disasters
could have a material impact upon results of operations; there may be changes in
the general economic conditions which affect customer payment practices or
consumer spending; competition for retail and wholesale customers, pricing and
transportation of products may vary from time to time due to seasonal variations
or otherwise; customer preferences for our products can be affected by
competition, or general market demand for domestic or imported goods or the
quantity, quality, price or delivery time of such goods; there could be an
unanticipated loss of a material customer, or a material license; the
availability and price of raw materials could be affected by weather, disease,
energy costs or other factors; efforts to avoid adverse effects due to computer
systems failing to function properly with respect to dates in the year 2000 and
beyond could meet with varying degrees of success in operations and in
transactions with customers, suppliers and financial institutions; and the
ability to project risk factors may vary. In addition, consideration should be
given to any other risks and uncertainties discussed in other documents filed by
the Company with the Securities and Exchange Commission. For a discussion of the
Company's year 2000 compliance program see "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operation."
ITEM 2. PROPERTIES
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.
The Company owns office space in West Point, Georgia and Lanett and Valley,
Alabama, and leases various additional office space, including approximately
288,000 square feet in New York City, of which approximately 180,000 square feet
is subleased to other tenants. The Company also owns or leases various
administrative, storage and office space.
The Company owns a chemical plant containing approximately 43,000 square feet of
floor space from which Grifftex Chemicals operates. In addition the Company owns
a printing facility consisting of 44,000 square feet in which Graphics prints
product packaging and labeling.
The Company and its subsidiaries own 24 manufacturing facilities located in
Alabama, Florida, Georgia, Indiana, Maine, North Carolina, South Carolina and
Virginia which contain in the aggregate approximately 9,569,000 square feet of
floor space and lease 4 manufacturing facilities in Georgia, Nevada, South
Carolina and England.
The Company and its subsidiaries also own 9 distribution centers and warehouses
for their operations which contain approximately 2,973,000 square feet of floor
space. In addition, the Company and its subsidiaries lease 9 distribution
outlets and warehouses containing approximately 658,000 square feet of floor
space.
WestPoint Stores owns 2 retail stores and leases its 42 other retail stores, all
of which are dispersed throughout the United States and Canada.
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ITEM 3. LEGAL PROCEEDINGS
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
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 1998, 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 (on a split basis), each
quarterly period within the two most recent fiscal years were:
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Quarter Ended Quotations
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1998 1997
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High/Ask Low/Bid High/Ask Low/Bid
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March 31 29 1/4 21 3/4 20 14 1/2
June 30 34 3/4 28 1/4 20 1/4 17 9/16
September 30 37 7/8 25 15/16 21 1/2 18 5/16
December 31 32 1/2 24 5/8 24 1/16 19
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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.
As of March 15, 1999, there were approximately 14,655 holders of the Company's
Common Stock. Of that total, approximately 278 were stockholders of record and
approximately 14,377 held their stock in nominee name.
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ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial data presented below for 1998, 1997 and 1996
were derived from the Audited Consolidated Financial Statements of the Company
and its subsidiaries for the years ended December 31, 1998, 1997 and 1996 (the
"Consolidated Financial Statements"), and should be read in conjunction
therewith, including the notes thereto and the other financial information
included elsewhere herein. The statement of operations data reflect the
discontinuance of the Alamac Knit Fabrics subsidiary and accordingly only
reflect the operations of Home Fashions.
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YEAR ENDED DECEMBER 31,
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1998 1997 1996 1995 1994
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(IN MILLIONS, EXCEPT PER SHARE DATA)
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STATEMENT OF OPERATIONS DATA:
Net sales $1,779.0 $1,657.5 $1,501.8 $1,418.2 $1,346.9
Gross earnings 474.7 419.8 372.4 359.1 331.9
Operating earnings (loss)(1) 248.3 214.9 188.5 26.3 (46.5)
Interest expense 105.7 102.2 94.5 93.5 94.2
Income (loss) from continuing operations
before income tax expense
(benefit) and extraordinary item 141.7 110.2 91.0 (70.4) (153.7)
Income (loss) from continuing operations
before extraordinary item 90.6 69.3 58.0 (102.3) (173.7)
Net income (loss) 40.0 78.0 57.7 (129.8) (203.4)
Diluted net income (loss) per common share:
Continuing operations 1.51 1.11 0.91 (1.57) (2.57)
Discontinued operations -- .14 -- (.42) (.44)
Extraordinary item - loss on extinguishment of debt(2) (.84) -- -- -- --
-------- -------- -------- -------- --------
Net income (loss) per common share .67 1.25 0.91 (1.99) (3.01)
Diluted average common shares outstanding 59.9 62.7 63.7 65.4 67.6
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets $1,391.2 $1,291.1 $1,157.0 $1,143.0 $1,270.2
Working capital (3) 178.2 212.2 140.9 115.7 122.7
Total debt 1,335.4 1,187.7 1,099.0 1,148.0 1,083.0
Stockholders' equity (deficit) (487.5) (425.0) (451.9) (507.5) (339.0)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
(IN MILLIONS, EXCEPT RATIOS) 1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation and amortization:(4)
Continuing operations $ 80.6 $ 71.7 $ 68.9 $ 69.3 $ 74.2
Discontinued operations -- 5.5 8.1 11.1 12.0
Amortization of excess reorganization value:
Continuing operations -- -- -- 152.4 203.3
Discontinued operations -- -- -- 25.3 33.6
Capital expenditures:
Continuing operations 147.5 148.9 94.9 92.4 84.5
Discontinued operations -- 3.2 5.0 9.8 24.5
Operating earnings from continuing
operations before amortization
of excess reorganization value(5) 248.3 214.9 188.5 178.7 156.8
Continuing operations adjusted
net income (6) 90.6 69.3 58.0 50.1 35.0
Operating margin from continuing
operations before amortization
of excess reorganization value(7) 14.0% 13.0% 12.6% 12.6% 11.6%
</TABLE>
See footnotes on following page.
10
<PAGE> 11
(1) Operating earnings (loss) for the years ended December 31, 1995 and 1994
includes amortization of excess reorganization value of $152.4 million and
$203.3 million, respectively.
(2) The Company recorded an extraordinary item of $50.6 million, net of income
taxes of $28.5 million, for the early extinguishment of debt. The extraordinary
charge consisted primarily of tender premiums and the write-off of deferred debt
costs.
(3) Working capital at December 31, 1998, 1997, 1996, 1995 and 1994 includes the
current portion of bank indebtedness and other long-term debt of $60.4 million,
$41.4 million, $24.0 million, $73.0 million, and $48.0 million, respectively.
(4) Excludes amortization of excess reorganization value.
(5) Such amounts are presented to facilitate comparisons between periods since
there were no charges for the years ended December 31, 1998, 1997 and 1996
for amortization of excess reorganization value.
(6) Continuing operations adjusted net income represents net income from
continuing operations, adjusted to remove the impact of the amortization of
excess reorganization costs and before extraordinary item and discontinued
operations. Adjusted continuing operations EPS for the years ended December 31,
1998, 1997, 1996, 1995 and 1994 was $1.51, $1.11, $.91, $.77 and $.52,
respectively.
(7) Operating margin before amortization of excess reorganization value
represents operating earnings before amortization of excess reorganization value
as a percentage of net sales for the periods presented.
11
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
During the second quarter of 1998, the Company entered into a series of
financing transactions pursuant to which the Company reduced interest expense,
extended debt maturities and improved financial flexibility. The components of
the financing transactions included (i) the sale of $525 million of 7 7/8%
Senior Notes due 2005 and $475 million of 7 7/8% Senior Notes due 2008, (ii) the
tender offers and consent solicitations for all outstanding 8 3/4% Senior Notes
due 2001 and 9 3/8% Senior Subordinated Debentures due 2005, (iii) the
redemption of the 9% Sinking Fund Debentures due 2017 and (iv) the amendment and
restatement of the existing bank revolving credit agreement to provide for a
term of 6 1/2 years and an increased commitment to $550 million. During the
third quarter of 1998, the Company amended the bank revolving credit agreement
to provide for an increased commitment to $575 million. See Note 2 -
Indebtedness and Financial Arrangements in the Notes to Consolidated Financial
Statements for additional information concerning the Company's financing
transactions.
YEAR 2000
General Description of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities.
In 1994, the Company began a company-wide project to replace all existing
information systems with improved systems launched from a newer technology
infrastructure and, as a by-product, make the new systems Year 2000 compliant.
The Company presently believes that with replacements and modifications of
existing software and certain hardware, the Year 2000 Issue can be mitigated.
However, if such modifications and replacements are not made, or are not
completed on a timely basis, the Year 2000 Issue could have a material impact on
the operations of the Company.
The Company's plan to resolve the Year 2000 Issue involves the following four
phases: assessment, remediation, testing and implementation. To date, the
Company has completed its assessment of all systems that could be significantly
affected by the Year 2000. The completed assessment indicated that most of the
Company's significant information technology systems could be affected. That
assessment also indicated that in some cases software and hardware (embedded
chips) used in production and manufacturing systems (hereafter also referred to
as operating equipment) were also at risk. Affected systems included automated
assembly lines and related robotics technologies used in various aspects of the
manufacturing process. However, based on a review of its product line, the
Company determined that none of the products it has sold and will continue to
sell required remediation to be Year 2000 compliant. Accordingly, the Company
does not believe that the Year 2000 Issue presents a material exposure as it
relates to the Company's products. In addition, the Company has gathered
information about the Year 2000 compliance status of its significant customers,
suppliers and subcontractors and continues to monitor their compliance.
Status of Progress in Becoming Year 2000 Compliant
The Company is on schedule with its plan for addressing the Year 2000 Issue. By
March 1, 1999, the Company had determined that 90% of its systems were Year 2000
compliant and has completed an assessment, remediation and testing of its most
critical systems. All implementation is expected to be completed by June 1,
1999. The Company will include the Year 2000 Issue as part of its disaster
recovery testing throughout the remainder of 1999.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000 Issue
The Company has surveyed key production, non-production, service, utility and
communication suppliers to determine their state of readiness. Responses
indicate most key vendors plan to be compliant in a timely manner. EDI
interfaces with suppliers
12
<PAGE> 13
GENERAL--CONTINUED
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000 Issue (continued)
are being tested, and early results indicate the Company's supplier interfaces
and procurement systems are compliant. However, there can be no assurance that
suppliers' systems, or their suppliers' systems, upon which the Company relies,
will be ready in a timely manner and will not have a material effect on the
Company.
The Company has surveyed key customers who electronically interface with the
Company via EDI to determine their state of readiness and plan for testing
compliant interfaces. Responses received from a majority of key customers
indicate that they expect to be compliant and able to test compliant interfaces.
However, there can be no assurance that all customers' systems, upon which the
Company relies, will be ready in a timely manner and will not have a material
effect on the Company.
To date, the Company is not aware of any third party with a Year 2000 Issue that
will materially impact the Company's results of operations, liquidity or capital
resources. However, the Company has no means of ensuring that third parties will
be Year 2000 ready. The inability of third parties to complete their Year 2000
resolution process in a timely fashion could materially impact the Company.
Costs, Risks and Contingency Plans for the Year 2000 Issue
The Company has and will continue to utilize both internal and external
resources to reprogram, or replace, test and implement the software and
operating equipment for Year 2000 modifications. The total cost of the Year 2000
project is estimated at $650,000 and is being funded through operating cash
flows. Of that amount, the Company estimates it has incurred approximately
$550,000 to date, related to all phases of the Year 2000 project and not related
to the systems improvement project started in 1994.
The Company has a high dependence on computer processes such as electronic order
and shipment information that automatically drive business processes, bar codes
that cannot be reproduced manually, and machinery containing advanced technology
requiring computerized controls. The Company's business transaction volume is
concentrated among a few customers who also have a high dependence upon
computers.
Management of the Company believes it has an effective program in place to
address the Year 2000 Issue in a timely manner, however, in the event that the
Company does not complete all necessary remaining phases of the Year 2000
program, the Company may experience some difficulties in operating its
equipment. In addition, disruptions in the economy generally resulting from Year
2000 Issues could have a material effect upon the Company.
The Company is updating its contingency plans based on the current status of its
progress toward becoming Year 2000 compliant. Contingency plans will continue to
address potential needs during the actual transition of operations on January 1,
2000. In addition, the Company is planning the development of a Year 2000
business continuity plan for its critical business functions that will include
potential failure by critical third parties to address the Year 2000 Issue.
The costs of the Year 2000 project and the date on which management of the
Company believes it will complete Year 2000 modifications are based on
management's best estimates, which are derived utilizing numerous assumptions of
future events, including the continued availability of certain resources and
other factors. However, there can be no assurance that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties.
13
<PAGE> 14
RESULTS OF OPERATIONS
The table below is a summary of the Company's operating results for the years
ended December 31, 1998, 1997 and 1996. See Note 10 in the Notes to Consolidated
Financial Statements for information concerning the Company's discontinued
operations. The following discussion is limited to an analysis of the results of
continuing operations (in millions of dollars and as percentages of net sales).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales ............................................... $1,779.0 $1,657.5 $1,501.8
Gross earnings .......................................... $ 474.7 $ 419.8 $ 372.4
Operating earnings ...................................... $ 248.3 $ 214.9 $ 188.5
Interest expense ........................................ $ 105.7 $ 102.2 $ 94.5
Income from continuing operations ....................... $ 90.6 $ 69.3 $ 58.0
Income (loss) from discontinued operations .............. -- 2.6 (0.3)
Gain on sale of discontinued operations ................. -- 6.1 --
Extraordinary item - loss on early extinguishment of debt (50.6) -- --
-------- -------- --------
Net income .............................................. $ 40.0 $ 78.0 $ 57.7
Gross margins ........................................... 26.7% 25.3% 24.8%
Operating margins ....................................... 14.0% 13.0% 12.6%
</TABLE>
1998 COMPARED WITH 1997
NET SALES. Net sales for the year ended December 31, 1998 increased $121.5
million, or 7.3%, to $1,779 million compared with net sales of $1,657.5 million
for the year ended December 31, 1997. The increase in net sales resulted
primarily from higher unit volume in 1998 compared with 1997.
GROSS EARNINGS/MARGINS. Gross earnings for the year ended December 31, 1998 of
$474.7 million increased $54.9 million, or 13.1%, compared with $419.8 million
for 1997, and reflect gross margins of 26.7% in 1998 compared with 25.3% in
1997. Gross earnings and margins increased in 1998, primarily as a result of the
increase in unit volume, a better mix of products sold and lower raw material
costs offsetting cost increases related to depreciation expense and wages.
OPERATING EARNINGS/MARGINS. Selling, general and administrative expenses
increased by $21.5 million, or 10.5%, for the year ended December 31, 1998,
compared with the same period of 1997, and as a percentage of net sales
represent 12.7% in 1998 and 12.4% in 1997. The increase in selling, general and
administrative expenses for 1998 was due primarily to higher selling,
administrative and warehousing/shipping expenses related to increased unit
volume.
Operating earnings for the year ended December 31, 1998 were $248.3 million, or
14.0% of sales, and increased $33.4 million, or 15.6%, compared with operating
earnings of $214.9 million, or 13.0% of sales, for the year ended December 31,
1997. The increase resulted from the increase in gross earnings offset somewhat
by the increase in selling, general and administrative expenses discussed above.
INTEREST EXPENSE. Interest expense for the year ended December 31, 1998 of
$105.7 million increased $3.5 million compared with interest expense for the
year ended December 31, 1997. The increase was due primarily to higher average
debt levels in the 1998 period compared with the corresponding 1997 average debt
levels offset somewhat by lower interest rates as a result of the refinancing
transactions in the second quarter of 1998.
14
<PAGE> 15
RESULTS OF OPERATIONS--CONTINUED
1998 COMPARED WITH 1997--CONTINUED
OTHER EXPENSE-NET. Other expense-net for the year ended December 31, 1998
decreased $1.5 million compared with 1997 and consists primarily of the
amortization of deferred financing fees of $3.3 million in 1998 compared with
$3.9 million in 1997 less certain miscellaneous income items in both years.
INCOME TAX EXPENSE. The Company's effective tax rate differed from the federal
statutory rate primarily due to state income taxes and nondeductible items.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations for the
year ended December 31, 1998 was $90.6 million, or $1.51 per share diluted,
compared with income from continuing operations of $69.3 million, or $1.11 per
share diluted, for the year ended December 31, 1997.
EXTRAORDINARY ITEM - LOSS ON EARLY EXTINGUISHMENT OF DEBT. As a result of the
refinancing transactions discussed above, the Company recorded an extraordinary
charge of $50.6 million, net of income taxes of $28.5 million, in the second
quarter of 1998 related to the early extinguishment of debt. The extraordinary
charge consisted primarily of tender premiums and the write-off of deferred debt
fees.
NET INCOME. Net income for the year ended December 31, 1998 was $40 million, or
$.67 per share diluted, compared with net income of $78 million, or $1.25 per
share diluted, for the year ended December 31, 1997.
Diluted per share amounts are based on 59.9 million and 62.7 million average
shares outstanding for the 1998 and 1997 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.
1997 COMPARED WITH 1996
NET SALES. Net sales for the year ended December 31, 1997 increased $155.7
million, or 10.4%, to $1,657.5 million compared with net sales of $1,501.8
million for the year ended December 31, 1996. The increase in net sales resulted
primarily from higher unit volume (including acquisitions) in 1997 compared with
1996.
GROSS EARNINGS/MARGINS. Gross earnings for the year ended December 31, 1997 of
$419.8 million increased $47.4 million, or 12.7%, compared with $372.4 million
for 1996, and reflect gross margins of 25.3% in 1997 compared with 24.8% in
1996. Gross earnings and margins increased in 1997, primarily as a result of the
increase in unit volume and lower raw material costs.
OPERATING EARNINGS/MARGINS. Selling, general and administrative expenses
increased by $21.1 million, or 11.5%, for the year ended December 31, 1997,
compared with the same period of 1996, and as a percentage of net sales
represent 12.4% in 1997 and 12.2% in 1996. The increase in selling, general and
administrative expenses for 1997 was due primarily to acquisitions along with
higher warehousing/shipping and advertising expenses.
Operating earnings for the year ended December 31, 1997 were $214.9 million, or
13.0% of sales, and increased $26.4 million, or 14.0%, compared with operating
earnings of $188.5 million, or 12.6% of sales, for the year ended December 31,
1996. The increase resulted from the increase in gross earnings offset somewhat
by the increase in selling, general and administrative expenses discussed above.
15
<PAGE> 16
RESULTS OF OPERATIONS--CONTINUED
1997 COMPARED WITH 1996--CONTINUED
INTEREST EXPENSE. Interest expense for the year ended December 31, 1997 of
$102.2 million increased $7.7 million compared with interest expense for the
year ended December 31, 1996. The increase was due primarily to higher average
debt levels in 1997 compared with the corresponding 1996 average debt levels.
OTHER EXPENSE-NET. Other expense-net for the year ended December 31, 1997
decreased $0.5 million compared with 1996. Included in other expense-net for the
years ended December 31, 1997 and 1996 are the amortization of deferred
financing fees of $3.9 million in each year 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 and nondeductible items.
INCOME FROM CONTINUING/DISCONTINUED OPERATIONS. Income from continuing
operations for the year ended December 31, 1997 was $69.3 million, or $1.11 per
share diluted, compared with income from continuing operations of $58 million,
or $.91 per share diluted, for the year ended December 31, 1996.
Income from discontinued operations for the year ended December 31, 1997 was
$2.6 million, or $.04 per share diluted, compared with a loss from discontinued
operations of $0.3 million for the year ended December 31, 1996.
GAIN ON SALE OF DISCONTINUED OPERATIONS. During the third quarter of 1997 the
Company recorded a gain on the sale of its Alamac Knit Fabrics subsidiary of
$6.1 million, or $.10 per share diluted.
NET INCOME. Net income for the year ended December 31, 1997 was $78 million, or
$1.25 per share diluted, compared with net income of $57.7 million, or $.91 per
share diluted, for the year ended December 31, 1996.
Diluted per share amounts are based on 62.7 million and 63.7 million average
shares outstanding for 1997 and 1996, 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.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Company expects to adopt the new
Statement effective January 1, 2000. The Statement will require the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If a derivative is
a hedge, depending on the nature of the hedge, changes in the fair value of the
derivative will either be offset against the change in fair value of the hedged
asset, liability, or firm commitment through earnings, or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company does not anticipate that the adoption of
this Statement will have a significant effect on its results of operations or
financial position.
RISK MANAGEMENT AND MARKET SENSITIVE INSTRUMENTS
The Company is exposed to various market risks, including changes in certain
commodity prices and interest rates. These exposures primarily relate to the
acquisition of raw materials and changes in interest rates.
Commodities Risk. The Company selectively uses commodity futures contracts,
forward purchase commodity contracts and option contracts to manage certain of
its commodities exposures. Such contracts are used principally to manage the
Company's exposure to cotton commodity price risk. The Company does not hold or
issue derivative instruments for trading purposes.
16
<PAGE> 17
RISK MANAGEMENT AND MARKET SENSITIVE INSTRUMENTS--CONTINUED
At December 31, 1998, the Company, in its normal course of business, had entered
into various commodity future contracts and forward purchase commodity
contracts. At the end of 1998, a sharp decline in demand for cotton as a result
of conditions in Asia as well as the termination of the U. S. government's
subsidy program caused a steep decline in long-term cotton prices. Thus, based
on year-end forward cotton prices, the Company's futures contracts and forward
purchase contracts at December 31, 1998 (which covered a portion of its 1999
needs) had a net deferred loss of approximately $16.8 million. However,
management believes that the Company's cost of cotton for 1999 will be at least
as favorable as the cost of cotton in 1998.
The hypothetical incremental loss in earnings for the combined commodity
positions at December 31, 1998 is estimated to be approximately $35.6 million,
assuming a decrease of 10% in commodity prices. The sensitivity analysis for
commodities reflects the impact of a hypothetical 10% adverse change in the
market price for such commodities. Actual commodity price volatility is
dependent on many varied factors impacting supply and demand that are impossible
to forecast. Therefore, actual changes in fair value over time could differ
substantially from the hypothetical change disclosed above.
Interest Rate Risk. Based on the Company's floating rate debt outstanding at
December 31, 1998, a 100 basis point increase in market rates would increase
interest expense and decrease income before income taxes by approximately $3.4
million. The amount was determined by calculating the effect of the hypothetical
interest rate on the Company's floating rate debt.
The fair market value of long-term fixed interest rate debt is also subject to
interest rate risk. Generally, the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. The
estimated fair value of the Company's total long-term fixed-rate debt at
December 31, 1998 was approximately $1,349.2 million, which exceeded its
carrying value by approximately $13.8 million. A hypothetical 100 basis point
decrease in the prevailing interest rates at December 31, 1998 would result in
an increase in fair value of total long-term debt by approximately $60.6
million. Fair market values are determined from quoted market prices where
available or based on estimates made by investment bankers.
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 25,
1999, the maximum commitment under the Senior Credit Facility was $575 million
and the Company had unused borrowing availability under the Senior Credit
Facility totaling $161.5 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 $147.5 million
in 1998 on capital expenditures and intends to invest approximately $125 million
in 1999.
During 1998, the Company purchased approximately 3.8 million shares under its
various stock repurchase programs, at an average price of $28.43 per share. As
of February 11, 1999, the Board of Directors has approved the purchase of up to
19.0 million shares of the Company's common stock, subject to the Company's debt
limitations. At December 31, 1998, approximately 4.9 million shares, including
the 3.0 million share increase announced in February 1999, remained to be
purchased under these programs.
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, 1998 and December 31, 1997, $145 million and
$111.8 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 1999 is estimated
to total approximately $7 million, compared with $6.5 million in 1998, and will
be charged to selling, general and administrative expenses.
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES--CONTINUED
Debt service requirements for interest payments in 1999 are estimated to total
approximately $101.8 million (excluding amounts related to the Trade Receivables
Program) compared with interest payments of $103.6 million in 1998. The
Company's long-term indebtedness has no scheduled principal requirements during
1999.
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.
18
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements for the years ended December 31, 1998, 1997
and 1996
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors ....... 20
Consolidated Balance Sheets ............................. 21 - 22
Consolidated Statements of Income ....................... 23
Consolidated Statements of Stockholders' Equity (Deficit) 24
Consolidated Statements of Cash Flows ................... 25
Notes to Consolidated Financial Statements .............. 26 - 39
</TABLE>
19
<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, 1998 and 1997, and the related consolidated
statements of income, stockholders' equity (deficit), and cash flows for each of
the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998 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 9, 1999
20
<PAGE> 21
WESTPOINT STEVENS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ..................... $ 527 $ 17,433
Accounts receivable (less allowances of $19,251
and $18,213, respectively) ............... 70,086 92,990
Inventories ................................... 381,022 345,818
Prepaid expenses and other current assets ..... 18,051 22,227
---------- ----------
Total current assets ................ 469,686 478,468
Property, Plant and Equipment
Land .......................................... 6,593 6,463
Buildings and improvements .................... 305,959 270,360
Machinery and equipment ....................... 888,540 779,867
Leasehold improvements ........................ 9,939 11,257
---------- ----------
1,211,031 1,067,947
Less accumulated depreciation and amortization (434,092) (360,796)
---------- ----------
Net property, plant and equipment ... 776,939 707,151
Other Assets
Deferred financing fees ....................... 21,102 19,231
Prepaid pension and other assets .............. 52,257 49,033
Goodwill ...................................... 71,227 37,223
---------- ----------
Total other assets .................. 144,586 105,487
---------- ----------
$1,391,211 $1,291,106
========== ==========
</TABLE>
See accompanying notes.
21
<PAGE> 22
WESTPOINT STEVENS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Senior Credit Facility ............................. $ 60,400 $ 37,683
Accrued interest payable ........................... 4,777 6,820
Accounts payable ................................... 85,908 75,655
Other accrued liabilities .......................... 140,423 142,382
Current portion of long-term debt .................. -- 3,750
---------- ----------
Total current liabilities .......... 291,508 266,290
Long-Term Debt .............................................. 1,275,000 1,146,250
Noncurrent Liabilities
Deferred income taxes .............................. 236,328 217,178
Other liabilities .................................. 75,827 86,381
---------- ----------
Total noncurrent liabilities ....... 312,155 303,559
Stockholders' Equity (Deficit)
Common Stock and capital in excess of par value:
Common Stock, $.01 par value;
200,000,000 and 75,000,000 shares
authorized, respectively; 70,862,029 and
70,296,310 shares issued, respectively ... 341,489 337,069
Accumulated deficit ................................ (585,115) (625,047)
Treasury stock; 14,576,744 and 10,895,242 shares
at cost, respectively .................... (240,896) (134,223)
Accumulated other comprehensive income (loss) ...... (2,930) (2,792)
---------- ----------
Total stockholders' equity (deficit) (487,452) (424,993)
---------- ----------
$1,391,211 $1,291,106
========== ==========
</TABLE>
See accompanying notes.
22
<PAGE> 23
WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net sales ..................................................... $1,778,991 $1,657,511 $1,501,795
Cost of goods sold ............................................ 1,304,231 1,237,657 1,129,386
---------- ---------- ----------
Gross earnings .......................................... 474,760 419,854 372,409
Selling, general and administrative expenses .................. 226,437 204,981 183,891
---------- ---------- ----------
Operating earnings ...................................... 248,323 214,873 188,518
Interest expense .............................................. 105,677 102,172 94,505
Other expense-net ............................................. 968 2,461 2,976
---------- ---------- ----------
Income from continuing operations before income tax
expense and extraordinary item ....................... 141,678 110,240 91,037
Income tax expense ............................................ 51,125 40,982 33,085
---------- ---------- ----------
Income from continuing operations before extraordinary item ... 90,553 69,258 57,952
Income (loss) from discontinued operations .................... -- 2,625 (287)
Gain on sale of discontinued operations ....................... -- 6,138 --
Extraordinary item - loss on early extinguishment of debt
(net of income tax benefit of $28,474) ................... (50,621) -- --
---------- ---------- ----------
Net income .............................................. $ 39,932 $ 78,021 $ 57,665
========== ========== ==========
Basic net income (loss) per common share:
Continuing operations ................................... $ 1.57 $ 1.14 $ .92
Discontinued operations ................................. -- .04 --
Gain on sale of discontinued operations ................. -- .10 --
Extraordinary item - loss on early extinguishment of debt (.88) -- --
---------- ---------- ----------
Net income per common share ............................. $ .69 $ 1.28 $ .92
========== ========== ==========
Diluted net income (loss) per common share:
Continuing operations ................................... $ 1.51 $ 1.11 $ .91
Discontinued operations ................................. -- .04 --
Gain on sale of discontinued operations ................. -- .10 --
Extraordinary item - loss on early extinguishment of debt (.84) -- --
---------- ---------- ----------
Net income per common share ............................. $ .67 $ 1.25 $ .91
========== ========== ==========
Basic average common shares outstanding ....................... 57,791 61,078 62,656
Dilutive effect of stock options and stock bonus plan ... 2,158 1,576 1,018
---------- ---------- ----------
Diluted average common shares outstanding ..................... 59,949 62,654 63,674
========== ========== ==========
</TABLE>
See accompanying notes.
23
<PAGE> 24
WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK ACCUMULATED
AND CAPITAL OTHER
IN COMPRE-
EXCESS OF TREASURY STOCK HENSIVE
COMMON PAR ------------------ ACCUMULATED INCOME
SHARES VALUE SHARES AMOUNT DEFICIT (LOSS) TOTAL
------ ----------- ------ ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 ........................ 69,194 $327,850 (5,242) $ (41,051) $(760,733) $(33,526) $(507,460)
Comprehensive income:
Net income ............................ -- -- -- -- 57,665 -- 57,665
Minimum pension liability adjustment .. -- -- -- -- -- 25,595 25,595
Foreign currency translation
adjustment......................... -- -- -- -- -- (22) (22)
---------
Comprehensive income ....................... 83,238
---------
Exercise of management stock options
including tax benefit ................. 220 1,532 -- -- -- -- 1,532
Issuance of stock pursuant to Stock Bonus
Plan including tax benefit ............ -- 12 116 1,226 -- -- 1,238
Purchase of treasury shares ................ -- -- (2,585) (30,491) -- -- (30,491)
------ -------- ------- --------- --------- -------- ---------
Balance, December 31, 1996 ...................... 69,414 329,394 (7,711) (70,316) (703,068) (7,953) (451,943)
Comprehensive income:
Net income ............................ -- -- -- -- 78,021 -- 78,021
Minimum pension liability adjustment .. -- -- -- -- -- 5,595 5,595
Foreign currency translation
adjustment......................... -- -- -- -- -- (434) (434)
---------
Comprehensive income ....................... 83,182
---------
Exercise of management stock options
including tax benefit ................. 882 7,649 (13) (282) -- -- 7,367
Issuance of stock pursuant to Stock Bonus
Plan including tax benefit ............ -- 308 198 2,240 -- -- 2,548
Purchase of treasury shares ................ -- -- (3,369) (66,147) -- -- (66,147)
------ -------- ------- --------- --------- -------- ---------
Balance, December 31, 1997 ...................... 70,296 337,351 (10,895) (134,505) (625,047) (2,792) (424,993)
Comprehensive income:
Net income ............................ -- -- -- -- 39,932 -- 39,932
Minimum pension liability adjustment .. -- -- -- -- -- 813 813
Foreign currency translation
adjustment......................... -- -- -- -- -- (951) (951)
---------
Comprehensive income ....................... 39,794
---------
Exercise of management stock options
including tax benefit ................. 566 5,235 (57) (1,666) -- -- 3,569
Issuance of stock pursuant to Stock Bonus
Plan including tax benefit ............ -- 851 212 2,421 -- -- 3,272
Purchase of treasury shares ................ -- -- (3,837) (109,094) -- -- (109,094)
------ -------- ------- --------- --------- -------- ---------
Balance, December 31, 1998 ...................... 70,862 $343,437 (14,577) $(242,844) $(585,115) $ (2,930) $(487,452)
====== ======== ======= ========= ========= ======== =========
</TABLE>
See accompanying notes.
24
<PAGE> 25
WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................. $ 39,932 $ 78,021 $ 57,665
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and other amortization .............................. 80,567 77,225 76,988
Gain on sale of discontinued operations .......................... -- (6,138) --
Deferred income taxes ............................................ 19,588 34,508 26,153
Extraordinary item - loss on early extinguishment of debt ........ 79,095 -- --
Changes in assets and liabilities excluding the effect of
acquisitions, dispositions and the Trade Receivables Program:
Accounts receivable ........................................ (3,319) 1,566 3,939
Inventories ................................................ (31,677) (54,024) 20,817
Prepaid expenses and other current assets .................. 4,211 (6,760) 4,567
Accrued interest payable ................................... (2,043) 283 (118)
Accounts payable and other accrued liabilities ............. 5,320 (18,113) (10,046)
Other-net .................................................. (10,367) (22,976) (8,964)
----------- ----------- ---------
Total adjustments ...................................................... 141,375 5,571 113,336
----------- ----------- ---------
Net cash provided by operating activities .................................. 181,307 83,592 171,001
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................... (147,463) (152,137) (99,943)
Net proceeds from sale of business ..................................... -- 120,840 --
Net proceeds from sale of assets ....................................... 825 1,081 1,098
Purchase of businesses ................................................. (42,169) (57,170) --
----------- ----------- ---------
Net cash used for investing activities ..................................... (188,807) (87,386) (98,845)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Senior Credit Facility:
Borrowings .......................................................... 1,533,419 1,177,299 645,500
Repayments .......................................................... (1,360,702) (1,088,616) (694,500)
Principal payments on long-term debt ................................... (1,025,000) -- --
Net proceeds from Trade Receivables Program ............................ 33,233 (21,233) 12,045
Purchase of Common Stock for treasury .................................. (110,760) (66,429) (30,491)
Proceeds from sale of notes ............................................ 1,000,000 -- --
Proceeds from issuance of Common Stock ................................. 4,679 6,177 1,332
Fees associated with refinancing ....................................... (84,275) -- --
----------- ----------- ---------
Net cash provided by (used for) financing activities ....................... (9,406) 7,198 (66,114)
----------- ----------- ---------
Net increase (decrease) in cash and cash equivalents ....................... (16,906) 3,404 6,042
Cash and cash equivalents at beginning of period ........................... 17,433 14,029 7,987
----------- ----------- ---------
Cash and cash equivalents at end of period ................................. $ 527 $ 17,433 $ 14,029
=========== =========== =========
</TABLE>
See accompanying notes.
25
<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, pillows, mattress pads, towels and related products. The Company
conducts its operations in the consumer home fashions (bed and bath products)
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, 1998, 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 $0.5 million and $17.4 million
are included in cash and cash equivalents at December 31, 1998 and 1997,
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, 1998 and 1997, approximately 83% and 84%, 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 $65.7 million and $53.4 million at December 31, 1998
and 1997, 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,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Finished goods ........... $ 170,896 $ 159,539
Work in progress ......... 160,995 139,410
Raw materials and supplies 59,466 58,876
LIFO reserve ............. (10,335) (12,007)
--------- ---------
$ 381,022 $ 345,818
========= =========
</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.
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 $79.5 million, $76.5 million,
and $77.0 million in the years ended December 31, 1998, 1997 and 1996,
respectively.
26
<PAGE> 27
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES--CONTINUED
Estimated useful lives for property, plant 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>
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, 1998 and 1997,
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 Statement No. 109,
Accounting for Income Taxes. Under Statement 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 defined benefit pension plans covering
essentially all employees. 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. During 1998, the Company
adopted Statement No. 132, Employers' Disclosures about Pensions and Other
Post-retirement Benefits. Statement 132 standardizes employer disclosures about
pension and other post-retirement plans; it does not change the measurement or
recognition of such plans. Data from periods prior to 1998 have been restated
for comparative purposes. See Note 3 - Employee Benefit Plans.
The Company also sponsors an employee savings plan covering eligible employees
who elect to participate. Participants in this plan make contributions as a
percent of earnings. The Company matches certain amounts of employee
contributions. 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 Statement No. 106, Employer's
Accounting for Post Retirement Benefits Other Than Pensions and Statement No.
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. Pro forma information regarding net
income and earnings per share, as calculated under the provisions of Statement
No. 123, Accounting for Stock-Based Compensation, are disclosed in Note 6 -
Stockholders' Equity.
FAIR VALUE DISCLOSURES. Cash and cash equivalents: The carrying amounts reported
in the balance sheets for cash and cash equivalents approximates its fair value.
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 $1,335 million and $1,188 million of outstanding debt at December 31,
1998 and 1997 was approximately $1,349.2 million and $1,235 million,
respectively.
27
<PAGE> 28
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES--CONTINUED
ACQUISITIONS AND GOODWILL. The Company's acquisitions are accounted for under
the purchase method of accounting. Under the purchase method of accounting, the
results of operations of the acquired businesses are included in the
accompanying consolidated financial statements as of their respective
acquisition dates. The assets and liabilities of acquired businesses are
included based on an allocation of the purchase price. The excess of the
purchase price over identified assets is classified as goodwill and is amortized
on a straight-line basis over a forty year period.
During the year ended December 31, 1997, the Company acquired certain
manufacturing facilities and other operations for approximately $57 million. The
assets acquired consisted of property and equipment, inventories and other
related assets. The excess of the purchase price over the assets acquired was
approximately $38 million.
In October 1998, the Company acquired the operations of a manufacturer of
bedding products for approximately $42.2 million. The assets acquired consisted
of property and equipment, inventories and other related assets. The excess of
the purchase price over the assets acquired was approximately $35.1 million.
Pro forma results have not been presented as they are not significantly
different than reported amounts.
IMPAIRMENT OF LONG-LIVED ASSETS. Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
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.
COMMON STOCK. On February 2, 1998, the Board of Directors declared a two-for-one
split of the Company's common stock, effected in the form of a stock dividend
payable on March 2, 1998 to stockholders of record on February 16, 1998. All
agreements concerning stock options and other commitments payable in shares of
the Company's common stock provide for the issuance of additional shares due to
the declaration of the stock split. This stock split has been reflected in the
Consolidated Statements of Stockholders' Equity (Deficit) at January 1, 1996.
All references to number of shares, except shares authorized, and to per share
information in the accompanying consolidated financial statements have been
adjusted to reflect the stock split on a retroactive basis.
EARNINGS PER COMMON SHARE. Basic and diluted earnings per share are calculated
in accordance with Statement No. 128, Earnings per Share. Basic earnings per
share excludes any dilutive effects of options, warrants and convertible
securities. All earnings per share amounts for all periods have been presented,
and where appropriate, restated to conform to the Statement 128 requirements.
SEGMENT INFORMATION. The Company is in one business segment, the consumer home
fashions business, and follows the requirements of Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information.
ACCOUNTING POLICIES NOT YET ADOPTED. In June 1998, the Financial Accounting
Standards Board issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. The statement will require the Company to recognize all
derivatives on the balance sheet at fair value.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. Statement of Position 98-1 provides
guidance that requires the capitalization of certain costs incurred during an
internal-use software development project.
The Company plans to adopt Statement 133 at January 1, 2000 and Statement of
Position 98-1 in 1999, but has not yet completed its analysis of the impact that
these pronouncements may have on its financial statements.
RECLASSIFICATIONS. Certain prior period amounts have been reclassified to
conform with the 1998 presentation.
28
<PAGE> 29
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS
Indebtedness is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
------- -------
<S> <C> <C>
Short-term indebtedness
Senior Credit Facility ............ $60,400 $37,683
9% Sinking Fund Debentures
due 2017....................... -- 3,750
------- -------
$60,400 $41,433
======= =======
</TABLE>
<TABLE>
<S> <C> <C>
Long-term indebtedness
Senior Credit Facility ....................... $ 275,000 $ 125,000
7 7/8% Senior Notes due 2005 ................. 525,000 --
7 7/8% Senior Notes due 2008 ................. 475,000 --
8 3/4% Senior Notes due 2001 ................. -- 400,000
9 3/8% Senior Subordinated Debentures
due 2005.................................. -- 550,000
9% Sinking Fund Debentures due 2017 .......... -- 71,250
---------- ----------
$1,275,000 $1,146,250
========== ==========
</TABLE>
On April 29, 1998, the Company announced cash tender offers and consent
solicitations for all of its then outstanding 8 3/4% Senior Notes due 2001 and
its 9 3/8% Senior Subordinated Debentures due 2005. The tender offers were
consummated on June 9, 1998. The Company purchased the tendered notes with the
proceeds from the issuance of $525 million of its 7 7/8% Senior Notes due 2005
and $475 million of its 7 7/8% Senior Notes due 2008 and with the proceeds from
the refinancing of its existing Senior Credit Facility with an amended and
restated Senior Credit Facility that provided for a term of 6 1/2 years and an
increased commitment to $550 million. The issuance of the new notes and the
amendment and restatement of the Senior Credit Facility were also consummated on
June 9, 1998. On June 10, 1998, the Company announced the redemption of its 9%
Sinking Fund Debentures due 2017 and the redemption was consummated on July 9,
1998 with available borrowings under the Senior Credit Facility. During the
third quarter of 1998, the Company amended the Senior Credit Facility to provide
for an increased commitment to $575 million. As a result of the refinancing
transactions discussed above, the Company recorded an extraordinary charge of
$50.6 million, net of income taxes of $28.5 million, related to the early
extinguishment of debt. The extraordinary charge consisted primarily of tender
premiums and the write-off of deferred debt fees.
The Company's Senior Credit Facility with certain lenders (collectively, the
"Banks") consists of a $575 million revolving credit facility ("Revolver") due
November 30, 2004. The Company has included $275 million of Revolver in
long-term debt at December 31, 1998 because the Company intends that at least
that amount would remain outstanding during the next twelve months. Borrowing
availability under the Senior Credit Facility was reduced by approximately $26.7
million of outstanding letters of credit at December 31, 1998.
At the option of the Company, interest under the Senior Credit Facility will be
payable monthly, either at the prime rate or at LIBOR plus 0.75%. Upon the
Company achieving certain ratios of EBITDA (as defined) to cash interest
expense, interest rates can be reduced up to 0.5%. At December 31, 1998, the
interest rates under this facility were LIBOR plus 0.5%. The Company pays a
facility fee in an amount equal to 0.25% 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.
The 7 7/8% Senior Notes due 2005 and 7 7/8% Senior Notes due 2008 (together, the
"Senior Notes") are general unsecured obligations of the Company and rank pari
passu in right of payment with all existing or future unsecured and
unsubordinated indebtedness of the Company and senior in right of payment to all
subordinated indebtedness of the Company.
29
<PAGE> 30
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS--CONTINUED
The Senior Notes bear interest at the rate of 7 7/8% per annum, payable
semi-annually on June 15 and December 15 of each year, commencing December 15,
1998. The Senior Notes are redeemable, in whole or in part, at any time at the
option of the Company at 100% of the principal amount thereof plus the
Make-Whole Premium (as defined) plus accrued and unpaid interest, if any, to the
date of purchase. In addition, in the event of a Change of Control (as defined),
the Company will be required to make an offer to purchase the notes at a price
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase.
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, a minimum interest
coverage ratio and a minimum consolidated net worth (as defined). At December
31, 1998, the Company could have made restricted payments aggregating
approximately $55.1 million.
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. In December 1998, the Company replaced its existing Trade
Receivables Program with a new one-year agreement with an independent issuer of
receivables backed commercial paper. This new agreement replaced an agreement
that would have expired in May 1999. Under the terms of the new Trade
Receivables Program, the Company has agreed to sell on an ongoing basis, and
without recourse, an undivided ownership interest in its accounts receivable
portfolio. The Company maintains the balance in the designated pool of accounts
receivable sold by selling undivided interests in new receivables as existing
receivables are collected. The new agreement permits the sale of up to $155
million of accounts receivable. The cost of the Trade Receivables Program is
charged to selling and administrative expense in the accompanying Consolidated
Statements of Income. At December 31, 1998 and 1997, $145.0 million and $111.8
million, respectively, of accounts receivable had been sold pursuant to the
trade receivables programs and the sale is reflected as a reduction of accounts
receivable in the accompanying Consolidated Balance Sheets.
Excluding amounts related to the Revolver, there are no maturities of long-term
debt for the next five years.
3. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The following table sets forth data for the Company's pension plans and amounts
recognized in the accompanying Consolidated Balance Sheets at December 31, 1998
and 1997 (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
Change in benefit obligation:
Projected benefit obligation at beginning of year $ 311,001 $ 312,981
Service cost .................................... 7,838 7,138
Interest cost ................................... 23,080 24,410
Actuarial gains ................................. 15,040 9,829
Benefit payments ................................ (25,113) (26,210)
Divestiture ..................................... -- (17,147)
--------- ---------
Projected benefit obligation at end of year ......... $ 331,846 $ 311,001
========= =========
Change in plan assets:
Fair value of plan assets at beginning of year .. $ 331,396 $ 299,892
Actual return on plan assets .................... 26,039 52,843
Employer contributions .......................... 8,417 17,622
Benefit payments ................................ (25,113) (26,210)
Divestiture ..................................... -- (12,751)
--------- ---------
Fair value of plan assets at end of year ............ $ 340,739 $ 331,396
========= =========
</TABLE>
30
<PAGE> 31
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. EMPLOYEE BENEFIT PLANS--CONTINUED
PENSION PLANS--CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1997
--------- ---------
<S> <C> <C>
Funded status:
Projected benefit obligation .............. $(331,846) $(311,001)
Fair value of assets ...................... 340,739 331,396
--------- ---------
Funded status ............................. 8,893 20,395
--------- ---------
Unrecognized amounts:
Prior service cost ..................... (38) (56)
Net actuarial losses ................... 42,729 21,796
Accumulated comprehensive income (loss) -- (1,291)
--------- ---------
Total unrecognized ..................... 42,691 20,449
--------- ---------
Prepaid pension cost at year-end .............. $ 51,584 $ 40,844
========= =========
Weighted average assumptions as of December 31:
Discount rate ............................. 7.25% 7.75%
Expected return on plan assets ............ 10.0% 10.0%
Rate of compensation increase ............. 3.5% 3.5%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Components of net periodic pension cost (benefit):
Service cost ................................. $ 7,838 $ 7,138
Interest cost ................................ 23,080 24,410
Expected return on plan assets ............... (32,177) (29,460)
Net amortization ............................. 227 557
-------- --------
Net periodic pension cost (benefit) .............. $( 1,032) $ 2,645
======== ========
</TABLE>
Plan assets are primarily invested in United States Government and corporate
debt securities and equity securities. At December 31, 1998, the Company's
pension plans held 705,558 shares of the Company's common stock with an
aggregate cost of $20 million and a market value of $22.3 million. At December
31, 1997, the Company's pension plans held investments in securities issued by
the Company with a market value of $14.2 million.
RETIREMENT SAVINGS PLAN
The Company matches 50 percent of each 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 1998, 1997
and 1996, the Company charged $2.3 million, $2.2 million and $2.4 million,
respectively, to expense in connection with the 401K Plan.
31
<PAGE> 32
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. EMPLOYEE BENEFIT PLANS--CONTINUED
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,
-------------------
1998 1997
------- -------
<S> <C> <C>
Accumulated post-retirement benefit obligation at beginning of year $17,517 $18,111
Service cost .................................................. 1 3
Interest cost ................................................. 1,194 1,369
Actuarial gains ............................................... (729) (144)
Benefit payments .............................................. (1,810) (1,822)
------- -------
Accumulated post-retirement benefit obligation at end of year ..... $16,173 $17,517
======= =======
</TABLE>
Net periodic post-retirement benefit plans expense is not material during the
three year period ended December 31, 1998.
As of December 31, 1998, the actuarial assumptions include a discount rate of
7.25% and a medical care trend rate of 7.0% for 1999, grading down to 6% by
2002. 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, 1998 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, 1998 by an immaterial amount.
4. OTHER EXPENSE--NET
Included in "Other expense-net" in the accompanying Consolidated Statements of
Income for each of the years in the three year period ended December 31, 1998,
1997 and 1996, are the amortization and write-off of deferred financing fees of
$3.3 million, $3.9 million and $3.9 million, respectively, less certain
miscellaneous income items.
5. INCOME TAXES
The Company accounts for income taxes in accordance with Statement 109;
accordingly 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 related to continuing operations
before extraordinary item consisted of the following (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current
Federal $ 966 $ 2,945 $ 957
State . 792 2,302 630
Foreign (50) 461 621
Deferred ...... 49,417 40,247 30,492
------- ------- -------
$51,125 $45,955 $32,700
======= ======= =======
</TABLE>
32
<PAGE> 33
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES--CONTINUED
Income tax expense (benefit) is included in the financial statements as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Continuing operations ................. $ 51,125 $ 40,982 $ 33,085
Discontinued operations ............... -- 1,368 (385)
Gain on sale of discontinued
operations......................... -- 3,605 --
-------- -------- --------
$ 51,125 $ 45,955 $ 32,700
======== ======== ========
</TABLE>
Income tax expense (benefit) differs from the statutory federal income tax rate
of 35% for the following reasons (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Income tax expense (benefit) at federal statutory income
tax rate ........................................... $ 49,587 $ 43,391 $ 31,628
State income taxes (net of effect of federal
income tax) ........................................ 1,232 2,264 1,183
Other-net .............................................. 306 300 (111)
-------- -------- --------
Income tax expense ..................................... $ 51,125 $ 45,955 $ 32,700
======== ======== ========
</TABLE>
Components of the net deferred income tax liability are as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Basis differences resulting from reorganization ................... $(148,501) $(137,783)
Accelerated depreciation .......................................... (77,398) (69,620)
Income taxes related to prior years, including interest ........... (17,264) (16,989)
Nondeductible expenses ............................................ (37,948) (44,774)
Other ............................................................. (1,424) (1,716)
Deferred tax assets:
Reserves for litigation, environmental, employee benefits
and other...................................................... 37,543 45,244
Other ............................................................. 8,664 8,460
--------- ---------
$(236,328) $(217,178)
========= =========
</TABLE>
At December 31, 1998, the Company has estimated operating net loss carryforwards
("NOLs") expiring in 2004-2009 of approximately $271 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 are subject to limitation under Internal Revenue
Code Section 382.
33
<PAGE> 34
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. STOCKHOLDERS' EQUITY (DEFICIT)
COMPREHENSIVE INCOME
In 1998 the Company adopted Statement No. 130, Reporting Comprehensive Income.
Statement 130 requires presentation of comprehensive income (net income plus
changes in currency translation adjustments and minimum pension liability). The
Company has changed the format of the Consolidated Statements of Stockholders'
Equity (Deficit) to present comprehensive income for all periods.
Components of accumulated other comprehensive income (loss) consist of the
following (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Foreign currency translation adjustment ..... $(2,930) $(1,979) $(1,545)
Minimum pension liability ................... -- (1,291) (10,171)
Income tax benefit .......................... -- 478 3,763
------- ------- -------
Accumulated other comprehensive
income (loss).............................. $(2,930) $(2,792) $(7,953)
======= ======= =======
</TABLE>
STOCK OPTIONS
The Company has granted stock options under various stock plans to key employees
and to non-employee directors. Also the Company granted certain contractual
stock options which were not granted pursuant to any plan. The Omnibus Stock
Incentive Plan (the "Omnibus Stock Plan"), an amendment and restatement of the
1993 Management Stock Option Plan, covers approximately 5.4 million shares of
Common Stock, and also replaced the 1994 Non-Employee Directors Stock Option
Plan after the 300,000 shares of Common Stock authorized under that plan had
been granted. The Omnibus Stock Plan allows for six categories of incentive
awards: options, stock appreciation rights, restricted shares, deferred shares,
performance shares and performance units. Key employees are granted options
under the various plans 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 various
plans have been at a price which is approximately equal to fair market value on
the date of grant. 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
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 using 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 1998, 1997 and 1996, respectively:
risk-free interest rates of 5.6%, 6.1% and 6.2%; no dividend yield; volatility
factors of the expected market price of the Company's common stock of .265, .25
and .29; and a weighted-average expected life of the option of 8 years.
34
<PAGE> 35
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. STOCKHOLDERS' EQUITY (DEFICIT)--CONTINUED
STOCK OPTIONS--CONTINUED
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.
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 1998 pro forma net income of $35.5 million (or
pro forma diluted net income per share of $.59), 1997 pro forma net income of
$75.5 million (or pro forma diluted net income per share of $1.20) and 1996 pro
forma net income of $57.2 million (or pro forma diluted net income per share of
$.90).
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, 1995 1,738 520 2,258 $ 6.57
Granted ............................ 1,776 -- 1,776 $13.34
Exercised and terminated ........... (134) (110) (244) $ 6.07
------ ------ ------ ------
Options outstanding at December 31, 1996 3,380 410 3,790 $ 9.78
Granted ............................ 1,176 20 1,196 $20.07
Exercised and terminated ........... (514) (390) (904) $ 7.15
------ ------ ------ ------
Options outstanding at December 31, 1997 4,042 40 4,082 $13.37
Granted ............................ 754 -- 754 $34.08
Exercised and terminated ........... (605) -- (605) $ 8.79
------ ------ ------ ------
Options outstanding at December 31, 1998 4,191 40 4,231 $17.71
====== ====== ====== ======
</TABLE>
At December 31, 1998, options for 2,362,316 shares were exercisable.
STOCK BONUS PLAN
The Company sponsors an employee benefit plan, the WestPoint Stevens Inc. 1995
Key Employee Stock Bonus Plan (the "Stock Bonus Plan"), covering 2,000,000
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 1998, 1997 and 1996, respectively, bonus awards were deemed earned by
forty-nine, forty-seven and fifty-three employees covering an aggregate of
266,121 shares, 398,456 shares and 643,464 shares of Common Stock. For
performance year 1998 and earlier the Amended Stock Bonus Plan provided for
vesting of the bonus awards of 20 percent on January 1 of the year following 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 $6.6 million, $4.4
million and $3.4 million to expense in 1998, 1997 and 1996, respectively, in
connection with the Stock Bonus Plan.
35
<PAGE> 36
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 sixteen 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 two years.
The following is a schedule, by year, of future minimum lease payments as of
December 31, 1998 under operating leases, including sublease arrangements, that
have initial or remaining noncancellable lease terms in excess of one year (in
thousands of dollars):
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
1999 ................................................... $ 24,112
2000 ................................................... 19,132
2001 ................................................... 13,634
2002 ................................................... 10,339
2003 ................................................... 8,579
Years subsequent to 2003 ............................... 11,970
--------
Total minimum lease payments ........................... 87,766
Minimum sublease rentals ............................... (3,206)
--------
Net minimum lease payments required for operating leases $ 84,560
========
</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,
-------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Minimum lease payments $34,295 $30,662 $40,217
Less sublease rentals (3,738) (3,986) (4,761)
------- ------- -------
Rent expense ......... $30,557 $26,676 $35,456
======= ======= =======
</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
36
<PAGE> 37
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LITIGATION AND CONTINGENT LIABILITIES--CONTINUED
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.
9. CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest .......................................... $107,720 $107,410 $102,565
======== ======== ========
Income taxes ...................................... $ 2,326 $ 9,444 $ 5,733
======== ======== ========
</TABLE>
10. DISCONTINUED OPERATIONS
On August 27, 1997, the Company closed a transaction pursuant to which WestPoint
Stevens sold its subsidiaries AIH Inc., Alamac Knit Fabrics, Inc. and Alamac
Enterprises Inc. (collectively, "Alamac Knit Fabrics subsidiary"), other than
cash, accounts receivable of approximately $42.5 million and a yarn mill located
in Whitmire, S.C., to Dyersburg Corporation for approximately $126 million. The
Whitmire facility was transferred by the Company to Home Fashions to support the
Company's expansion of its sheeting production capacity. As a result of the
transaction, the Company accounted for the Alamac Knit Fabrics subsidiary as a
discontinued operation and the accompanying financial statements have been
adjusted and restated accordingly.
Data relative to Alamac Knit Fabrics subsidiary is as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED DECEMBER 31,
AUGUST 27, 1997 1996
---------------- -------------
<S> <C> <C>
Net sales .................................... $162,428 $222,019
======== ========
Operating earnings ........................... $ 9,189 $ 7,051
======== ========
Net income (loss) ............................ $ 2,625 $ (287)
======== ========
Gain on sale, net of income taxes of $3,605 .. $ 6,138
========
Capital expenditures, including
capital leases............................ $ 3,237 $ 4,998
======== ========
Depreciation and other amortization .......... $ 5,501 $ 8,059
======== ========
</TABLE>
37
<PAGE> 38
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. MAJOR CUSTOMER INFORMATION
The Company's consumer home fashions products are sold primarily to domestic
chain stores, mass merchants, department and specialty stores. Sales to two
customers, as a percent of net sales, amounted to approximately 13% and 11% for
the year ended December 31, 1998. Sales to two customers, as a percent of net
sales, amounted to approximately 13% and 10% for the year ended December 31,
1997. Sales to three customers, as a percent of net sales, amounted to
approximately 13%, 12% and 10% for the year ended December 31, 1996. During
1998, 1997 and 1996, the Company's six largest customers accounted for
approximately 53%, 52% and 55%, respectively, of the Company's net sales.
38
<PAGE> 39
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
---------------------------------------------
FIRST SECOND THIRD FOURTH
----- ------ ----- ------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Net sales ................................................... $398.7 $437.0 $473.2 $470.1
Gross earnings .............................................. 99.5 113.3 134.4 127.6
Operating earnings .......................................... 44.4 52.6 79.3 72.0
Income from continuing operations ........................... 11.7 15.8 34.1 29.0
Extraordinary item - loss on early extinguishment of debt ... -- (50.6) -- --
------ ------ ------ ------
Net income (loss) ........................................... 11.7 (34.8) 34.1 29.0
Basic net income (loss) per common share (1):
Continuing operations ................................... .20 .27 .59 .51
Extraordinary item - loss on early extinguishment of debt -- (.87) -- --
------ ------ ------ ------
Net income (loss) per common share ...................... .20 (.60) .59 .51
Diluted net income (loss) per common share (1):
Continuing operations ................................... .19 .26 .57 .49
Extraordinary item - loss on early extinguishment of debt -- (.83) -- --
------ ------ ------ ------
Net income (loss) per common share ...................... .19 (.57) .57 .49
YEAR ENDED DECEMBER 31, 1997
Net sales ................................................... $357.1 $395.8 $459.0 $445.6
Gross earnings .............................................. 89.2 96.2 122.1 112.3
Operating earnings .......................................... 38.5 43.1 69.2 64.1
Income from continuing operations ........................... 9.0 10.7 26.5 23.1
Income from discontinued operations ......................... 1.1 1.1 0.4 --
Gain on sale of discontinued operations ..................... -- -- 6.1 --
------ ------ ------ ------
Net income .................................................. 10.1 11.8 33.0 23.1
Basic net income per common share (1):
Continuing operations ................................... .14 .18 .43 .39
Discontinued operations ................................. .02 .01 .01 --
Gain on sale of discontinued operations ................. -- -- .10 --
------ ------ ------ ------
Net income per common share ............................. .16 .19 .54 .39
Diluted net income per common share (1):
Continuing operations ................................... .14 .17 .42 .38
Discontinued operations ................................. .02 .01 .01 --
Gain on sale of discontinued operations ................. -- -- .10 --
------ ------ ------ ------
Net income per common share ............................. .16 .18 .53 .38
</TABLE>
- -----------
(1)Net income (loss) per common share calculations for each of the quarters is
based on the average common shares outstanding for each period.
39
<PAGE> 40
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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 1999 definitive proxy statement (under the caption "Board of
Directors") to be filed with the Securities and Exchange Commission by April 9,
1999 (the "1999 Proxy Statement").
IDENTIFICATION OF EXECUTIVE OFFICERS
The information called for in this item is incorporated by reference from the
Company's 1999 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 1999 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 1999 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 1999 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,
1998.
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors ...... 20
Consolidated Balance Sheets ............................. 21 - 22
Consolidated Statements of Income ....................... 23
Consolidated Statements of Stockholders' Equity (Deficit) 24
Consolidated Statements of Cash Flows ................... 25
Notes to Consolidated Financial Statements .............. 26 - 39
</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."
40
<PAGE> 41
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts.......... 46
</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, 1998.
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
3.1 Restated Certificate of Incorporation of WestPoint Stevens
Inc., as currently in effect, incorporated by reference to
Exhibit 3(b) to the Registration Statement on Form S-4
(Commission File No. 333-59817) filed by the Company with the
Securities and Exchange Commission on August 4, 1998.
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 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.
10.2 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.
10.3 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.
10.4 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.
10.5 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.
</TABLE>
41
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.6 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.
10.7 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.
10.8 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.
10.9 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.
10.10 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.
10.11 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.
10.12 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.
10.13 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.
10.14 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.
10.15 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.
10.16 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.
10.17 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.
10.18 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.
</TABLE>
42
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.19 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.
10.20 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.
10.21 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.
10.22 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.
10.23 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.
10.24 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., incorporated by reference to the Annual Report on Form
10-K/A for the fiscal year ended December 31, 1996 (Commission
File No. 0-21496) filed by the Company with the Commission.
10.25 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, incorporated by
reference to the Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1996 (Commission File No. 0-21496)
filed by the Company with the Commission.
10.26 First Amendment to the WestPoint Stevens Inc. Supplemental
Retirement Plan dated as of September 6, 1996, incorporated by
reference to the Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1996 (Commission File No. 0-21496)
filed by the Company with the Commission.
10.27 Employment Agreement effective January 1, 1997 between the
Company and Joseph L. Jennings superseding the Employment
Agreement of February 1, 1993, incorporated by reference to
the Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1996 (Commission File No. 0-21496) filed by the
Company with the Commission.
10.28 WestPoint Stevens Inc. Omnibus Stock Incentive Plan,
incorporated by reference to the Company's 1997 Proxy
Statement for the fiscal year ended December 31, 1996
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.29 Third Amendment Agreement, dated as of May 22, 1997, among the
Company, as Borrower, 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, Scotiabank Inc., Wachovia Bank of Georgia, N.A.,
SunTrust Bank, Atlanta, AmSouth Bank of Alabama, and ABN AMRO
Bank, N.V., incorporated by reference to the Form 10-Q for the
quarterly period ended June 30, 1997 (Commission File No.
0-21496) filed by the Company with the Commission.
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.30 Stock Purchase Agreement by and among Dyersburg Corporation,
as Purchaser, Alamac Sub Holdings Inc., as Seller, AIH Inc.
and Company dated as of July 15, 1997, incorporated by
reference to the Current Report on Form 8-K (Commission File
No. 0-21496) filed by the Company with the Commission on
September 11, 1997.
10.31 Supplemental Agreement relating to Phase II Environmental
Investigation among Alamac Sub Holdings Inc., AIH Inc.,
Company and Dyersburg Corporation dated as of July 15, 1997,
incorporated by reference to the Current Report on Form 8-K
(Commission File No. 0-21496) filed by the Company with the
Commission on September 11, 1997.
10.32 Amendment to Stock Purchase Agreement among Alamac Sub
Holdings Inc., AIH Inc., Company and Dyersburg Corporation
dated as of August 15, 1997, incorporated by reference to the
Current Report on Form 8-K (Commission File No. 0-21496) filed
by the Company with the Commission on September 11, 1997.
10.33 Supplemental Environmental Indemnity among Alamac Sub Holdings
Inc., AIH Inc., Company and Dyersburg Corporation dated as of
August 20, 1997, incorporated by reference to the Current
Report on Form 8-K (Commission File No. 0-21496) filed by the
Company with the Commission on September 11, 1997.
10.34 Second Supplemental Environmental Indemnity among Alamac Sub
Holdings Inc., AIH Inc., Company and Dyersburg Corporation
dated as of August 27, 1997, incorporated by reference to the
Current Report on Form 8-K (Commission File No. 0-21496) filed
by the Company with the Commission on September 11, 1997.
10.35 Assignment and Assumption Agreement among Company (the
"Assignor"), Alamac Knit Fabrics, Inc. (the "Assignee") and
Dyersburg Corporation dated as of August 27, 1997,
incorporated by reference to the Current Report on Form 8-K
(Commission File No. 0-21496) filed by the Company with the
Commission on September 11, 1997.
10.36 Letter Amendment Agreement, dated as of July 22, 1997, among
the Company, as Borrower, NationsBank, N.A. (formerly known as
NationsBank of North Carolina, N.A.), The Bank of New York,
BankBoston, N.A. (formerly known as The First National Bank of
Boston), The First National Bank of Chicago, Scotiabank Inc.,
Wachovia Bank of Georgia, N.A., SunTrust Bank, Atlanta,
AmSouth Bank of Alabama and ABN AMRO Bank, N.A., incorporated
by reference to the Form 10-Q for the quarterly period ended
September 30, 1997 (Commission File No. 0-21496) filed by the
Company with the Commission.
10.37 Letter Amendment Agreement, dated as of August 5, 1997, among
the Company, as Borrower, NationsBank, N.A. (formerly known as
NationsBank of North Carolina, N.A.), The Bank of New York,
BankBoston, N.A. (formerly known as The First National Bank of
Boston), The First National Bank of Chicago, Scotiabank Inc.,
Wachovia Bank of Georgia, N.A., SunTrust Bank, Atlanta,
AmSouth Bank of Alabama, and ABN AMRO Bank, N.V., incorporated
by reference to the Form 10-Q for the quarterly period ended
September 30, 1997 (Commission File No. 0-21496) filed by the
Company with the Commission.
10.38 Indenture dated as of June 9, 1998, between the Company and
The Bank of New York, as trustee, for the 7-7/8% Senior Notes
due 2005, incorporated by reference to Exhibit 4(a) to
Registration Statement on Form S-4 (Commission File No.
333-59817) filed by the Company with the Commission.
10.39 Form of Old 7-7/8% Senior Notes due 2005 (included in the
Indenture incorporated by reference as Exhibit 10.38),
incorporated by reference to Exhibit 4(b) to Registration
Statement on Form S-4 (Commission File No.
333-59817) filed by the Company with the Commission.
10.40 Form of Exchange 7-7/8% Senior Notes due 2005 (included in the
Indenture incorporated by reference as Exhibit 10.38),
incorporated by reference to Exhibit 4(c) to Registration
Statement on Form S-4 (Commission File No. 333-59817) filed by
the Company with the Commission.
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.41 Registration Rights Agreement dated as of June 9, 1998 among
the Company and the Initial Purchasers with respect to the
Senior Notes due 2005, incorporated by reference to Exhibit
4(d) to Registration Statement on Form S-4 (Commission File
No. 333-59817) filed by the Company with the Commission.
10.42 Indenture for the 7-7/8% Senior Notes due 2008 dated as of
June 9, 1998 between the Company and the Bank of New York, as
Trustee, incorporated by reference to Exhibit 4(e) to
Registration Statement on Form S-4 (Commission File No.
333-59817) filed by the Company with the Commission.
10.43 Form of Old 7-7/8% Senior Notes due 2008 (included in the
Indenture incorporated by reference as Exhibit 10.42),
incorporated by reference to Exhibit 4(f) to Registration
Statement on Form S-4 (Commission File No.
333-59817) filed by the Company with the Commission.
10.44 Form of Exchange 7-7/8% Senior Notes due 2008 (included in the
Indenture incorporated by reference as Exhibit 10.42),
incorporated by reference to Exhibit 4(g) to Registration
Statement on Form S-4 (Commission File No. 333-59817) filed by
the Company with the Commission.
10.45 Registration Rights Agreement dated June 9, 1998 among the
Company and the Initial Purchasers with respect to the Senior
Notes due 2008, incorporated by reference to Exhibit 4(h) to
Registration Statement on Form S-4 (Commission File No.
333-59817) filed by the Company with the Commission.
10.46 Letter Amendment Agreement, dated as of July 31, 1998, among
the Company, WestPoint Stevens (UK) Limited, WestPoint Stevens
(Europe) Limited, NationsBank., N.A., as agent and other
financial institutions party thereto, incorporated by
reference to the Form 10-Q for the quarterly period ended
September 30, 1998 (Commission File No. 0-21496) filed by the
Company with the Commission.
10.47 Letter Amendment Agreement, dated as of October 7, 1998 among
the Company, WestPoint Stevens (UK) Limited, WestPoint Stevens
(Europe) Limited, NationsBank, N.A., as agent and other
financial institutions party thereto.
10.48 Amendment dated October 29, 1998 to the WestPoint Stevens Inc.
1995 Key Employee Stock Bonus Plan (As Amended).
10.49 Receivables Purchase Agreement dated as of December 18, 1998,
by and between the Company and WPS Receivables Corporation.
10.50 Non-Negotiable Promissory Note, dated as of December 18, 1998,
by WPS Receivables Corporation in favor of the Company.
10.51 Asset Interest Transfer Agreement, dated as of December 18,
1998, among WPS Receivables Corporation, the Company, Blue
Ridge Funding Corporation and Wachovia Bank, N.A.
21 List of Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, independent auditors.
27.1 Financial Data Schedule for the period ended December 31, 1998
(for SEC use only)
</TABLE>
45
<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(3) PERIOD (4)
------ -------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1998
Accounts receivable allowances:
Doubtful accounts ............ $13,137 $ 1,627 $1,506(1) $ 90 $13,348
Cash and/or trade discounts
and returns and allowances 5,076 334(2) -- 493 5,903
------- ------- ------ ------ -------
$18,213 $ 1,961 $1,506 $ 583 $19,251
======= ======= ====== ====== =======
Inventory reserves:
Market and obsolescence ...... $21,050 $ 4,176(2) $ -- $1,900 $27,126
======= ======= ====== ====== =======
Year Ended December 31, 1997
Accounts receivable allowances:
Doubtful accounts ............ $12,536 $ 1,555 $1,001(1) $ 47 $13,137
Cash and/or trade discounts
and returns and allowances 4,429 428(2) -- 219 5,076
------- ------- ------ ------ -------
$16,965 $ 1,983 $1,001 $ 266 $18,213
======= ======= ====== ====== =======
Inventory reserves:
Market and obsolescence ...... $15,599 $ 2,252(2) $ -- $3,199 $21,050
======= ======= ====== ====== =======
Year Ended December 31, 1996
Accounts receivable allowances:
Doubtful accounts ............ $12,107 $ 615 $ 186(1) $ -- $12,536
Cash and/or trade discounts
and returns and allowances 5,360 (931)(2) -- -- 4,429
------- ------- ------ ------ -------
$17,467 $ (316) $ 186 $ -- $16,965
======= ======= ====== ====== =======
Inventory reserves:
Market and obsolescence ...... $16,810 $(1,211)(2) $ -- $ -- $15,599
======= ======= ====== ====== =======
</TABLE>
(1)Accounts written off, less recoveries of accounts previously written off.
(2)Net change.
(3)Additions relate to acquisitions closed during the period.
(4)Reserves are deducted from assets to which they apply.
46
<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
March 31, 1999
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)
March 31, 1999 March 31, 1999
By /s/ Thomas J. Ward By /s/ J. Nelson Griffith
------------------------------------------ -----------------------------------------------
Thomas J. Ward J. Nelson Griffith
President and Chief Operating Officer Controller
(principal accounting officer)
March 31, 1999 March 31, 1999
By /s/ Hugh M. Chapman By /s/ M. Katherine Dwyer
------------------------------------------ -----------------------------------------------
Hugh M. Chapman M. Katherine Dwyer
Director Director
March 31, 1999 March 31, 1999
</TABLE>
47
<PAGE> 48
<TABLE>
<S> <C>
By /s/ John G. Hudson By /s/ Charles W. McCall
------------------------------------------ -----------------------------------------------
John G. Hudson Charles W. McCall
Director Director
March 31, 1999 March 31, 1999
By /s/ Gerald B. Mitchell . By /s/ Phillip Siegel
------------------------------------------ -----------------------------------------------
Gerald B. Mitchell Phillip Siegel
Director Director
March 31, 1999 March 31, 1999
By /s/ John F. Sorte
------------------------------------------
John F. Sorte
Director
March 31, 1999
</TABLE>
48
<PAGE> 1
EXHIBIT 10.47
(NATIONSBANK LETTERHEAD)
NationsBank, N.A.
Charlotte, NC 28255
TEL 704 386-5000
October 7, 1998
WESTPOINT STEVENS INC.
507 West Tenth Street
West Point, Georgia 31833
Attention: Mr. Morgan M. Schuessler
Re: Revision of Definition of "Maximum Restricted Payment Amount"
and Minimum Net Worth Covenant
Dear Sirs:
Reference is made to that certain Second Amended and Restated Credit Agreement,
dated as of June 9, 1998, among WestPoint Stevens Inc. ("Borrower"), WestPoint
Stevens (UK) Limited and WestPoint Stevens (Europe) Limited (the "Foreign
Borrowers"), the various banks and lending institutions party thereto (the
"Banks"), and NationsBank, N.A. as agent (the "Agent") for the Banks, as
amended by that certain Amendment Agreement dated as of July 31, 1998 (as
amended from time to time, the "Credit Agreement"). Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement.
By their signatures below, the Borrower, the Foreign Borrowers and the Required
Banks hereby agree that the existing definition of "Maximum Restricted Payment
Amount" in Section 1.1 of the Credit Agreement shall be amended to read in its
entirety as follows:
"Maximum Restricted Payment Amount" means the sum of (i)
$84,210,000, plus (ii) 50% of the Consolidated Net Income from and
after March 31, 1998 until any relevant measurement date, plus (iii)
the Net Cash Proceeds received by the Borrower from the exercise of
stock warrants or options by employees or former employees of the
Borrower in respect of Capital Stock of the Borrower from and after
March 31, 1998, plus (iv) $21,790,978 (representing the Net Cash
Proceeds received by Alamac Sub Holdings Inc. from the sale of its
facility located in Whitmire, South Carolina), and (v) beginning with
the fiscal quarter ending nearest December 31, 1998, minus the lesser
of $50,000,000 or 50% of the Consolidated Net Income from and after
October 1, 1998 until any relevant measurement date.
<PAGE> 2
WestPoint Stevens Inc.
October 7, 1998
Page 2
By their signatures below, the Borrower, the Foreign Borrowers and the Required
Banks hereby agree that Section 7.11(a) be amended to read in its entirety as
follows:
Minimum Consolidated Net Worth. Have a Consolidated Net Worth
as of the last day of each fiscal quarter of not less than (i)
$205,000,000, (ii) increased on a cumulative basis as of the end of
each fiscal quarter of the Consolidated Parties, commencing with the
fiscal quarter ending June 30, 1998, by an amount equal to forty
percent (40%) of Consolidated Net Income (to the extent positive) for
the fiscal quarter then ended, and (iii)further increased on a
cumulative basis as of the end of each fiscal quarter of the
Consolidated Parties beginning with the fiscal quarter ending nearest
December 31, 1998 by an amount equal to the lesser of (A) fifty
percent (50%) of Consolidated Net Income (to the extent positive) for
each such fiscal quarter or (B) $50,000,000.
By their signatures below, each of the Subsidiary Guarantors acknowledges and
consents to this revision in the definition of "Maximum Restricted Payment
Amount" and each Subsidiary Guarantor agrees that this revision does not
operate to reduce or discharge any of such Subsidiary's obligations under any
of the Collateral Documents.
Until this letter agreement shall have been executed by the Borrower, the
Foreign Borrowers, the Subsidiary Guarantors, and the Required Banks, it shall
not be effective in revising either the definition of "Maximum Restricted
Payment Amount" or Section 7.11(a). Except for the revision to the definition
of "Maximum Restricted Payment Amount" and the revision of Section 7.11(a)
effected hereby upon the execution of this letter agreement by the Borrower,
the Foreign Borrowers, the Subsidiary Guarantors, and the Required Banks, the
Credit Agreement shall remain in full force and effect.
Please execute this letter agreement and cause each of the Foreign Borrowers
and the Subsidiary Guarantors to execute this letter agreement, and return such
completed signature pages to the Agent at your earliest convenience.
Sincerely,
NATIONSBANK, N.A., in its capacity
as the Agent
By: /s/ David H. Dinkins
-------------------------------
David H. Dinkins
Title: Vice President
----------------------------
ACKNOWLEDGED AND AGREED:
WESTPOINT STEVENS INC.
By: /s/ Morgan M. Schuessler
------------------------------
Title: Executive Vice President
Finance and Chief Financial
Officer
[Signatures Continued]
<PAGE> 3
WestPoint Stevens Inc.
October 7, 1998
Page 3
WESTPOINT STEVENS (UK) LIMITED
By: /s/ Morgan M. Schuessler
---------------------------------------
Morgan M. Schuessler
Title: Director, Vice President & Treasurer
------------------------------------
WESTPOINT STEVENS (EUROPE) LIMITED
By: /s/ Morgan M. Schuessler
---------------------------------------
Morgan M. Schuessler
Title: Director, Vice President & Treasurer
------------------------------------
WESTPOINT STEVENS STORES, INC.
By: /s/ Morgan M. Schuessler
---------------------------------------
Morgan M. Schuessler
Title: Vice President & Treasurer
------------------------------------
J.P. STEVENS & CO., INC.
By: /s/ Morgan M. Schuessler
---------------------------------------
Morgan M. Schuessler
Title: Vice President & Treasurer
------------------------------------
WEST POINT-PEPPERELL ENTERPRISES, INC.
By: /s/ Edward J. Jones
---------------------------------------
Edward J. Jones
Title: Vice President & Assistant Treasurer
------------------------------------
J.P. STEVENS ENTERPRISES, INC.
By: /s/ Edward J. Jones
---------------------------------------
Edward J. Jones
Title: Vice President & Assistant Treasurer
------------------------------------
ALAMAC HOLDINGS INC.
By: /s/ Edward J. Jones
---------------------------------------
Edward J. Jones
Title: Vice President & Assistant Treasurer
------------------------------------
[Signatures Continued]
<PAGE> 4
WestPoint Stevens Inc.
October 7, 1998
Page 4
ALAMAC SUB HOLDINGS INC.
By: /s/ Edward J. Jones
---------------------------------------
Edward J. Jones
Title: Vice President & Assistant Treasurer
------------------------------------
NATIONSBANK, N.A., as a Bank
By: /s/ David H. Dinkins
---------------------------------------
David H. Dinkins
Title: Vice President
------------------------------------
THE BANK OF NEW YORK
By: /s/ Ronald R. Reedy
---------------------------------------
Ronald R. Reedy
Title: Vice President
------------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Kirsten H. Hertel
---------------------------------------
Kirsten H. Hertel
Title: Vice President
------------------------------------
SCOTIABANC INC.
By: /s/ P.M. Brown
---------------------------------------
P. M. Brown
Title: Relationship Manager
------------------------------------
WACHOVIA BANK, N.A.
By: /s/ Reginald T. Dawson
---------------------------------------
Title: Senior Vice President
------------------------------------
[Signatures Continued]
<PAGE> 5
WestPoint Stevens Inc.
October 7, 1998
Page 5
SOCIETE GENERALE
By: /s/ Ralph Saheb
---------------------------------------
Ralph Saheb
Vice President
Title: Southwest Operations Manager
------------------------------------
ABN AMRO BANK, N.V.
By: /s/ Linda K. Davis
---------------------------------------
Title: Vice President
------------------------------------
By: /s/ Robert A. Budnek
---------------------------------------
Robert A. Budnek
Title: Vice President
------------------------------------
SUNTRUST BANK, ATLANTA
By: /s/ Laura Kahn
---------------------------------------
Laura Kahn
Title: Senior Vice President
------------------------------------
By: /s/ Brenda Zino
---------------------------------------
Brenda Zino
Title: Banking Officer
------------------------------------
FIRST UNION NATIONAL BANK
By: /s/ Roger Pelz
---------------------------------------
Title: Senior Vice President
------------------------------------
FLEET BANK, N.A.
By:
---------------------------------------
Title:
------------------------------------
[Signatures Continued]
<PAGE> 6
WestPoint Stevens Inc.
October 7, 1998
Page 6
AMSOUTH BANK
By:
---------------------------------------
Title:
------------------------------------
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By: /s/ Theodore W. Cox
---------------------------------------
Theodore W. Cox
Title: Vice President
------------------------------------
By: /s/ W. Jeffrey Vollack
---------------------------------------
W. Jeffrey Vollack
Senior Credit Officer
Title: Senior Vice President
------------------------------------
NATIONAL WESTMINSTER BANK PLC
By: /s/ R. Elsom
---------------------------------------
R. Elsom
Title: Senior Corporate Manager
------------------------------------
<PAGE> 1
EXHIBIT 10.48
AMENDMENT TO THE
WESTPOINT STEVENS INC.
1995 KEY EMPLOYEE STOCK BONUS PLAN
(As Amended)
THIS AMENDMENT to the WestPoint Stevens Inc. 1995 Key Employee Stock
Bonus Plan (As Amended) (the "Plan") is made the 29th day of October, 1998 by
WestPoint Stevens Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Plan for the benefit of its
eligible employees;
WHEREAS, the Company's Board of Directors has the authority to amend
or modify the Plan at any time and in any respect with certain limitations as
stated in the Plan; and
WHEREAS, the Company desires to amend the Plan as provided herein; and
WHEREAS, the Board of Directors of the Company, acting within its
authority has approved the amendment of the Plan as provided herein;
NOW, THEREFORE, the Plan is hereby amended as follows by amending the
first sentence of Section 7 to read as follows:
Within the first 90 days of each Performance Year
(or, in the case of the initial Performance Year,
within 90 days of the date the Plan is approved by
the Board), the Committee shall establish a vesting
schedule that shall apply to the Bonus Awards
granted for that Performance Year; provided,
however, that not less than 10% of the shares
subject to each Bonus Award shall become vested as
of January 1 of the year immediately following the
Performance Year and in each succeeding year.
<PAGE> 1
EXHIBIT 10.49
EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT
dated as of December 18, 1998
by and between
WESTPOINT STEVENS INC.,
as Seller
and
WPS RECEIVABLES CORPORATION,
as Purchaser
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
ARTICLE I
AGREEMENT TO PURCHASE AND SELL.................................... 2
1.1 Agreement to Purchase and Sell.................................................................... 2
1.2 Timing of Purchases............................................................................... 3
1.3 Consideration for Purchases....................................................................... 3
1.4 No Recourse....................................................................................... 3
1.5 No Assumption of Obligations Relating to
Receivables, Related Assets or Contracts.......................................................... 3
1.6 True Sales........................................................................................ 4
1.7 Savings Clause.................................................................................... 4
1.8 Addition of Sellers............................................................................... 4
1.9 Termination of Status as a Seller................................................................. 5
ARTICLE II
CALCULATION OF PURCHASE PRICE.................................... 6
2.1 Calculation of Purchase Price..................................................................... 6
2.2 Definitions and Calculations Related to Purchase
Price Percentage.................................................................................. 7
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC............................. 8
3.1 Purchase Price Payments........................................................................... 8
3.2 The WPS Finco Note................................................................................ 9
3.3 Application of Collections and Other Funds........................................................ 10
3.4 Servicing of Receivables and Related Assets....................................................... 10
3.5 Payments and Computations, Etc.................................................................... 11
ARTICLE IV
CONDITIONS TO PURCHASES....................................... 11
4.1 Conditions Precedent to Initial Purchase.......................................................... 11
4.2 Certification as to Representations and
Warranties........................................................................................ 12
4.3 Effect of Payment of Purchase Price............................................................... 12
ARTICLE V
REPRESENTATIONS AND WARRANTIES.................................... 13
5.1 Representations and Warranties of Seller.......................................................... 13
5.2 Representations and Warranties of WPS Finco....................................................... 20
ARTICLE VI
GENERAL COVENANTS OF SELLER...................................... 20
6.1 Affirmative Covenants............................................................................. 20
6.2 Reporting Requirements............................................................................ 24
6.3 Negative Covenants................................................................................ 28
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE TRANSFERRED ASSETS................................. 31
7.1 Rights of WPS Finco............................................................................... 31
7.2 Responsibilities of Seller........................................................................ 32
7.3 Further Action Evidencing Purchases............................................................... 32
7.4 Collection of Receivables; Rights of WPS Finco and Its Assignees.................................. 34
ARTICLE VIII
TERMINATION............................................. 35
8.1 Termination by Seller............................................................................. 35
8.2 Automatic Termination............................................................................. 35
ARTICLE IX
INDEMNIFICATION........................................... 35
9.1 Indemnities by Seller............................................................................. 35
9.2. Contribution...................................................................................... 37
ARTICLE X
MISCELLANEOUS............................................ 38
10.1 Amendments; Waivers, Etc......................................................................... 38
10.2 Notices, Etc..................................................................................... 38
10.3 Cumulative Remedies.............................................................................. 39
10.4 Binding Effect; Assignability; Survival of
Provisions....................................................................................... 39
10.5 Governing Law.................................................................................... 39
10.6 Costs, Expenses and Taxes........................................................................ 40
10.7 Consent to Jurisdiction; Waiver of Immunities.................................................... 40
10.8 Waiver of Jury Trial............................................................................. 41
10.9 Integration...................................................................................... 41
10.10 Execution in Counterparts....................................................................... 41
10.11 Acknowledgment and Consent...................................................................... 41
10.12 No Partnership or Joint Venture................................................................. 42
10.13 No Proceedings.................................................................................. 42
10.14 Severability of Provisions...................................................................... 42
10.15 Recourse to WPS Finco........................................................................... 43
</TABLE>
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EXHIBITS
EXHIBIT 3.2 Form of WPS Finco Note
SCHEDULES
SCHEDULE 5.1(f) Litigation and Other Proceedings
SCHEDULE 5.1(n) Offices of the Sellers where Records are
Maintained
SCHEDULE 5.1(o) Lock-Box Banks and Accounts
SCHEDULE 5.1(q) Legal Names
APPENDICES
APPENDIX A Definitions
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THIS RECEIVABLES PURCHASE AGREEMENT (this "Purchase Agreement"), dated
as of December 18, 1998, is made by and between WestPoint Stevens Inc., a
Delaware corporation ("Seller"), and WPS Receivables Corporation, a Delaware
corporation ("WPS Finco"). Except as otherwise specifically provided herein,
capitalized terms used in this Purchase Agreement have the meanings ascribed to
such terms in Appendix A hereto, and this Purchase Agreement shall be
interpreted in accordance with the conventions set forth in Parts B, C and D of
Appendix A.
W I T N E S S E T H
WHEREAS, Seller and WPS Finco entered into a Receivables Purchase
Agreement dated as of December 10, 1993 and amended and restated as of May 27,
1994 (the "Original Purchase Agreement"), pursuant to which Seller agreed to
sell Receivables that it owned on December 10, 1993 and from time to time
thereafter owned, to WPS Finco, and WPS Finco agreed to purchase such
Receivables from Seller from time to time; and
WHEREAS, Seller exercised its termination rights under Section 8.1 of
the Original Purchase Agreement and terminated such agreement;
WHEREAS, WPS Finco continues to own all Receivable outstanding as of
the close of business on the Effective Date and conveyed pursuant to the
Original Purchase Agreement. (such Receivables, the "Previously Transferred
Receivables");
WHEREAS, Seller and WPS Finco desire to enter into a new Receivables
Purchase Agreement pursuant to which Seller will sell Receivables that it owns
on the Effective Date and from time to time thereafter owns, to WPS Finco, and
WPS Finco will purchase such Receivables from Seller on the Effective Date and
thereafter from time to time, in each case, on the terms and conditions set
forth herein; and
WHEREAS, concurrent with this Purchase Agreement, WPS Finco, as
Transferor, Seller, as Servicer, Blue Ridge Asset Funding Corporation, as
Transferee ("Blue Ridge"), and Wachovia Bank, N.A., as Administrator (the
"Administrator"), are entering into an Asset Interest Transfer Agreement
pursuant to which WPS Finco will transfer to Blue Ridge an undivided interest in
Pool Receivables and Related Assets (as defined therein), in order to, among
other things, finance WPS Finco's purchases hereunder.
<PAGE> 6
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell. On the terms and subject to
the conditions set forth in this Purchase Agreement (including the conditions to
purchases set forth in Article IV), Seller agrees to sell, transfer, assign, set
over and otherwise convey, and does hereby sell, to WPS Finco, and WPS Finco
agrees to purchase, and does hereby purchase, from Seller, at the times set
forth in Section 1.2, all of Seller's right, title and interest in, to and
under:
(a) each Receivable of Seller that exists and is owing to Seller
as at the closing of Seller's business on the Effective Date
(other than the Previously Transferred
Receivables),
(b) each Receivable created by Seller that arises during the
period from and including the closing of Seller's business on
the Effective Date but excluding the Purchase Termination
Date,
(c) all Related Security with respect to all Receivables
described above,
(d) all proceeds of the foregoing, including all funds
received by any Person in payment of any amounts owed
(including invoice prices, finance charges, interest
and all other charges, if any) in respect of any
Receivable described above or Related Security with
respect to any such Receivable, or otherwise applied to
repay or discharge any such Receivable (including
insurance payments that Seller or the Servicer applies
in the ordinary course of its business to amounts owed
in respect of any such Receivable (it being understood
that property insurance covering inventory is not so
applied and is not included in this grant) and net
proceeds of sale or other disposition of repossessed
goods that were the subject of any such Receivable) or
other collateral or property of any Obligor or any
other party directly or indirectly liable for payment
of such Receivables), and
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(e) all Records relating to any of the foregoing; provided that
the Seller shall be entitled to retain duplicates of such
Records.
As used herein, (i) "Purchased Receivables" means the items listed
above in clauses (a) and (b) and the Previously Transferred Receivables; (ii)
"Related Assets" means the items listed above in clauses (c), (d) and (e); and
(iii) "Transferred Assets" means the Purchased Receivables and the Related
Assets.
SECTION 1.2 Timing of Purchases.
(a) Effective Date Purchases. All of the Transferred Assets of Seller,
other than the Previously Transferred Receivables (which have been previously
transferred to WPS Finco) existing at the closing of its business on the
Effective Date automatically (and without further action by any Person) shall be
sold to WPS Finco on the Effective Date.
(b) Regular Purchases. Except to the extent otherwise provided in
Section 8.2, after the closing of Seller's business on the Effective Date until
the closing of Seller's business on the Business Day immediately preceding the
Purchase Termination Date, each Receivable and the Related Assets of Seller
shall be deemed to have been sold to WPS Finco pursuant hereto immediately (and
without further action by any Person) upon the creation of such Receivable.
SECTION 1.3 Consideration for Purchases. On the terms and subject to
the conditions set forth in this Purchase Agreement, WPS Finco agrees to make
Purchase Price payments to Seller in accordance with Article III.
SECTION 1.4 No Recourse. Except as specifically provided in this
Purchase Agreement, the sale and purchase of Transferred Assets under this
Purchase Agreement shall be without recourse to Seller; it being understood that
Seller shall be liable to WPS Finco for all representations, warranties,
covenants and indemnities made by Seller pursuant to the terms of this Purchase
Agreement, all of which obligations are limited so as not to constitute recourse
to Seller for the credit risk of the Obligors.
SECTION 1.5 No Assumption of Obligations Relating to Receivables,
Related Assets or Contracts. Neither WPS Finco, nor the Servicer, nor any of
their respective assigns, shall have any obligation or liability to any Obligor
or other customer or client of Seller (including any obligation to perform any
of the obligations of Seller under any Receivable, related Contracts or any
other related purchase orders or other agreements). No such
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obligation or liability is intended to be assumed hereunder by WPS Finco, the
Servicer, or any of their respective assigns, and any such assumption is
expressly disclaimed.
SECTION 1.6 True Sales. Seller and WPS Finco intend the transfers of
Receivables hereunder to be true sales by Seller to WPS Finco that are absolute
and irrevocable and that provide WPS Finco with the full benefits of ownership
of the Receivables, and neither Seller nor WPS Finco intends the transactions
contemplated hereunder to be, or for any purpose to be characterized as, loans
from WPS Finco to Seller.
SECTION 1.7 Savings Clause.
If, notwithstanding the intention of the parties expressed in Section
1.6 above, the conveyance by Seller to WPS Finco of Receivables hereunder shall
be characterized as a secured loan and not a sale, this Purchase Agreement shall
constitute a security agreement under the UCC and other applicable law. For this
purpose, Seller hereby grants WPS Finco a duly perfected, first priority
security interest in all of Seller's right, title and interest in, to and under
the Receivables and the Related Security with respect thereto, this Purchase
Agreement and all proceeds of any thereof, to secure the timely payment and
performance by Seller of all amounts owing to WPS Finco hereunder and any other
obligations owing to WPS Finco hereunder. In the event this Purchase Agreement
shall be characterized as a security agreement and upon a default by Seller
hereunder, WPS Finco and its assignees shall have, in addition to the rights and
remedies which they may have under this Purchase Agreement, all other rights and
remedies provided to a secured creditor after default under the UCC and other
applicable law, which rights and remedies shall be cumulative.
SECTION 1.8 Addition of Sellers. Any Subsidiary of WestPoint Stevens
may become an additional Seller hereunder and sell its accounts receivable and
property of the types that constitute Receivables and Related Assets hereunder
to WPS Finco if the Administrator (on behalf of Blue Ridge) consents to such
addition. WestPoint Stevens and its Subsidiary that is proposed to be added as a
Seller shall give to WPS Finco and the Administrator no less than forty-five
days' prior written notice of the effective date of the addition of such
Subsidiary as a Seller, and such Subsidiary shall provide the Administrator (on
behalf of Blue Ridge) with reasonable access to its officers and to its books,
records and accounting systems to enable the Administrator to conduct a due
diligence review of the accounts receivable and accounting systems of such
Subsidiary. Upon the Administrator granting its consent to the proposed
addition, such addition shall become effective on the first Business Day
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<PAGE> 9
following the date on which the Subsidiary and the parties hereto shall have
executed and delivered such agreements, instruments and other documents and such
amendments or other modifications to the Transaction Documents, in form and
substance reasonably satisfactory to WPS Finco and the Administrator, that WPS
Finco or the Administrator reasonably determines are necessary or appropriate to
effect such addition.
SECTION 1.9 Termination of Status as a Seller. (a) At any time when
more than one Person is a Seller, a Seller (other than WestPoint Stevens) may
terminate its obligation to sell its Receivables and Related Assets to WPS Finco
if:
(i) such Seller (a "Terminating Seller") shall have given WPS
Finco no less than thirty days' prior written notice of such
Seller's intention to terminate such obligations;
(ii) an Authorized Officer of the Terminating Seller shall have
certified that the termination by the Terminating Seller of
its status as a Seller will not have a Material Adverse
Effect; and
(iii) both immediately before and after giving effect to such
termination by the Terminating Seller, no Liquidation Event or
Unmatured Liquidation Event shall have occurred and be
continuing or shall reasonably be expected to occur.
Any termination by a Seller pursuant to this Section 1.9(a) shall
become effective on the first Business Day that follows the day on which the
requirements of foregoing clauses (a)(i) through (iii) shall have been satisfied
(or such later date specified in the notice or certificate referred to in such
clauses). Any termination by a Seller pursuant to this Section 1.9(a) shall
terminate such Seller's right and obligation to sell Receivables and Related
Assets hereunder to WPS Finco and WPS Finco's agreement, with respect to such
Seller, to purchase such Receivables and Related Assets; provided, however, that
such termination shall not relieve such Seller of any of its other Obligations,
to the extent such Obligations relate to Receivables (and Related Assets with
respect thereto) originated by such Seller prior to the effective date of such
termination.
(b) The right and obligation of a Seller (other than WestPoint Stevens)
to sell its Receivables and Related Assets to WPS Finco shall terminate
immediately if such Seller ceases to be a Subsidiary of WestPoint Stevens;
provided, however, that such termination shall not relieve such Seller of any of
its other
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Obligations, to the extent such Obligations relate to Receivables (and Related
Assets with respect thereto) originated by such Seller prior to the effective
date of such termination.
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1 Calculation of Purchase Price. On the Effective Date, and
thereafter on each Reporting Date, the Servicer shall deliver to WPS Finco, the
Administrator and Seller, a Monthly Report with respect to WPS Finco's purchases
of Receivables from Seller
(i) that are to be made on the Effective Date (in the case of
the Monthly Report to be delivered on the Effective Date) or
(ii) that were made in the immediately preceding Reporting
Period (in the case of each subsequent Monthly Report).
On each day when Receivables are purchased by WPS Finco from Seller
pursuant to Article I hereof, the "Purchase Price" to be paid to Seller on such
day (in the case of the Effective Date), or on the next Business Day for the
Receivables and Related Assets that are to be sold by Seller on such day, shall
be determined in accordance with the following formula:
PP = AUB x PPP
where:
PP = the aggregate Purchase Price for the Receivables
and Related Assets purchased from Seller on such
day,
AUB = the "Aggregate Unpaid Balance" of the Receivables
that are to be purchased from Seller on such day.
For purposes of this calculation, "Aggregate
Unpaid Balance" shall mean (i) for purposes of
calculating the Purchase Price to be paid to
Seller on the Effective Date, the sum of the
Unpaid Balances of each Receivable generated by
Seller, as measured as at the closing of Seller's
business on the Effective Date, and (ii) for
purposes of calculating the Purchase Price to be
paid to Seller on each Business Day thereafter,
the sum of the Unpaid Balances of each Receivable
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<PAGE> 11
to be purchased from Seller on such day,
calculated at the time of such Receivable's
generation and sale to WPS Finco,
PPP = the Purchase Price Percentage applicable to the
Receivables purchased from Seller on such day, as
determined pursuant to Section 2.2.
SECTION 2.2 Definitions and Calculations Related to
Purchase Price Percentage.
(a) "Purchase Price Percentage" for the Receivables to be sold by
Seller on any day shall mean the percentage determined in accordance with the
following formula:
PPP = 100% - RRF
where:
PPP = the Purchase Price Percentage in effect on such
day
RRF = the Required Reserve Factor (expressed as a
percentage) determined as of the most recent
Reporting Date, pursuant to paragraph (b) below.
The Purchase Price Percentage and the Required Reserve Factor shall be
recomputed by the Servicer on each Reporting Date, in each case for the then
most recent ended Reporting Period, and such recomputed amounts shall be used
for purposes of calculating the Purchase Price payable to Seller for
Receivables sold to WPS Finco through the next Reporting Date.
7
<PAGE> 12
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 Purchase Price Payments.
(a) On the Effective Date and on the Business Day following each day on
which any Receivables are purchased from Seller by WPS Finco pursuant to Article
I hereof, on the terms and subject to the conditions of this Purchase Agreement,
WPS Finco shall pay to Seller the Purchase Price for the Receivables and Related
Assets purchased on such day, by WPS Finco from Seller by (i) making a cash
payment to Seller to the extent that WPS Finco has cash available to make such
payment pursuant to Section 3.3 and (ii) automatically increasing the principal
amount outstanding under Seller's WPS Finco Note by the amount of the excess of
the Purchase Price to be paid to Seller for such Receivables and Related Assets
over the amount of any cash payment made on such day to Seller.
(b) Non-Complying Receivables and Dilution Adjustment. If on any day
(i) the Unpaid Balance of any Receivable sold to WPS Finco by
Seller is:
(A) reduced as a result of any defective, rejected or
returned merchandise or services, any cash discount,
incorrect billings, price rollbacks, freight charge
discrepancies or any other adjustment by Seller or
any Affiliate thereof, or as a result of any tariff
or other governmental or regulatory action, or
(B) reduced or canceled as a result of a setoff in
respect of any claim by the Obligor thereof (whether
such claim arises out of the same or a related or an
unrelated transaction), or
(C) reduced on account of the obligation of Seller or any
Affiliate thereof to pay to the related Obligor any
rebate or refund, or
(D) less than the amount reported in the applicable
Monthly Report (for any reason
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<PAGE> 13
other than such Receivable being paid by the Obligor
thereof or becoming a Defaulted Receivable), or
(ii) the representations and warranties made by Seller in
Section 5.1(k) with respect to such Receivable were not true when made,
then, the Purchase Price payable to Seller on the next Business Day or Days
shall be reduced as follows (such reduction, a "NonComplying Receivables and
Dilution Adjustment"):
(A) in the case of clause (i) above, in the amount of
such reduction or cancellation or the difference
between the actual Unpaid Balance and the amount
reported in the applicable Monthly Report, as
applicable; and
(B) in the case of clause (ii) above, in the amount of
the Unpaid Balance of such Receivable.
(c) If, on any day on or after the Purchase Termination Date, there is
a positive Noncomplying Receivables and Dilution Adjustment and the principal
amount of the WPS Finco Note has been reduced to zero (or Seller no longer holds
the WPS Finco Note), Seller shall pay to WPS Finco in cash the amount of such
Noncomplying Receivables and Dilution Adjustment on the next succeeding Business
Day.
SECTION 3.2 The WPS Finco Note.
(a) On the Effective Date, WPS Finco shall deliver to Seller a
promissory note, substantially in the form of Exhibit 3.2, payable to the order
of Seller (such promissory note, as the same may be amended, supplemented,
endorsed or otherwise modified from time to time, together with any promissory
note issued from time to time in substitution therefor or renewal thereof in
accordance with the Transaction Documents, the "WPS Finco Note"), which WPS
Finco Note shall be subordinated to all payments now or hereafter arising under
or in connection with the Asset Interest Transfer Agreement. The WPS Finco Note
is payable in full on the date that is eighteen months after the Final Payout
Date under the Asset Interest Transfer Agreement. The WPS Finco Note shall bear
interest at a rate per annum equal to the Prime Rate in effect on the most
recent Reporting Date. WPS Finco may prepay all or part of the outstanding
balance of the WPS Finco Note from time to time without any premium or penalty,
unless such prepayment would result in a default in WPS Finco's payment of any
other amount required to be paid by it under any Transaction Document.
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<PAGE> 14
(b) The Servicer shall hold the WPS Finco Note for the benefit of
Seller, and shall make all appropriate recordkeeping entries with respect to the
WPS Finco Note or otherwise to reflect the payments on and adjustments thereto.
The Servicer's books and records shall constitute rebuttable presumptive
evidence of the principal amount of and accrued interest on the WPS Finco Note
at any time. Seller hereby irrevocably authorizes the Servicer to mark the WPS
Finco Note "CANCELLED" and to return the WPS Finco Note to WPS Finco upon the
final payment thereof.
SECTION 3.3 Application of Collections and Other Funds. If, on any day,
WPS Finco receives (a) Collections that it is not required to hold in trust for,
or remit to, the Servicer or the Administrator pursuant to the Asset Interest
Transfer Agreement or (b) proceeds or transfers pursuant to the Asset Interest
Transfer Agreement, WPS Finco shall apply such funds as follows:
(i) first, to pay its existing expenses and to set aside funds
for the payment of expenses that are then accrued;
(ii) second, to pay the Purchase Price pursuant to Section 3.1
for Receivables and Related Assets purchased by WPS Finco from Seller
on the Effective Date or in the applicable Reporting Period, as the
case may be; and
(iii) third, in such order as WPS Finco may elect, (A) to
repay amounts owed by WPS Finco to Seller under the WPS Finco Note, or
(B) to declare and pay dividends to Seller to the extent permitted by
law.
SECTION 3.4 Servicing of Receivables and Related Assets. Consistent
with WPS Finco's ownership, as between the parties to this Purchase Agreement,
of the Receivables and the Related Assets, WPS Finco shall have the sole right
to service, administer and collect the Receivables, to assign such right and to
delegate such right to others. Without limiting the generality of Section 10.11,
Seller hereby acknowledges and agrees that WPS Finco shall assign to the
Administrator (for the benefit of Blue Ridge) the rights and interests granted
by Seller to WPS Finco hereunder and agrees to cooperate fully with the Servicer
and the Administrator in the exercise of such rights. As more fully described in
Section 7.4(b) hereof and in the Asset Interest Transfer Agreement, the
Administrator may only exercise such rights in the place of WPS Finco (as
assignee or otherwise) following the designation of a Servicer other than
WestPoint Stevens pursuant to Section 8.01 of the Asset Interest Transfer
Agreement or upon the occurrence and during the continuance of a Liquidation
Event.
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SECTION 3.5 Payments and Computations, Etc. All amounts to be paid by
Seller to WPS Finco hereunder shall be paid in accordance with the terms hereof
no later than 2:00 p.m. (New York time) on the day when due in Dollars in
immediately available funds to an account that WPS Finco shall from time to time
specify in writing. Payments received by WPS Finco after such time shall be
deemed to have been received on the next Business Day. In the event that any
payment becomes due on a day which is not a Business Day, then such payment
shall be made on the next succeeding Business Day. Seller shall, to the extent
permitted by law, pay to WPS Finco, on demand, interest on all amounts not paid
when due hereunder at 1.0% per annum above the interest rate on the WPS Finco
Note in effect on the date such payment was due; provided, however, that such
interest rate shall not at any time exceed the maximum rate permitted by
applicable law. All computations of interest payable hereunder shall be made on
the basis of a year of 360 days for the actual number of days (including the
first but excluding the last day) elapsed.
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase. The initial
purchase hereunder is subject to the conditions precedent that (i) each of the
conditions precedent to the execution, delivery and effectiveness of each other
Transaction Document (other than a condition precedent in any such other
Transaction Document relating to the effectiveness of this Purchase Agreement)
shall have been fulfilled to the satisfaction of WPS Finco, and (ii) WPS Finco
shall have received (or in the case of subsection (i) below, shall have
delivered) each of the following, on or before the Effective Date, each (unless
otherwise indicated) dated the Effective Date and each in form and substance
satisfactory to WPS Finco:
(a) Seller Assignment Certificate. A Seller Assignment
Certificate in the form of Exhibit 4.1(a) from Seller, duly completed,
executed and delivered by Seller;
(b) Resolutions. A copy of the resolutions of the Board of
Directors of Seller approving this Purchase Agreement and the other
Transaction Documents to be delivered by Seller hereunder and the
transactions contemplated hereby and thereby and addressing such other
matters as may be required by WPS Finco, certified by its Secretary or
Assistant Secretary, each as of a recent date acceptable to WPS Finco;
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<PAGE> 16
(c) Good Standing Certificate of Seller; Certificates as to
Foreign Qualification of Seller. A good standing certificate for
Seller, issued by the Secretary of State of Delaware and of each state
in which Seller transacts business, is required to be in good standing
and where the failure to be in good standing could materially and
adversely affect the condition (financial or otherwise), properties,
business or results of operations of Seller, each dated as of a recent
date;
(d) Incumbency Certificate. A certificate of the Secretary or
Assistant Secretary of Seller certifying, as of the date of this
Purchase Agreement, the names and true signatures of the officers
authorized on Seller's behalf to sign this Purchase Agreement and the
other Transaction Documents to be delivered by Seller hereunder;
(e) Other Transaction Documents. Original copies, executed by
each of the parties thereto in such reasonable number as shall be
specified by WPS Finco, of each of the other Transaction Documents to
be executed and delivered in connection herewith; and
(f) Opinions of Counsel. The following opinions of counsel
each in form and substance satisfactory to WPS Finco: (i) opinions of
Weil, Gotshal & Manges LLP, special counsel to Seller as to
enforceability and UCC validity matters and true sale and
non-consolidation, and (ii) opinions of Sutherland, Asbill and Brennan,
as to Georgia tax and UCC perfection and priority matters.
SECTION 4.2 Certification as to Representations and Warranties. Seller,
by accepting the Purchase Price paid for each purchase of Receivables generated
by Seller and the Related Assets of Seller, shall be deemed to have certified,
with respect to the Receivables and Related Assets to be sold by it on such day,
that its representations and warranties contained in Article V (excluding, with
respect to any day after the Effective Date, Section 5.1(i)) are true and
correct on and as of such day, with the same effect as though made on and as of
such day.
SECTION 4.3 Effect of Payment of Purchase Price. Upon the payment of
the Purchase Price (whether in cash or by an increase in the WPS Finco Note
pursuant to Section 3.1) for any Purchase, title to the Receivables and the
Related Assets included in such Purchase shall rest in WPS Finco, whether or not
the conditions precedent to such Purchase were in fact satisfied; provided,
however, that WPS Finco shall not be deemed to have waived any claim it may have
under this Purchase Agreement for the failure by Seller in fact to satisfy any
such condition precedent.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of Seller. In order to
induce WPS Finco to enter into this Purchase Agreement and to make purchases
hereunder, Seller hereby makes the representations and warranties set forth in
this Section 5.1 at the times and to the extent set forth in Section 4.2.
(a) Organization and Good Standing. Seller is a corporation
duly organized and validly existing in good standing under the laws of
the State of Delaware and has full power and authority to own its
properties and to conduct its business as such properties are presently
owned and such business is presently conducted. Seller had at all
relevant times, and now has, all necessary power, authority, and legal
right to own and sell the Receivables and the Related Assets.
(b) Due Qualification. Seller is duly qualified to do business
and is in good standing as a foreign corporation (or is exempt from
such requirement), and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of
property or the conduct of its business requires such qualification,
licenses or approvals and where the failure so to qualify, to obtain
such licenses and approvals or to preserve and maintain such
qualification, licenses or approvals could reasonably be expected to
have a Material Adverse Effect.
(c) Power and Authority; Due Authorization. Seller has (i) all
necessary corporate power and authority to (A) execute and deliver this
Purchase Agreement and the other Transaction Documents to which it is a
party, (B) perform its obligations under this Purchase Agreement and
the other Transaction Documents to which it is a party, and (C) sell
and assign Receivables and the Related Assets on the terms and subject
to the conditions herein and therein provided, (ii) duly authorized by
all necessary corporate action such sale and assignment and the
execution, delivery, and performance of this Purchase Agreement and the
other Transaction Documents to which it is a party and the consummation
of the transactions provided for in this Purchase Agreement and the
other Transaction Documents to which it is a party and (iii) duly
executed and delivered this Purchase Agreement and each other
Transaction Document to which it is a party.
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(d) Valid Sale; Binding Obligations. Each sale made by Seller
pursuant to this Purchase Agreement constitutes a valid sale, transfer,
and assignment of all of Seller's right, title and interest in, to and
under the Receivables and the Related Assets of Seller to WPS Finco
which is perfected and of first priority under the UCC and otherwise,
enforceable against creditors of, and purchasers from, Seller and free
and clear of any Adverse Claim (other than any Adverse Claim arising
solely as a result of any action taken by WPS Finco hereunder (or by
the Administrator on behalf of Blue Ridge under the Asset Interest
Transfer Agreement); and this Purchase Agreement constitutes, and each
other Transaction Document to which Seller is a party constitutes, a
legal, valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(e) No Conflict or Violation. The execution, delivery and
performance of, and the consummation of the transactions contemplated
by, this Purchase Agreement and the other Transaction Documents to be
signed by Seller and the fulfillment of the terms hereof and thereof
will not (i) conflict with, violate, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse
of time or both) a default under, (A) the Certificate of Incorporation
or the Bylaws of Seller or (B) any indenture, loan agreement,
receivables purchase agreement, mortgage, deed of trust, or other
material agreement or instrument to which Seller is a party or by which
it or any of its properties is bound, (ii) result in the creation or
imposition of any Adverse Claim upon any of the Receivables or Related
Assets other than pursuant to this Purchase Agreement and the other
Transaction Documents, or (iii) conflict with or violate any federal,
state, local or foreign law or any decision, decree, order, rule, or
regulation applicable to Seller or any of its properties of any court
or of any federal, state, local or foreign regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over Seller or any of its properties, which conflict,
violation, breach or default, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(f) Litigation and Other Proceedings. Except as described in
Schedule 5.1(f) (as Schedule 5.1(f) may be
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amended or supplemented from time to time pursuant to Section 6.2(e)),
(i) there is no action, suit, proceeding or investigation pending or,
to the best knowledge of Seller, threatened against Seller before any
court, regulatory body, arbitrator, administrative agency, or other
tribunal or governmental instrumentality and (ii) Seller is not subject
to any order, judgment, decree, injunction, stipulation or consent
order of or with any court or other government authority, that, in the
case of each of the foregoing clauses (i) and (ii), (A) asserts the
invalidity of this Purchase Agreement or any other Transaction
Document, (B) seeks to prevent the sale of any Receivables or Related
Assets by Seller to WPS Finco, or the consummation of any of the
transactions contemplated by this Purchase Agreement or any other
Transaction Document (C) seeks any determination or ruling that would
materially and adversely affect the performance by Seller of its
obligations under this Purchase Agreement or any other Transaction
Document or the validity or enforceability of this Purchase Agreement
or any other Transaction Document, (D) seeks to affect adversely the
income tax attributes of the purchases hereunder or the Seller
Assignment Certificate, in the case of each of the foregoing whether
under the United States federal income tax system or any state income
tax system, or (E) individually or in the aggregate for all such
actions, suits, proceedings and investigations, could reasonably be
expected to have a Material Adverse Effect.
(g) Bulk Sales Act. No transaction contemplated by this
Purchase Agreement or any other Transaction Document requires
compliance with, or will be subject to avoidance under, any bulk sales
act or similar law.
(h) Government Approvals. All authorizations, consents, orders
and approvals of, or other action by, any Governmental Authority that
are required to be obtained by Seller, and all notices to and filings
with any Governmental Authority that are required to be made by Seller,
in the case of each of the foregoing in connection with the conveyance
of Receivables and Related Assets or the due execution, delivery and
performance by Seller of this Purchase Agreement or any other
Transaction Document to which it is a party, and the consummation of
the transactions contemplated by this Purchase Agreement, have been
obtained or made and are in full force and effect, except where the
failure to obtain or to make any such authorization, consent, order,
approval, notice or filing, individually or in the aggregate for all
such failures, could not reasonably be expected to have a Material
Adverse Effect.
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(i) Financial Condition. WestPoint Stevens Inc. hereby
represents that its consolidated balance sheets as at December 31,
1997, and the related statements of income and shareholders' equity of
WestPoint Stevens Inc. and its Consolidated Subsidiaries for the fiscal
year then ended certified by, Ernst & Young, LLP, independent certified
public accountants, copies of which have been furnished to WPS Finco,
fairly present the consolidated financial condition and business of
WestPoint Stevens Inc. and its Consolidated Subsidiaries as at such
date and the consolidated results of the operations of WestPoint
Stevens and its Consolidated Subsidiaries for the period ended on such
date, all in accordance with GAAP consistently applied throughout the
periods reflected therein, and since December 31, 1997 through the date
of this Purchase Agreement there has been no material adverse change in
the condition (financial or otherwise), business or operations of
Seller;
(j) Margin Regulations. No funds obtained by Seller under this
Purchase Agreement will be used (i) for a purpose that violates or will
conflict with or contravene any of Regulations T, U and X promulgated
by the Board of Governors of the Federal Reserve System from time to
time or (ii) to acquire any security in any transaction that is subject
to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(k) Quality of Title.
(i) Immediately before each purchase to be made by
WPS Finco hereunder, each Receivable and Related Asset of
Seller which is then to be transferred to WPS Finco hereunder
or thereunder, and the related Contracts, shall be owned by
Seller free and clear of any Adverse Claim (other than any
Adverse Claim arising solely as the result of any action taken
by WPS Finco hereunder or by the Administrator on behalf of
Blue Ridge under the Asset Interest Transfer Agreement); and
Seller shall have made all filings and shall have taken all
other action under applicable law in each relevant
jurisdiction in order to protect and perfect the ownership
interest of WPS Finco and its successors in such Receivables
and Related Assets against all creditors of, and purchasers
from, Seller.
(ii) Whenever WPS Finco makes a purchase hereunder,
it shall have acquired and shall at all times thereafter
continuously maintain a valid and perfected first priority
ownership interest in each Transferred Asset, free and clear
of any Adverse Claim
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(other than any Adverse Claim arising solely as the result of
any action taken by WPS Finco hereunder or by the
Administrator on behalf of Blue Ridge under the Asset Interest
Transfer Agreement).
(iii) No currently effective financing statement or
other instrument similar in effect that covers all or part of
any Receivable, any interest therein or any Related Asset with
respect thereto is on file in any recording office except such
as may be filed (A) in favor of Seller in accordance with the
Contracts, (B) in favor of WPS Finco pursuant to this Purchase
Agreement and, (C) in favor of the Administrative Agent for
the benefit of Blue Ridge, in accordance with the Asset
Interest Transfer Agreement.
(iv) No purchase of an interest in any Receivable or
Related Asset of Seller by WPS Finco from Seller constitutes a
fraudulent transfer or fraudulent conveyance under the United
States Bankruptcy Code or applicable state bankruptcy or
insolvency laws or is otherwise void or voidable or subject to
subordination under similar laws or principles or for any
other reason.
(v) The purchase of Receivables and Related Assets by
WPS Finco from Seller constitutes a true and valid sale of
such Receivables and Related Assets under applicable state law
and true and valid assignments and transfers for consideration
(and not merely a pledge of such Receivables and Related
Assets for security purposes), enforceable against the
creditors of Seller, and no Receivables or Related Assets
transferred to WPS Finco hereunder shall constitute property
of Seller.
(l) Eligible Receivables. On the date of each Monthly Report
which identifies a Receivable as an Eligible Receivable, such
Receivable is an Eligible Receivable.
(m) Accuracy of Information. All written information furnished
prior to, on and after the Effective Date by Seller or any other WPS
Person to WPS Finco, the Servicer or the Administrative Agent pursuant
to or in connection with any Transaction Document or any transaction
contemplated herein or therein shall not contain any untrue statement
of a material fact or omit to state material facts necessary to make
the statements made not misleading, in each case on the date such
statement was made and in light of the circumstances under which such
statements were made or such information was furnished.
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(n) Offices. The principal place of business and chief
executive office of Seller is located at the address set forth under
Seller's signature hereto, and the offices where Seller keeps all
Records and all Contracts, purchase orders and agreements related to
the Receivables and the Related Assets (and all original documents
relating thereto) are located at the addresses specified in Schedule
5.1(n) (or at such other locations, notified to the Servicer and the
Administrative Agent in accordance with Section 6.1(f), in
jurisdictions where all action required pursuant to Section 7.3 has
been taken and completed).
(o) Lock-Box Banks and Payment Instructions. The names and
addresses of all Lock-Box Banks and the Concentration Bank, together
with the account numbers of the Lock-Box Accounts and the Concentration
Account at such Lock-Box Banks or Concentration Bank (as applicable)
are accurately identified on Schedule 5.1(o) hereto and will be
specified in such notices as shall have been delivered thereafter
pursuant to Section 6.3(c). Each lock-box identified on Schedule 5.1(o)
is subject to a Lock-Box/Collection Account Agreement that is in full
force and effect and exclusive dominion and control of each such
lock-box has been transferred to WPS Finco. Seller has not granted any
Person, other than WPS Finco as contemplated by this Purchase
Agreement, any currently effective right of dominion and control of any
such lock-box or Lock-Box Account or the Concentration Account, or the
right to take dominion and control of any such lock-box or Lock-Box
Account or the Concentration Account at a future time or upon the
occurrence of a future event. Seller has instructed all Obligors to
submit all payments on the Receivables and Related Assets directly to
one of the LockBox Accounts. Seller has and maintains accounting,
administrative and operating procedures that permit identification of
the Collections.
(p) Compliance with Applicable Laws. Seller is in compliance
in all respects with the requirements of all applicable laws, rules,
regulations, and orders of all Governmental Authorities (federal,
state, local or foreign, and including environmental laws), a violation
of any of which, individually or in the aggregate for all such
violations, could reasonably be expected to have a Material Adverse
Effect.
(q) Legal Names. During the past five years (i) Seller has not
been known by or used any legal name other than its corporate name as
of the date hereof, and (ii) Seller has not been the subject of any
merger or other
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corporate reorganization that resulted in a change of name, identity or
corporate structure. Seller uses no trade names or assumed names other
than its actual corporate name and the trade names and assumed names
set forth in Schedule 5.1(q).
(r) Investment Company Act. Seller is not, and is not
controlled by, an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended.
(s) Taxes. Seller has filed or caused to be filed all material
tax returns and reports required by law to have been filed by it and
has paid all taxes, assessments and governmental charges thereby shown
to be owing, except any such taxes, assessments or charges (i) which
are being diligently contested in good faith by appropriate
proceedings, (ii) for which adequate reserves in accordance with GAAP
shall have been set aside on its books and (iii) with respect to which
no Lien has been imposed upon any Receivables or Related Assets.
(t) Year 2000 Compliance. Seller has conducted a review and
assessment of its and its Subsidiaries' computer applications and made
inquiry of its key suppliers, vendors and customers with respect to the
Year 2000 Problem and, based on that review and inquiry, Seller
reasonably believes that the Year 2000 Problem will not result in a
Material Adverse Effect.
(u) Compliance with Credit and Collection Policy. With respect
to each Receivable, the Seller has complied in all material respects
with the Credit and Collection Policy.
(v) Payments to Seller. With respect to each Receivable
transferred to WPS Finco by Seller pursuant to this Purchase Agreement,
Seller represents that the Purchase Price paid to it constitutes
reasonably equivalent value in consideration for the Receivables
originated by it and the Related Assets with respect thereto and such
transfer was not made for or on account of antecedent debt.
(w) Ownership of WPS Finco. Seller owns, directly or
indirectly, 100% of the issued and outstanding capital stock of WPS
Finco, free and clear of any Adverse Claim. Such capital stock is
validly issued, fully paid and nonassessable, and there are no options,
warrants or other rights to acquire securities of WPS Finco.
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(x) Material Agreements. The Agreements listed on Schedule A
to the opinion of Weil, Gotshal & Manges LLP of even date herewith are
all of the agreements relating to the financing of the Seller.
(y) Pay-Off of Previous Securitization. WestPoint Stevens
Inc., in its capacity as servicer under the Amended and Restated
Pooling and Servicing Agreement, dated as of December 10, 1993 and
amended and restated as of May 27, 1994, by and among WPS Finco,
WestPoint Stevens, Inc., as servicer, and The Chase Manhattan Bank, as
successor in interest to Chemical Bank, as trustee, has computed the
amounts necessary to satisfy in full all obligations due thereunder and
under the related transaction documents in order to provide for the
termination of such agreement and the trust created thereby (including,
without limitation, all fees, expenses and prepayment premiums) and
such computation is true and correct.
SECTION 5.2 Representations and Warranties of WPS Finco. From the date
hereof until the Purchase Termination Date, WPS Finco hereby represents and
warrants that (a) (i) this Purchase Agreement has been duly executed and
delivered by WPS Finco and (ii) constitutes WPS Finco's valid, binding and
legally enforceable obligation, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law, and (b) the execution, delivery and performance of this
Purchase Agreement does not violate any applicable law or any agreement to which
WPS Finco is a party or by which its properties are bound.
ARTICLE VI
GENERAL COVENANTS OF SELLER
SECTION 6.1 Affirmative Covenants. From the Effective Date until the
first day following the Purchase Termination Date on which all Obligations of
Seller shall have been finally and fully paid and performed and the Transferee's
Total Investment shall have been reduced to zero, unless WPS Finco shall
otherwise give its prior written consent, Seller hereby agrees that it will
perform the covenants and agreements set forth in this Section 6.1.
(a) Compliance with Laws, Etc. Seller will comply with all
applicable laws, rules, regulations, judgments, decrees and orders
(including those relating to the
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Receivables, the Related Assets, the related Contracts and any other
agreements related thereto), where the failure so to comply,
individually or in the aggregate for all such failures, could
reasonably be expected to have a Material Adverse Effect.
(b) Preservation of Corporate Existence. Seller will preserve
and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its incorporation, and qualify and remain
qualified in good standing as a foreign corporation in each
jurisdiction where the failure to preserve and maintain such existence,
rights, franchises, privileges and qualifications could reasonably be
expected to have a Material Adverse Effect.
(c) Receivables Reviews. Seller shall, during regular business
hours upon not less than five Business Days' prior notice (unless a
Liquidation Event has occurred and is continuing (or the Administrator,
on Blue Ridge's behalf, reasonably believes in good faith that a
Liquidation Event has occurred and is continuing), in which case one
Business Day notice shall be required), permit WPS Finco or the
Administrator and their respective agents or representatives, (i) to
examine and make copies of and abstracts from, and to conduct
accounting reviews of, all Records in the possession or under the
control of Seller relating to the Receivables or Related Assets
generated by Seller, and (ii) to visit the offices and properties of
Seller for the purpose of examining such materials described in clause
(i) next above, and to discuss matters relating to any Receivables or
any Related Assets of Seller or Seller's performance hereunder with any
of the Authorized Officers of Seller or, with the prior consent of an
Authorized Officer of Seller, with employees of Seller having knowledge
of such matters (the examinations set forth in the foregoing clauses
(i) and (ii) being herein called a "Seller Receivables Review"). WPS or
the Administrator Finco and its agents or representatives shall be
entitled to conduct Seller Receivables Reviews whenever WPS Finco, in
its reasonable judgment, deems a Seller Receivables Review appropriate.
The costs and expenses of one such Seller Receivables Review in any one
calendar year shall be paid by Seller, and the costs and expenses of
any additional Seller Receivables Review during such calendar year
shall be paid by WPS Finco unless a Liquidation Event shall have
occurred and be continuing.
(d) Keeping of Records and Books of Account. Seller shall
maintain and implement administrative and operating procedures
(including, an ability to recreate records
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evidencing its Receivables and Related Assets in the event of the
destruction of the originals thereof), and shall keep and maintain, all
documents, books, records and other information which, in the
reasonable determination of WPS Finco and the Administrator, are
necessary or advisable in accordance with prudent industry practice and
custom for transactions of this type for the collection of all
Receivables and the Related Assets. Upon the request of WPS Finco or
the Administrator made at any time after the occurrence and continuance
of a Servicer Transfer Event, Seller will deliver copies of all books
and records maintained pursuant to this Section 6.1(d) to the
Administrator. Seller shall maintain at all times accurate and complete
books, records and accounts relating to the Receivables, Related Assets
and Contracts and all Collections thereon in which timely entries shall
be made. Such books and records shall be marked to indicate the sales
of all Receivables and Related Assets hereunder and shall include (i)
all payments received and all credits and extensions granted with
respect to such Receivables and (ii) the return, rejection,
repossession, or stoppage in transit of any merchandise, the sale of
which has given rise to a Receivable that has been purchased by WPS
Finco.
(e) Performance and Compliance with Receivables and Contracts.
Seller will, at its expense, timely and fully perform and comply with
all provisions, covenants and other promises required to be observed by
it under the Contracts and all other agreements of Seller related to
the Receivables and Related Assets, the breach of which provisions,
covenants or promises could be reasonably expected to have a Material
Adverse Effect.
(f) Location of Records and Offices. Seller will keep its
principal place of business and chief executive office, and the offices
where it keeps all Records related to the Receivables and the Related
Assets (and all original documents relating thereto), at the addresses
referred to in Schedule 5.1(n) or, upon not less than 30 days' prior
written notice given by Seller to WPS Finco, and the Administrator, at
such other locations in jurisdictions where all action required by
Section 7.3 shall have been taken and completed.
(g) Credit and Collection Policies. Seller will comply in all
material respects with its Credit and Collection Policy in regard to
each Receivable of Seller and the Related Assets and the Contracts
related to each such Receivable, where the failure so to comply,
individually or
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in the aggregate for all such failures, could reasonably be expected to
have a Material Adverse Effect.
(h) Separate Corporate Existence of WPS Finco. Seller hereby
acknowledges that the Administrator, on behalf of Blue Ridge, is
entering into the transactions contemplated by the Asset Interest
Transfer Agreement in reliance upon WPS Finco's identity as a legal
entity separate from Seller and the other WPS Persons. Therefore, from
and after the date hereof until the first day following the Purchase
Termination Date on which all Obligations of Seller shall have been
fully paid and performed and the Transferee's Total Investment shall
have been reduced to zero, Seller will, and will cause each other WPS
Person to, take all reasonable steps to continue their respective
identities as separate legal entities and to make it apparent to third
Persons that each is an entity with assets and liabilities distinct
from those of WPS Finco and that WPS Finco is not a division of the
Servicer, Seller or any other Person.
(i) Payment Instructions to Obligors. Seller will instruct all
Obligors to submit all payments on all Receivables and Related Assets
purchased by WPS Finco either (i) directly to one of the Lock-Box
Accounts or (ii) directly to the Concentration Account. Seller will
cause (i) all proceeds deposited directly to any Lock-Box Account to be
transferred daily to the Concentration Account, and (ii) each such
lock-box and Lock-Box Account and the Concentration Account to be
subject at all times to a Lock- Box/Collection Account Agreement that
is in full force and effect. Seller shall not grant any Person, other
than WPS Finco or the Administrator, dominion and control of any such
lock-box or Lock-Box Account or the Concentration Account, or the right
to take dominion or control of any lock-box or Lock-Box Account or the
Concentration Account at a future time or upon the occurrence of a
future event. Seller shall maintain accounting, administrative and
operating procedures that permit identification of the Collections.
(j) Taxes. Seller will file all tax returns and reports
required by law to be filed by it, will accrue in accordance with GAAP
for all taxes payable by it and will pay all taxes and governmental
charges shown on such tax returns and reports to be owing by it, prior
to the date on which penalties attach thereto except any such taxes or
charges which (i) are being diligently contested in good faith by
appropriate proceedings, (ii) for which adequate reserves in accordance
with GAAP have been set aside on their respective books and (iii) with
respect to which no
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Lien has been imposed upon any Receivables or Related Assets.
(k) Reserved
(l) Identification of Eligible Receivables. Seller will
establish and maintain such procedures as are necessary for determining
monthly whether each Receivable qualifies as an Eligible Receivable as
of the date of Purchase and thereafter as of each Reporting Date, and
for identifying all Receivables sold or to be sold in that month which
are not Eligible Receivables.
(m) Accuracy of Information. All written information furnished
on and after the Effective Date by Seller or any other WPS Person to
WPS Finco, the Servicer or the Administrator pursuant to or in
connection with any Transaction Document or any transaction
contemplated herein or therein shall not contain any untrue statement
of a material fact or omit to state material facts necessary to make
the statements made not misleading, in each case on the date such
statement was made and in light of the circumstances under which such
statements were made or such information was furnished.
(n) Year 2000 Compliance. Seller will use its best efforts to
meet the milestones contained in its Year 2000 Plan and will use its
best efforts to have all of its and its Subsidiaries hardware and
software systems Year 2000 Compliant and Ready (including all internal
and external testing) on or before June 30, 1999.
(o) Ownership Interest of WPS Finco. Seller shall take all
necessary action to establish and maintain, in favor of WPS Finco or
its assigns, a valid and perfected first priority undivided percentage
ownership interest in all Receivables and the Related Assets to the
full extent contemplated herein, free and clear of any Adverse Claims
other than Adverse Claims in favor of WPS Finco or its assigns
(including, without limitation, the filing of all financing statements
or other similar instruments or documents necessary under the UCC of
all appropriate jurisdictions (or any comparable law) to perfect WPS
Finco's or its assign's interest in such Receivables and Related Assets
and such other action to perfect, protect or more fully evidence the
interest of WPS Finco or its assigns as WPS Finco or its assigns may
reasonably request).
SECTION 6.2 Reporting Requirements. From the Effective Date until the
first day following the Purchase Termination Date
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on which all Obligations of Seller shall have been finally and fully paid and
performed and the Transferee's Total Investment shall have been reduced to zero,
Seller agrees that it will, unless WPS Finco and the Administrator, on behalf of
Blue Ridge, shall otherwise give prior written consent, furnish to WPS Finco and
the Administrator:
(a) Quarterly Financial Statements. Within 50 days after the
end of each of the first three fiscal quarters of each fiscal year of
WestPoint Stevens, copies of the unaudited consolidated balance sheets
of WestPoint Stevens and its Consolidated Subsidiaries as at the end of
such fiscal quarter and the related unaudited statements of earnings
and cash flows and stockholders' equity, in each case for such fiscal
quarter and for the period from the beginning of such fiscal year
through the end of such fiscal quarter, prepared in accordance with
GAAP consistently applied throughout the periods reflected therein and
certified (subject to year end adjustments) by the chief financial
officer or chief accounting officer of WestPoint Stevens;
(b) Annual Financial Statements. As soon as possible and in
any event within 95 days after the end of each fiscal year of WestPoint
Stevens, a copy of the consolidated balance sheet of WestPoint Stevens
and its Consolidated Subsidiaries as at the end of such fiscal year and
the related statements of earnings, stockholders' equity and cash flows
of WestPoint Stevens and its Consolidated Subsidiaries for such fiscal
year, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year and prepared in accordance with
GAAP consistently applied throughout the periods reflected therein,
accompanied by an opinion of Ernst & Young, LLP, (or such other
independent certified public accountants of a nationally recognized
standing in the United States of America as shall be selected by
Administrator), which opinion shall not be qualified in any material
respect;
(c) Liquidation Events. As soon as possible, and in any event
within three Business Days after an Authorized Officer of Seller has
obtained knowledge of the occurrence of any Liquidation Event or any
Unmatured Liquidation Event, a written statement of an Authorized
Officer of Seller describing such event and the action that Seller
proposes to take with respect thereto, in each case in reasonable
detail;
(d) Material Adverse Effect. As soon as possible and in any
event within three Business Days after an Authorized Officer of Seller
has knowledge thereof, written notice that describes in reasonable
detail any event or occurrence which, individually or in the aggregate
for all such events or occurrences, has had, or that could reasonably
be expected to have a Material Adverse Effect;
(e) Proceedings. As soon as possible and in any event within
five Business Days after an Authorized
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Officer of Seller has knowledge thereof, written notice of (i) any
litigation, investigation or proceeding of the type described in
Section 5.1(f) not previously disclosed to WPS Finco and (ii) any
judgment, settlement or other final disposition with respect to any
such previously disclosed litigation, investigation or proceeding;
(f) Reserved
(g) Year 2000 Notices. Seller will deliver to WPS Finco:
i. Simultaneously with the delivery of each set of
annual and quarterly financial statements referred to
in subsections (a) and (b) above, a statement of the
chief executive officer, chief financial officer,
controller, treasurer, assistant treasurer or chief
technology officer to the effect that nothing has
come to their attention to cause them to believe that
Seller's Year 2000 Plan milestones have not been met
in a manner such that Seller's and its Subsidiaries'
hardware and software systems will not be Year 2000
Compliant and Ready in accordance with its Year 2000
Plan; and
ii. Within five (5) Business Days after Seller
becomes aware of any deviations from its Year 2000
Plan which would cause compliance with such Year 2000
Plan to be delayed or not achieved, a statement of
the chief executive officer, chief financial officer,
controller, treasurer, assistant treasurer or chief
technology officer setting forth the details thereof
and the action which Seller is taking or proposes to
take with respect thereto.
(h) Reports to Holders and Exchanges. In addition to the
reports required by subsections (a), and (b) above, promptly upon WPS
Finco's request, Seller will furnish to WPS Finco copies of any reports
specified in such request which Seller sends to any of its
securityholders, and any
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reports or registration statements that Seller files with the
Securities and Exchange Commission or any national securities exchange
other than registration statements relating to employee benefit plans
and to registrations of securities for selling securities,
(i) ERISA. Promptly after the filing or receiving thereof,
Seller will furnish to WPS Finco copies of all reports and notices with
respect to any Reportable Event defined in Article IV of ERISA which
Seller or any of its Subsidiaries files under ERISA with the Internal
Revenue Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which Seller or any of its Subsidiaries receives
from the Pension Benefit Guaranty Corporation,
(j) Review of Pool Receivables. As soon as available and in
any event by the end of each fiscal year of Seller, Seller will furnish
to WPS Finco a report, prepared by a Person reasonably acceptable to
WPS Finco as of the end of such fiscal year, substantially in the form
of the report delivered pursuant to Section 5.01(l) of the Asset
Interest Transfer Agreement and covering such other matters as WPS
Finco may reasonably request in order to protect the interests of WPS
Finco under or as contemplated by this Purchase Agreement; provided
that Seller shall not be required to furnish a report pursuant to this
Section 6.2(i) for its fiscal year ending December 31, 1999 unless the
Scheduled Maturity Date shall have been extended during such year
pursuant to Section 1.06 of the Asset Interest Transfer Agreement;
(k) Change in Business or Credit and Collection Policy. At
least ten (10) Business Days prior to its effective date, Seller will
furnish to WPS Finco notice of (i) any material change in the character
of Seller's business, and (ii) any material change in the Credit and
Collection Policy;
(l) Ratings. Within one Business Day of obtaining knowledge
thereof, Seller will furnish to WPS Finco notice of any downgrading or
withdrawal of any rating of Seller's senior secured debt by any rating
agency; and
(m) Other. Promptly, from time to time, (i) such other
information, documents, records or reports respecting the Receivables
or the Related Assets or (ii) such other publicly available information
respecting the condition or operations, financial or otherwise, of
Seller, in each case as WPS Finco may from time to time reasonably
request in
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order to protect the interests of WPS Finco, the Administrative Agent
or Blue Ridge under or as contemplated by this Purchase Agreement.
SECTION 6.3 Negative Covenants. From the Effective Date until the first
day following the Purchase Termination Date on which all Obligations of Seller
shall have been finally and fully paid and performed and the Transferee's Total
Investment shall have been reduced to zero, unless WPS Finco and the
Administrator shall otherwise give their prior written consent (which consent
shall not be unreasonably withheld or delayed), Seller hereby agrees that it
will perform the covenants and agreements set forth in this Section 6.3.
(a) Sales, Liens, Etc. Except as otherwise provided herein or
in the Asset Interest Transfer Agreement, Seller will not (i) (A) sell,
assign (by operation of law or otherwise) or otherwise transfer to any
Person, (B) pledge any interest in, (C) grant, create, incur, assume or
permit to exist any Adverse Claim to or in favor of any Person upon or
with respect to, or (D) cause to be filed any financing statement or
equivalent document relating to perfection that covers, any Transferred
Asset or any Contract related to any Receivable, or upon or with
respect to any Lock-Box Account or Concentration Account or any
interest therein, (ii) assign to any Person any right to receive income
from or in respect of any of the foregoing or (iii) assert any interest
in any Transferred Receivable or any Contract relating to any
Receivable, except as Servicer.
In the event that Seller fails to keep any Transferred Assets
free and clear of any Adverse Claim (other than Adverse Claims arising
hereunder or under the Asset Interest Transfer Agreement, and other
Adverse Claims permitted by any other Transaction Document), WPS Finco
may (without limiting its other rights with respect to Seller's breach
of its obligations hereunder) make reasonable expenditures necessary to
release such Adverse Claim. WPS Finco shall be entitled to
indemnification for any such expenditures pursuant to the
indemnification provisions of Article IX. Alternatively, WPS Finco may
deduct such expenditures as an offset to the Purchase Price owed to
Seller hereunder.
(b) Extension or Amendment of Receivables; Change in Credit
and Collection Policy or Contracts. Seller will not extend, amend or
otherwise modify the terms of any Receivable or Contract in a manner
that materially adversely affects the collectibility of any Receivable
or WPS Finco's or the Administrator's rights therein (except in its
capacity as Servicer and then only to the extent permitted
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under Section 8.02(c) of the Asset Interest Transfer Agreement) or (ii)
make or permit to be made any change in the character of its business
or in the Credit and Collection Policy that would, in either case,
impair the collectibility of any significant portion of the Receivables
or otherwise adversely affect the interests or remedies of WPS Finco's
or the Administrator's rights therein unless with respect to any
material change in accounting policies relating to Receivables, such
change is made in accordance with GAAP.
(c) Change in Payment Instructions to Obligors. Seller will
not (i) add or terminate any bank as a Lock-Box Bank from those listed
on Schedule 5.1(o) unless, prior to any such addition, termination or
change WPS Finco and the Administrator shall have received not less
than ten Business Days' prior written notice of such addition or
termination and, not less than ten Business Days prior to the effective
date of any such proposed addition, change or termination, WPS Finco
and the Administrator shall have received (A) counterparts of the
applicable type of Lock-Box/Collection Account Agreement with each new
Lock-Box Bank, duly executed by such new Lock-Box Bank and all other
parties thereto and (B) copies of all other agreements and documents
signed by such Lock-Box Bank and such other parties with respect to any
new Lock-Box Account, all of which agreements and documents shall be
reasonably satisfactory in form and substance to WPS Finco and the
Administrator, or (ii) make any change in its instructions to Obligors,
given in accordance with Section 5.1(o), regarding payments to be made
to Seller or payments to be made to any Lock-Box Bank or the
Concentration Account, other than changes in such instructions which
direct Obligors to make payments to another Lock-Box Account or
Concentration Account (as applicable) at such Lock-Box or Concentration
Bank.
(d) Mergers, Consolidations, Sales, etc. Except for mergers or
consolidations permitted by the Credit Agreement, Seller will not be a
party to any merger or consolidation or, except as permitted by the
Credit Agreement, purchase, lease or otherwise acquire (in one
transaction or in a series of transactions) all or substantially all of
the assets of any other Person (whether directly by purchase, lease or
acquisition of all or substantially all of the assets of such Person or
indirectly by purchase or other acquisition of all or substantially all
of the capital stock of such other Person). Seller will give WPS Finco
and the Administrator notice of any such permitted merger or
consolidation promptly following completion thereof. Seller will not,
directly or indirectly, transfer, assign, convey
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or lease, whether in one transaction or in a series of transactions,
all or substantially all of its assets except as permitted by the
Credit Agreement, or sell or assign, with or without recourse, any
Receivables or Related Assets, in each case other than pursuant to this
Purchase Agreement.
(e) Change in Name. Seller will not (i) change its corporate
name, any trade name or corporate structure or (ii) change the name
under or by which it does business in any manner which would or may
make any financing statement filed by Seller in accordance herewith
seriously misleading within the meaning of Section 9-402(7) of an
applicable enactment of the UCC, in each case unless Seller shall have
given WPS Finco, the Servicer and the Administrator 30 days' prior
written notice thereof and unless, prior to any such change in name,
Seller shall have taken and completed all action required by Section
7.3.
(f) Certificate of Incorporation. Seller will not cause WPS
Finco to amend its Certificate of Incorporation or Bylaws without the
prior written consent of WPS Finco and the Administrator, which consent
will not be unreasonably withheld or delayed.
(g) Amendments to Transaction Documents. Seller will not amend
or otherwise modify or supplement any Transaction Document to which it
is a party unless WPS Finco and the Administrator shall have given its
prior written consent to each such amendment, modification or
supplement, which consent shall not be unreasonably withheld or
delayed.
(h) Accounting for Purchases. Seller shall prepare its
financial statements in accordance with GAAP. Seller shall not prepare
any financial statements which account for the transactions
contemplated in this Purchase Agreement in any manner other than as a
sale of the Purchased Assets by Seller to WPS Finco, or in any other
respect account for or treat the transactions contemplated in this
Purchase Agreement (including but not limited to accounting and, where
taxes are not consolidated, for tax reporting purposes) in any manner
other than as a sale of the Transferred Assets by Seller to WPS Finco.
(i) Receivables Not to be Evidenced by Promissory Notes.
Seller shall not take any action to cause or permit any Receivable to
become evidenced by any "instrument" (as defined in the applicable
UCC), except in connection with the collection of any such Receivable
which is overdue provided that the original of such instrument is
delivered to WPS Finco, duly endorsed.
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(j) Deposits to Lock-Box Accounts and Concentration account.
Seller shall not deposit or otherwise credit, or cause or permit to be
so deposited or credited, to any LockBox Account or Concentration
Account, any cash or cash proceeds other than Collections of
Receivables. To the extent that any such funds nevertheless are
deposited into any of such Lock-box Accounts or Concentration Account,
the Seller shall promptly identify any such funds, or shall cause such
funds to be so identified, to WPS Finco, the Servicer and the
Administrator (following which notice, WPS Finco shall cause the
Servicer to return all such funds to the Seller).
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE TRANSFERRED ASSETS
SECTION 7.1 Rights of WPS Finco.
(a) Subject to Section 7.4(b), Seller hereby authorizes WPS Finco, the
Servicer and/or their respective designees to take any and all steps in Seller's
name and on behalf of Seller that WPS Finco, the Servicer and/or their
respective designees determine are reasonably necessary or appropriate to
collect all amounts due under any and all Transferred Assets, including
endorsing the name of Seller on checks and other instruments representing
Collections and enforcing such Receivables and Related Assets.
(b) Except as set forth in Section 3.1(c) with respect to Noncomplying
Receivables and Dilution Adjustments to the Purchase Price, WPS Finco shall have
no obligation to account for, to replace, to substitute or to return any
Transferred Asset to Seller. WPS Finco shall have no obligation to account for,
or to return Collections, or any interest or other finance charge collected
pursuant thereto, to Seller, irrespective of whether such Collections and
charges are in excess of the Purchase Price for such Purchased Assets.
(c) WPS Finco shall have the unrestricted right to further assign,
transfer, deliver, hypothecate, subdivide or otherwise deal with the Transferred
Assets, and all of WPS Finco's right, title and interest in, to and under this
Purchase Agreement, on whatever terms WPS Finco shall determine, pursuant to the
Asset Interest Transfer Agreement or otherwise.
(d) WPS Finco shall have the sole right to retain any gains or profits
created by buying, selling or holding the Transferred
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Assets and shall have the sole risk of and responsibility for losses or damages
created by such buying, selling or holding.
SECTION 7.2 Responsibilities of Seller. Anything herein to the contrary
notwithstanding:
(a) Seller agrees to deliver directly to the Servicer (for WPS
Finco's account), within one Business Day after receipt thereof, any
Collections that it receives, in the form so received, and agrees that
all such Collections shall be deemed to be received in trust for WPS
Finco and shall be maintained and segregated separate and apart from
all other funds and moneys of Seller until delivery of such Collections
to the Servicer.
(b) Seller shall perform all of its obligations hereunder and
under the Contracts related to the Receivables and Related Assets to
the same extent as if such Receivables had not been sold hereunder, and
the exercise by WPS Finco or its designee or assignee of WPS Finco's
rights hereunder or in connection herewith shall not relieve Seller
from any of its obligations under the Contracts or Related Assets
related to the Receivables.
(c) Seller hereby grants to WPS Finco an irrevocable power of
attorney, with full power of substitution, coupled with an interest, to
take in the name of Seller all steps necessary or advisable to endorse,
negotiate or otherwise realize on any writing or other right of any
kind held or transmitted by Seller or transmitted or received by WPS
Finco (whether or not from Seller) in connection with any Transferred
Asset.
(d) To the extent that Seller does not own the computer
software that Seller uses to account for Receivables, Seller shall use
reasonable efforts to provide WPS Finco and the Administrator with such
licenses, sublicenses and/or assignments of contracts as WPS Finco or
the Administrator shall require with regard to all services and
computer hardware or software used by Seller that relate to the
servicing of the Receivables or the Related Assets.
SECTION 7.3 Further Action Evidencing Purchases. Seller agrees that
from time to time, at its expense, it will promptly, upon reasonable request,
execute and deliver all further instruments and documents, and take all further
action, in order to perfect, protect or more fully evidence the purchase by WPS
Finco of the Receivables and the Related Assets under this Purchase Agreement,
or to enable WPS Finco to exercise or enforce any of its rights hereunder or
under any other Transaction
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Document. Seller further agrees that from time to time, at its expense, it will
promptly, upon request, take all action that WPS Finco, the Servicer or the
Administrator may reasonably request in order to perfect, protect or more fully
evidence such purchase of the Receivables and the Related Assets or to enable
WPS Finco or the Administrator, on Blue Ridge's behalf (as the assignee of WPS
Finco), to exercise or enforce any of its rights hereunder or under any other
Transaction Document. Without limiting the generality of the foregoing, upon the
request of WPS Finco, Seller will:
(a) execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as WPS Finco or the Administrator may
reasonably determine to be necessary or appropriate; and
(b) place on its computer systems and records which store
information relating to and evidencing the Receivables the following
legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO WPS
RECEIVABLES CORPORATION PURSUANT TO A RECEIVABLES PURCHASE
AGREEMENT, DATED AS OF DECEMBER 18, 1998, BETWEEN WESTPOINT
STEVENS INC. AND WPS RECEIVABLES CORPORATION; AND SUCH
RECEIVABLES HAVE BEEN TRANSFERRED TO WACHOVIA BANK, N.A., AS
ADMINISTRATOR ON BEHALF OF BLUE RIDGE ASSET FUNDING
CORPORATION PURSUANT TO AN ASSET INTEREST TRANSFER AGREEMENT,
DATED AS OF DECEMBER 18, 1998, AMONG WPS RECEIVABLES
CORPORATION, AS TRANSFEROR, WESTPOINT STEVENS INC., AS INITIAL
SERVICER, BLUE RIDGE ASSET FUNDING CORPORATION, AS TRANSFEREE
AND WACHOVIA BANK, N.A., AS ADMINISTRATOR."
Seller hereby authorizes WPS Finco or its designee to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Receivables and Related Assets of Seller,
in each case whether now existing or hereafter generated by Seller. Except for
material performance obligations of Seller to any Obligor hereunder or under any
of the Contracts, if (i) Seller fails to perform any of its agreements or
obligations under this Purchase Agreement and does not remedy such failure
within the applicable cure period, if any, and (ii) WPS Finco in good faith
reasonably believes that the performance of such agreements and obligations is
necessary or appropriate to protect the interests of WPS Finco under this
Purchase Agreement, then WPS Finco or its designee may (but shall not be
required to) perform, or cause performance of,
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such agreement or obligation and the reasonable expenses of WPS Finco or its
designee or assignee incurred in connection with such performance shall be
payable by Seller as provided in Section 9.1.
SECTION 7.4 Collection of Receivables; Rights of WPS Finco and Its
Assignees.
(a) Seller hereby transfers to WPS Finco ownership of, and the
exclusive dominion and control over, each of the Lock-Box Accounts owned by
Seller, and Seller hereby agrees to take any further action that WPS Finco or
the Administrator (as assignee of WPS Finco) may reasonably request in order to
effect or complete such transfer.
(b) WPS Finco may, at any time, direct the Obligors of Receivables, or
any of them, to pay all amounts payable under any Transferred Asset directly to
the Administrator or its designees. Furthermore, Seller shall, at the request of
WPS Finco and at Seller's expense, promptly give notice of Blue Ridge's interest
in the Receivables of such Obligor and the Related Assets to each such Obligor
and direct that payments be made directly to the Administrator or its designee,
which notice shall be acceptable in form and substance to WPS Finco. In
addition, Seller hereby authorizes WPS Finco to take any and all steps in
Seller's name and on behalf of Seller that are necessary or desirable, in the
reasonable determination of WPS Finco, to collect all amounts due under any and
all Transferred Assets, including endorsing Seller's name on checks and other
instruments representing Collections and enforcing the Receivables, Related
Assets and the Contracts related to such Receivables. The Administrator, on Blue
Ridge's behalf, may exercise any of the foregoing rights in the place of WPS
Finco (as assignee or otherwise) at any time following the designation of a
Servicer other than WestPoint Stevens pursuant to Section 8.01 of the Asset
Interest Transfer Agreement or the occurrence and continuance of a Liquidation
Event.
(c) At any time when (i) a Liquidation Event shall have occurred and
remain continuing or (ii) a Servicer other than WestPoint Stevens has been
designated pursuant to Section 8.01 of the Asset Interest Transfer Agreement,
Seller shall, at WPS Finco's request, assemble all of the Records which evidence
the Receivables and Related Assets originated by Seller and the Contracts
related to such Receivables, or which are otherwise necessary or desirable to
collect such Receivables or Related Assets, and make the same available to WPS
Finco or the Administrator at a place selected by the Administrator or its
designee.
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ARTICLE VIII
TERMINATION
SECTION 8.1 Termination by Seller. Prior to the Termination Date,
Seller may terminate its agreement to sell Receivables hereunder to WPS Finco by
giving WPS Finco and the Administrator not less than thirty Business Days' prior
written notice of Seller's election not to continue to sell Receivables to WPS
Finco. Upon receipt of a termination notice from Seller, WPS Finco shall notify
the Administrator and Blue Ridge that it is electing to reduce the Transferee's
Total Investment to zero pursuant to Section 3.02 of the Asset Interest Transfer
Agreement as early as is practicable. The sale of Receivables under this
Purchase Agreement will not cease until the Transferee's Total Investment shall
have been reduced to zero.
SECTION 8.2 Automatic Termination. The agreement of Seller to sell
Receivables hereunder, and the agreement of WPS Finco to purchase Receivables
from Seller hereunder, shall terminate automatically as a result of a bankruptcy
proceeding being filed by or against Seller or WPS Finco.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by Seller. Without limiting any other rights
which any RPA Indemnified Party (as defined below) may have hereunder or under
applicable law, Seller severally agrees to indemnify WPS Finco, each of its
successors, permitted transferees and assigns, and all officers, directors,
shareholders, controlling Persons, employees and agents of any of the foregoing
(each of the foregoing Persons being individually called a "RPA Indemnified
Party"), forthwith on demand, from and against any and all damages, losses,
claims (whether on account of settlements or otherwise), judgments, liabilities
and related reasonable costs and expenses (including reasonable attorneys' fees
and disbursements) awarded against or incurred by any of them arising out of or
as a result of any of the following (all of the foregoing being collectively
called "RPA Indemnified Losses"):
(a) any representation or warranty made in writing by Seller
(or any of its Authorized Officers) under or in connection with any of
the Transaction Documents, any Monthly Report or any other information
or report delivered by Seller or the Servicer (for so long as the
Servicer is a WPS Person) shall have been false, incorrect or
materially
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misleading when made or deemed made or omitted to state material facts
necessary to make the statements made not misleading;
(b) the failure by Seller to comply with any applicable law,
rule or regulation with respect to any Receivable or any Related Asset
or to comply with any Contract related thereto, or the nonconformity of
any Receivable, the related Contract or any Related Assets with any
such applicable law, rule or regulation;
(c) the failure to vest and maintain vested in WPS Finco and
its assigns a first priority perfected ownership interest in the
Receivables, the Related Assets, the related Collections and the
proceeds of each of the foregoing, free and clear of any Adverse Claim
(other than an Adverse Claim created in favor of WPS Finco pursuant to
this Purchase Agreement or in favor of the Administrator on behalf of
Blue Ridge pursuant to the Asset Interest Transfer Agreement), whether
existing at the time of the sale of such Receivable or at any time
thereafter;
(d) any failure of Seller to perform its duties or obligations
in accordance with the provisions of the Transaction Documents;
(e) any products liability claim, personal injury or property
damage suit, environmental liability claim or any other claim or action
by a party other than WPS Finco or a WPS Person of whatever sort,
whether sounding in tort, contract or any other legal theory, arising
out of or in connection with the goods or services that are the subject
of any Receivable or the Related Assets with respect thereto or
Collections thereof;
(f) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Receivables or the Related Assets or Collections, whether at the
time of any sale or at any subsequent time;
(g) any dispute, claim, offset or defense (other than the
discharge in bankruptcy) of an Obligor to the payment of any Receivable
or Related Asset, or Related Asset, including a defense based on such
Receivable's or the related Contract's not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms or any other claim resulting from the sale of the
merchandise or services related to such Receivable or the
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furnishing or failure to furnish such merchandise or services;
(h) any tax or governmental fee or charge (other than
franchise taxes and taxes on or measured by the net income of WPS Finco
or any of its assignees), all interest and penalties thereon or with
respect thereto, and all reasonable out-of-pocket costs and expenses,
including the reasonable fees and expenses of counsel in defending
against the same, which may arise by reason of the purchase or
ownership of the Receivables or any Related Asset connected with any
such Receivables or in any goods which secure any such Receivable or
Related Asset;
(i) any transfer by Seller of any interest in any Receivable
other than the transfer of Receivables and related property by the
Seller to WPS Finco pursuant to this Purchase Agreement; and
(j) any claim of breach by any Seller of any related
Contract with respect to any Receivable.
Notwithstanding the foregoing (and with respect to clause (ii) below, without
prejudice to the rights that WPS Finco may have pursuant to the other provisions
of this Purchase Agreement or the provisions of any of the other Transaction
Documents), in no event shall any RPA Indemnified Party be indemnified for any
RPA Indemnified Losses (i) resulting from gross negligence or willful misconduct
on the part of such RPA Indemnified Party, (ii) to the extent the same includes
losses in respect of Receivables and reimbursement therefor that would
constitute credit recourse to Seller for the amount of any Receivable or Related
Asset not paid by the related Obligor, (iii) resulting from the action or
omission of the Servicer (unless the Servicer is a WPS Person), (iv) to the
extent that the same are or result from lost profits (except to the extent any
such lost profits are incurred under Sections 4.02 or 4.03 of the Asset Interest
Transfer Agreement), (v) to the extent the same are or result from taxes on or
measured by the net income of such RPA Indemnified Party and (vi) to the extent
the same constitute consequential, special or punitive damages (except to the
extent any such consequential, special or punitive damages are actually imposed
on an RPA Indemnified Party as a result of a claim brought by a third party).
Section 9.2. Contribution. If for any reason the indemnification
provided in Section 9.1 is unavailable to a RPA Indemnified Party or is
insufficient to hold a RPA Indemnified Party harmless, then Seller shall
contribute to the maximum
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amount payable or paid to such RPA Indemnified Party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by such RPA Indemnified Party on the one
hand and Seller on the other hand, but also the relative fault of such RPA
Indemnified Party (if any) and Seller and any other relevant equitable
considerations.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc.
(a) The provisions of this Purchase Agreement may from time to time be
amended, modified or waived, if such amendment, modification or waiver is in
writing and signed by WPS Finco and Seller (with respect to an amendment) or by
WPS Finco (with respect to a waiver or consent by it) and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. This Purchase Agreement shall not be amended unless WPS
Finco shall have delivered the proposed amendment to the Administrative Agent at
least ten Business Days (or such shorter period as shall be acceptable to the
Administrative Agent) prior to the execution and delivery thereof.
(b) No failure or delay on the part of WPS Finco, any RPA Indemnified
Party, or the Administrative Agent or any other third party beneficiary referred
to in Section 10.12(a) in exercising any power or right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power
or right preclude any other or further exercise thereof or the exercise of any
other power or right. No notice to or demand on Seller in any case shall entitle
it to any notice or demand in similar or other circumstances. No waiver or
approval by WPS Finco or the Administrative Agent under this Purchase Agreement
shall, except as may otherwise be stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval under this Purchase
Agreement shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.
SECTION 10.2 Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
express mail or courier or by certified mail, postage prepaid, or by facsimile,
to the intended party at the address or facsimile number of such
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party set forth under its name on the signature pages hereof or at such other
address or facsimile number as shall be designated by such party in a written
notice to the other parties hereto given in accordance with this Section 10.2.
Copies of all notices and other communications provided for hereunder shall be
delivered to the Administrative Agent at its address for notices set forth in
the Asset Interest Transfer Agreement. All notices and communications provided
for hereunder shall be effective, (a) if personally delivered, or sent by
express mail or courier or if sent by certified mail, when received, and (b) if
transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means.
SECTION 10.3 Cumulative Remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. Without limiting
the foregoing, Seller hereby authorizes WPS Finco, at any time and from time to
time, to the fullest extent permitted by law, to set-off, against any
Obligations of WPS Finco to Seller that are then due and payable or that are not
then due and payable by WPS Finco to Seller but have then accrued, any and all
indebtedness or other obligations (i) at any time owing to WPS Finco by Seller
or (ii) that are not then due and payable from WPS Finco to Seller but have then
accrued.
SECTION 10.4 Binding Effect; Assignability; Survival of Provisions.
This Purchase Agreement shall be binding upon and inure to the benefit of WPS
Finco, Seller and their respective successors and permitted assigns. Seller may
not assign any of its rights hereunder or any interest herein without the prior
written consent of WPS Finco and of the Administrator (on Blue Ridge's behalf).
This Purchase Agreement shall create and constitute the continuing obligations
of the parties hereto in accordance with its terms, and shall remain in full
force and effect until the earlier of (i) the first date following the Purchase
Termination Date, (ii) the date on which the Transferee's Total Investment shall
have been reduced to zero pursuant to Section 3.02 of the Asset Interest
Transfer Agreement, and all Obligations of Seller hereunder shall have been
finally and fully paid and performed and (iii) such other later time as the
parties hereto shall agree. The rights and remedies with respect to any breach
of any representation and warranty made by Seller pursuant to Article V and the
indemnification and payment provisions of Article IX and Section 10.6 shall be
continuing and shall survive any termination of this Purchase Agreement.
SECTION 10.5 Governing Law. THIS PURCHASE AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICT OF LAWS
39
<PAGE> 44
PRINCIPLES, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF WPS
FINCO IN THE RECEIVABLES AND THE RELATED ASSETS ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 10.6 Costs, Expenses and Taxes. In addition to the obligations
of Seller under Article IX, Seller, severally with respect to itself, agrees to
pay on demand:
(a) all reasonable out-of-pocket and other costs and expenses
in connection with the enforcement of this Purchase Agreement, the
Seller Assignment Certificate or the other Transaction Documents by WPS
Finco or any successor in interest to WPS Finco; and
(b) all stamp and other taxes and fees payable or determined
to be payable in connection with the execution and delivery by Seller,
and the filing and recording, of this Purchase Agreement or the other
Transaction Documents, and agrees to indemnify each RPA Indemnified
Party against any liabilities with respect to or resulting from any
delay in paying or the omission to pay such taxes and fees.
SECTION 10.7 Consent to Jurisdiction; Waiver of Immunities.
EACH PARTY HERETO HEREBY ACKNOWLEDGES AND AGREES THAT:
(A) IT IRREVOCABLY (I) SUBMITS TO THE JURISDICTION, FIRST, OR
ANY UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL JURISDICTION IS NOT
AVAILABLE, OF ANY GEORGIA STATE COURT, IN EITHER CASE, SITTING IN FULTON COUNTY,
GEORGIA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS PURCHASE
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, (II) AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED ONLY IN SUCH
GEORGIA STATE OR FEDERAL COURT AND NOT IN ANY OTHER COURT, (III) WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING, (IV) CONSENTS TO THE SERVICE OF
ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF
SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SPECIFIED FOR NOTICES HEREUNDER, AND
(V) TO THE EXTENT ALLOWED BY LAW, AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
(B) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO
EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT
HEREBY WAIVES SUCH
40
<PAGE> 45
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER OR IN CONNECTION WITH THIS PURCHASE
AGREEMENT.
SECTION 10.8 Waiver of Jury Trial. EACH PARTY HERETO EXPRESSLY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER OR RELATING TO THIS PURCHASE AGREEMENT, ANY OTHER TRANSACTION
DOCUMENT, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN), ACTIONS OF EITHER OF THE PARTIES HERETO OR ANY OTHER RELATIONSHIP
EXISTING IN CONNECTION WITH THIS PURCHASE AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
SECTION 10.9 Integration. This Purchase Agreement and the other
Transaction Documents contain a final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
thereof and shall together constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and thereof, superseding all
prior oral or written understandings.
SECTION 10.10 Execution in Counterparts. This Purchase Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
SECTION 10.11 Acknowledgment and Consent.
(a) Seller acknowledges that, contemporaneously herewith, WPS Finco is
selling, transferring, assigning, setting over and otherwise conveying to the
Administrator on behalf of Blue Ridge an Asset Interest in the outstanding pool
of Receivables and Related Assets sold by Seller to WPS Finco from time to time
pursuant to this Purchase Agreement. Seller hereby consents to the sale,
transfer, assignment, set over and conveyance to the Administrator on behalf of
Blue Ridge by WPS Finco of the Asset Interest, and all of WPS Finco's rights,
remedies, powers and privileges, and all claims of WPS Finco against Seller,
under or with respect to this Purchase Agreement and the other Transaction
Documents (whether arising pursuant to the terms of this Purchase Agreement or
otherwise available at law or in equity), including (i) the right of WPS Finco,
at any time, to enforce this Purchase Agreement against Seller and the
obligations of Seller hereunder, and (ii) the right, at any time, to give or
withhold any and all consents, requests, notices, directions, approvals,
demands,
41
<PAGE> 46
extensions or waivers under or with respect to this Purchase Agreement, any
other Transaction Document or the obligations in respect of Seller thereunder to
the same extent as WPS Finco may do. Each of the parties hereto acknowledges and
agrees that the Administrator (on behalf of Blue Ridge) and Blue Ridge are third
party beneficiaries of the rights of WPS Finco arising hereunder and under the
other Transaction Documents to which Seller is a party. Seller hereby
acknowledges and agrees that it has no claim to or interest in any of the
Lock-Box Accounts or the Concentration Account.
(b) Seller hereby agrees to execute all agreements, instruments and
documents, and to take all other action, that WPS Finco or the Administrator
reasonably determines is necessary or appropriate to evidence its consent
described in paragraph (a) above. To the extent that WPS Finco, individually or
through the Servicer, has granted or grants powers of attorney to the
Administrator under the Asset Interest Transfer Agreement, Seller hereby grants
a corresponding power of attorney on the same terms to WPS Finco. Seller hereby
acknowledges and agrees that WPS Finco, in all of its capacities, shall assign
to the Administrator for the benefit of Blue Ridge such powers of attorney and
other rights and interests granted by Seller to WPS Finco hereunder and agrees
to cooperate fully with the Administrator in the exercise of such rights.
SECTION 10.12 No Partnership or Joint Venture. Nothing contained in
this Purchase Agreement shall be deemed or construed by the parties hereto or by
any third person to create the relationship of principal and agent or of
partnership or of joint venture.
SECTION 10.13 No Proceedings. Seller hereby agrees that it will not
institute against WPS Finco or Blue Ridge, or join any other Person in
instituting against WPS Finco or Blue Ridge, any insolvency or bankruptcy
proceeding (namely, any proceeding of the type referred to in the definition of
"Event of Bankruptcy") so long as Commercial Paper Notes shall be outstanding or
there shall not have elapsed one year plus one day since the last day on which
any such Commercial Paper Notes shall have been outstanding. The foregoing shall
not limit the right of Seller to file any claim in or otherwise take any action
with respect to any insolvency proceeding that was instituted against WPS Finco
or Blue Ridge by any Person other than Seller or any other WPS Person.
SECTION 10.14 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Purchase Agreement or any of
the other Transaction Documents shall for any reason whatsoever be held invalid,
then such
42
<PAGE> 47
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Purchase Agreement
or such other Transaction Document (as applicable) and shall in no way affect
the validity or enforceability of the other provisions of this Purchase
Agreement or any of the other Transaction Documents.
SECTION 10.15 Recourse to WPS Finco. Except to the extent expressly
provided otherwise in the Transaction Documents, the obligations of WPS Finco
under the Transaction Documents to which it is a party are solely the
obligations of WPS Finco, and no recourse shall be had for payment of any fee
payable by or other obligation of or claim against WPS Finco that arises out of
any Transaction Document to which WPS Finco is a party against any director,
officer or employee of WPS Finco. The provisions of this Section 10.15 shall
survive the termination of this Purchase Agreement.
(SIGNATURE PAGE FOLLOWS)
43
<PAGE> 48
IN WITNESS WHEREOF, the parties have caused this Receivables Purchase
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
WESTPOINT STEVENS INC.
By: /s/ Nelson Griffith
-----------------------------------------
Name: J. Nelson Griffith
Title: Controller
Address: 507 West 10th Street
Post Office Box 71
West Point, GA 31833
Attention: J. Nelson Griffith
Telephone: (706) 645-4213
Facsimile: (706) 645-4066
WPS RECEIVABLES CORPORATION
By: /s/ Nelson Griffith
-----------------------------------------
Name: J. Nelson Griffith
Title: Vice President/Assistant Treasurer
Address: 507 West 10th Street
Post Office Box 71
West Point, GA 31833
Attention: J. Nelson Griffith
Telephone: (706) 645-4213
Facsimile: (706) 645-4066
<PAGE> 1
EXHIBIT 10.50
NON-NEGOTIABLE
PROMISSORY NOTE
New York, New York
December 18, 1998
FOR VALUE RECEIVED, the undersigned, WPS RECEIVABLES CORPORATION, a
Delaware corporation ("WPS Finco"), promises to pay to WESTPOINT STEVENS INC.,
a Delaware corporation (the "Seller"), on the terms and subject to the
conditions set forth herein and in the Receivables Purchase Agreement referred
to below, the aggregate unpaid Purchase Price of all Receivables and Related
Assets purchased by WPS Finco pursuant to the Receivables Purchase Agreement
(subject to adjustment pursuant to Section 3.1(c) of such Receivables Purchase
Agreement). Such amount and accrued interest thereon as shown in the records of
the Servicer will be rebuttable presumptive evidence of the principal amount
and accrued interest thereon owing under this Note.
1. Purchase Agreement. This Note is the WPS Finco Note described
in, and is subject to the terms and conditions set forth in, that certain
Receivables Purchase Agreement dated as of December 18, 1998 (as the same may
be amended, supplemented, amended and restated or otherwise modified in
accordance with its terms, the "Purchase Agreement"), between the Seller and
WPS Finco. Reference is hereby made to the Purchase Agreement for a statement
of certain other rights and obligations of WPS Finco and the Seller.
2. Definitions. Capitalized terms used (but not defined) herein
have the meaning ascribed thereto in Appendix A to the Purchase Agreement or
Appendix A to the Asset Interest Transfer Agreement. In addition, as used
herein, the following terms have the following meanings:
"Administrator" means Wachovia Bank, N.A. in its capacity as
administrator under the Asset Interest Transfer Agreement; and its
successors under the Asset Interest Transfer Agreement.
"Bankruptcy Proceedings" has the meaning set forth in clause
(a) of paragraph 7 hereof.
"Final Maturity Date" means the date occurring eighteen
months after the Purchase Termination Date.
"Junior Liabilities" means all obligations of WPS Finco to
the Seller under this Note.
"Senior Interests" means all obligations of WPS Finco to the
Administrator, Transferee and the other Indemnified Parties, howsoever
created, arising or evidenced, whether
<PAGE> 2
direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due, including, without limitation, all interest,
fees and other charges that accrue after the commencement of a
Bankruptcy Proceeding whether or not allowed as a claim in such
proceeding.
"Senior Interest Holders" means, collectively, the
Administrator, Transferee and each other Indemnified Party.
"Subordination Provisions" means, collectively, the
provisions of paragraph 7 hereof.
3. Interest. Subject to the Subordination Provisions, WPS Finco
promises to pay interest on the aggregate unpaid principal amount of this Note
outstanding on each day at a rate per annum equal to the rate of interest
publicly announced from time to time by Bankers Trust Company or any successor
as its "reference rate."
4. Interest Payment Dates. Subject to the Subordination
Provisions, WPS Finco shall pay accrued interest on this Note on each
Settlement Date and on the Final Maturity Date. Subject to the Subordination
Provisions, WPS Finco also shall pay accrued interest on the principal amount
of each prepayment hereof on the date of each such prepayment.
5. Basis of Computation. Interest accrued hereunder shall be
computed for the actual number of days elapsed on the basis of a 360-day year.
6. Principal Payment Dates. Subject to the Subordination
Provisions, any unpaid principal of this Note shall be paid on the Final
Maturity Date. Subject to the Subordination Provisions, the principal amount of
and accrued interest on this Note may be prepaid on any Business Day without
premium or penalty.
7. Subordination Provisions. WPS Finco covenants and agrees,
and the Seller, by its acceptance of this Note, likewise covenants and agrees,
that the payment of all Junior Liabilities is hereby expressly subordinated in
right of payment to the payment and performance of the Senior Interests to the
extent and in the manner set forth in Section 7.03(g)(iv) of the Asset Interest
Transfer Agreement and this paragraph 7:
(a) In the event of any dissolution, winding
up, liquidation, readjustment, reorganization or other similar event
relating to WPS Finco, whether voluntary or involuntary, partial or
complete, and whether in bankruptcy, insolvency, receivership or other
similar proceedings, or upon an assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of
WPS Finco or any sale of all or substantially all of the assets of WPS
2
<PAGE> 3
Finco except pursuant to the Asset Interest Transfer Agreement (such
proceedings being herein collectively called "Bankruptcy Proceedings"
and individually called a "Bankruptcy Proceeding"), the Senior
Interests shall first be paid and performed in full and in cash before
the Seller shall be entitled to receive and to retain any payment or
distribution in respect of the Junior Liabilities. In order to
implement the foregoing: (x) all payments and distributions of any
kind or character in respect of the Junior Liabilities to which the
Seller would be entitled except for this clause (a) shall be made
directly to the Administrator (for the benefit of the Senior Interest
Holders); (y) if a Bankruptcy Proceeding has been commenced, the
Seller shall promptly file a claim or claims, in the form required in
any Bankruptcy Proceedings, for the full outstanding amount of the
Junior Liabilities, and shall use reasonable efforts to cause said
claim or claims to be approved and all payments and other
distributions in respect thereof to be made directly to the
Administrator (for the benefit of the Senior Interest Holders) until
the Senior Interests shall have been paid and performed in full and in
cash; and (z) the Seller hereby irrevocably agrees that the Trust (or
the Administrator acting on the Trust's behalf), in the name of the
Seller or otherwise, may demand, sue for, collect, receive and receipt
for any and all such payments or distributions, and file, provide and
vote or consent in any such Bankruptcy Proceedings with respect to any
and all claims of the Seller relating to the Junior Liabilities, in
each case until the Senior Interests shall have been paid and
performed in full and in cash.
(b) In the event that the Seller receives any
payment or other distribution of any kind or character from WPS Finco
or from any other source whatsoever in respect of the Junior
Liabilities in contravention of Section 7.03(g) of the Asset Interest
Transfer Agreement or after the commencement of any Bankruptcy
Proceeding, such payment or other distribution shall be received in
trust for the Senior Interest Holders and shall be turned over by the
Seller to the Administrator (for the benefit of the Senior Interest
Holders) forthwith, until all Senior Interests shall have been paid
and performed in full and in cash. All payments and distributions
received by the Administrator in respect of the Junior Liabilities, to
the extent received in or converted into cash, may be applied by the
Administrator (for the benefit of the Senior Interest Holders) first
to the payment of any and all reasonable expenses (including
reasonable attorneys' fees and legal expenses) paid or incurred by the
Administrator or the Senior Interest Holders in enforcing these
Subordination Provisions, or in endeavoring to collect or realize upon
the Junior Liabilities, and any balance thereof shall, solely as
between the Seller and the Senior Interest Holders, be
3
<PAGE> 4
applied by the Administrator toward the payment of the Senior
Interests in a manner determined by the Administrator to be in
accordance with the Asset Interest Transfer Agreement; but as between
WPS Finco and its creditors, no such payments or distributions of any
kind or character shall be deemed to be payments or distributions in
respect of the Senior Interests.
(c) Upon the final payment in full and in cash
of all Senior Interests, the Seller shall be subrogated to the rights
of the Senior Interest Holders to receive payments or distributions
from WPS Finco that are applicable to the Senior Interests until the
Junior Liabilities are paid in full.
(d) These Subordination Provisions are intended
solely for the purpose of defining the relative rights of the Seller,
on the one hand, and the Senior Interest Holders, on the other hand.
Nothing contained in these Subordination Provisions or elsewhere in
this Note is intended to or shall impair, as between WPS Finco, its
creditors (other than the Senior Interest Holders) and the Seller, WPS
Finco's obligation, which is unconditional and absolute, to pay the
Junior Liabilities as and when the same shall become due and payable
in accordance with the terms hereof and of the Purchase Agreement or
to affect the relative rights of the Seller and creditors of WPS Finco
(other than the Senior Interest Holders).
(e) The Seller shall not, until the Senior
Interests have been finally paid and performed in full and in cash,
(i) cancel, waive, forgive, transfer or assign, or commence legal
proceedings to enforce or collect, or subordinate to any obligation of
WPS Finco, howsoever created, arising or evidenced, whether director
or indirect, absolute or contingent, or now or hereafter existing, or
due or to become due, other than the Senior Interests, the Junior
Liabilities or any rights in respect hereof or (ii) convert the Junior
Liabilities into an equity interest in WPS Finco, unless, in the case
of each of clauses (i) and (ii) above, the Seller shall have received
the prior written consent of the Administrator in each case.
(f) The Seller shall not, without the advance
written consent of the Administrator, commence, or join with any other
Person in commencing, any Bankruptcy Proceedings with respect to WPS
Finco until at least one year and one day shall have passed since the
Senior Interests shall have been finally paid and performed in full
and in cash.
(g) If, at any time, any payment (in whole or
in part) made with respect to any Senior Interest is rescinded or must
be restored or returned by a Senior Interest Holder
4
<PAGE> 5
(whether in connection with any Bankruptcy Proceedings or otherwise),
these Subordination Provisions shall continue to be effective or shall
be reinstated, as the case may be, as though such payment had not been
made.
(h) As between the Seller and the Senior
Interest Holders, each of the Senior Interest Holders may, from time
to time, at its sole discretion, without notice to the Seller, and
without waiving any of its rights under these Subordination
Provisions, take any or all of the following actions: (i) retain or
obtain an interest in any property to secure any of the Senior
Interests; (ii) retain or obtain the primary or secondary obligations
of any other obligor or obligors with respect to any of the Senior
Interests; (iii) extend or renew for one or more periods (whether or
not longer than the original period), alter, increase or exchange any
of the Senior Interests, or release or compromise any obligation of
any nature with respect to any of the Senior Interests; (iv) amend,
supplement, amend and restate, or otherwise modify any Transaction
Document; and (v) release its security interest in, or surrender,
release or permit any substitution or exchange for all or any part of
any rights or property securing any of the Senior Interest, or extend
or renew for one or more periods (whether or not longer than the
original period), or release, compromise, alter or exchange any
obligations of any nature of any obligor with respect to any such
rights or property.
(i) By its acceptance hereof, the Seller hereby
waives: (i) notice of acceptance of these Subordination Provisions by
any of the Senior Interest Holders; (ii) notice of the existence,
creation, non-payment or non-performance of all or any of the Senior
Interests; and (iii) all diligence in enforcement, collection or
protection of, or realization upon, the Senior Interests, or any
thereof, or any security therefor.
(j) These Subordination Provisions constitute
a continuing offer from WPS Finco to all Persons who become the
holders of, or who continue to hold, Senior Interest; and these
Subordination Provisions are made for the benefit of the Senior
Interest Holders, and the Administrator may proceed to enforce such
provisions on behalf on each of such Persons.
8. General. No failure or delay on the part of the Seller in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Note shall in any event be effective unless
5
<PAGE> 6
(a) the same shall be in writing and signed and delivered by WPS Finco
and the Seller, and (b) all consents required for such actions under the
Transaction Documents shall have been received by the appropriate Persons.
9. Limitation on Interest. Notwithstanding anything in this Note
to the contrary, WPS Finco shall never be required to pay unearned interest on
any amount outstanding hereunder, and shall never be required to pay interest
on the principal amount outstanding hereunder, at a rate in excess of the
maximum nonusurious interest rate that may be contracted for, charged or
received under applicable federal or state law (such maximum rate being herein
called the "Highest Lawful Rate"). If the effective rate of interest which
would otherwise be payable under this Note would exceed the Highest Lawful
Rate, or the Seller shall receive any unearned interest or shall receive monies
that are deemed to constitute interest which would increase the effective rate
of interest payable by WPS Finco under this Note to a rate in excess of the
Highest Lawful Rate, then (i) the amount of interest which would otherwise be
payable by WPS Finco under this Note shall be reduced to the amount allowed by
applicable law, and (ii) any unearned interest paid by WPS Finco or any
interest paid by WPS Finco in excess of the Highest Lawful Rate shall be
refunded to WPS Finco. Without limitation of the foregoing, all calculations of
the rate of interest contracted for, charged or received by the Seller under
this Note that are made for the purpose of determining whether such rate
exceeds the Highest Lawful Rate shall be made, to the extent permitted by
applicable usury laws (now or hereafter enacted), by amortizing, prorating and
spreading in equal parts during the actual period during which any amount has
been outstanding hereunder all interest at any time contracted for, charged or
received by the Seller in connection herewith. If at any time and from time to
time (i) the amount of interest payable to the Seller on any date shall be
computed at the Highest Lawful Rate pursuant to the provisions of the foregoing
sentence, and (ii) in respect of any subsequent interest computation period the
amount of interest otherwise payable to the Seller would be less than the
amount of interest payable to the Seller computed at the Highest Lawful Rate,
then the amount of interest payable to the Seller in respect of such subsequent
interest computation period shall continue to be computed at the Highest Lawful
Rate until the total amount of interest payable to the Seller shall equal the
total amount of interest which would have been payable to the Seller if the
total amount of interest had been computed without giving effect to the
provisions of the foregoing sentence.
10. No Negotiation. This Note is not negotiable.
6
<PAGE> 7
11. Restrictions on Transfer, Etc. Except to the extent expressly
provided otherwise in the Transaction Documents, the Seller shall not create or
permit to exist any Adverse Claim with respect to this Note or any interest
herein and shall not sell or otherwise transfer or dispose of this Note or any
interest herein. Except to the extent expressly provided otherwise in the
Transaction Documents, no Person other than the Seller, on its own behalf and
not for the benefit of any other Person, may enforce any rights of the Seller
arising under or in connection with this Note.
12. GOVERNING LAW. THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW
YORK, AND SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
13. Captions. Paragraph captions used in this Note are provided
solely for convenience of reference and shall not affect the meaning or
interpretation of any provisions of this Note.
WPS RECEIVABLES CORPORATION,
a Delaware corporation
By: /s/ Nelson Griffith
-----------------------------
Name: J. Nelson Griffith
Title: Vice President/Assistant Treasurer
<PAGE> 1
EXHIBIT 10.51
================================================================================
ASSET INTEREST TRANSFER AGREEMENT
DATED AS OF DECEMBER 18, 1998
AMONG
WPS RECEIVABLES CORPORATION
AS TRANSFEROR
AND
WESTPOINT STEVENS INC.
AS INITIAL SERVICER
AND
BLUE RIDGE ASSET FUNDING CORPORATION
AS TRANSFEREE
AND
WACHOVIA BANK, N.A.
AS ADMINISTRATOR
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
TRANSFERS AND REINVESTMENTS
<TABLE>
<S> <C> <C>
SECTION 1.01 Commitments to Transfer; Limits on Transferee's Obligations......-2-
SECTION 1.02 Transfer Procedures; Assignment of Transferee's Interests........-3-
SECTION 1.03 Reinvestments of Certain Collections; Payment of Remaining
Collections......................................................-3-
SECTION 1.04 Asset Interest...................................................-6-
SECTION 1.05 Adjustments of Transfer Limit....................................-7-
ARTICLE II
COMPUTATIONAL RULES
SECTION 2.01 Selection of Asset Tranches......................................-8-
SECTION 2.02 Computation of Transferee's Total Investment and Transferee's
Tranche Investment...............................................-8-
SECTION 2.03 Computation of Concentration Limits and Unpaid Balance...........-9-
SECTION 2.04 Liquidity Fundings; Computation of Earned Discount...............-9-
SECTION 2.05 Estimates of Earned Discount Rate, Fees, etc.....................-9-
ARTICLE III
SETTLEMENTS
SECTION 3.01 Settlement Procedures...........................................-10-
SECTION 3.02 Deemed Collections; Reduction of Transferee's Total Invest
ment, Etc.......................................................-13-
SECTION 3.03 Payments and Computations, Etc..................................-17-
SECTION 3.04 Treatment of Collections and Deemed Collections.................-17-
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01 Fees............................................................-18-
SECTION 4.02 Yield Protection................................................-18-
SECTION 4.03 Funding Losses..................................................-21-
</TABLE>
-i-
<PAGE> 3
ARTICLE V
CONDITIONS OF TRANSFERS
<TABLE>
<S> <C> <C>
SECTION 5.01 Conditions Precedent to Initial Transfer........................-22-
SECTION 5.02 Conditions Precedent to All Transfers and Reinvestments.........-25-
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01 Representations and Warranties of Transaction Parties...........-26-
ARTICLE VII
GENERAL COVENANTS OF TRANSACTION PARTIES
SECTION 7.01 Affirmative Covenants of Transaction Parties....................-32-
SECTION 7.02 Reporting Requirements of Transaction Parties...................-36-
SECTION 7.03 Negative Covenants of Transaction Parties.......................-39-
SECTION 7.04 Separate Corporate Existence of Transferor......................-42-
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01 Designation of Servicer.........................................-46-
SECTION 8.02 Duties of Servicer..............................................-47-
SECTION 8.03 Rights of the Administrator.....................................-48-
SECTION 8.04 Responsibilities of Transaction Parties.........................-50-
SECTION 8.05 Further Action Evidencing Transfers and Reinvestments...........-50-
ARTICLE IX
SECURITY INTEREST
SECTION 9.01 Grant of Security Interest......................................-52-
SECTION 9.02 Further Assurances..............................................-52-
SECTION 9.03 Remedies........................................................-52-
ARTICLE X
LIQUIDATION EVENTS
SECTION 10.01 Liquidation Events..............................................-52-
SECTION 10.02 Remedies........................................................-55-
</TABLE>
-ii-
<PAGE> 4
ARTICLE XI
THE ADMINISTRATOR
<TABLE>
<S> <C> <C>
SECTION 11.01 Authorization and Action........................................-56-
SECTION 11.02 Administrator's Reliance, Etc...................................-56-
SECTION 11.03 Wachovia and Affiliates.........................................-57-
ARTICLE XII
ASSIGNMENT OF PURCHASER'S INTEREST
SECTION 12.01 Restrictions on Assignments.....................................-57-
SECTION 12.02 Rights of Assignee..............................................-58-
SECTION 12.03 Terms and Evidence of Assignment................................-58-
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01 Indemnities by Transferor.......................................-58-
SECTION 13.02 Indemnities by Servicer.........................................-61-
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01 Amendments, Etc.................................................-62-
SECTION 14.02 Notices, Etc....................................................-62-
SECTION 14.03 No Waiver; Remedies.............................................-62-
SECTION 14.04 Binding Effect; Survival........................................-63-
SECTION 14.05 Costs, Expenses and Taxes.......................................-63-
SECTION 14.06 No Proceedings..................................................-64-
SECTION 14.07 Confidentiality of Transferor Information.......................-64-
SECTION 14.08 Confidentiality of Program Information..........................-67-
SECTION 14.09 Captions and Cross References...................................-69-
SECTION 14.10 Integration.....................................................-69-
SECTION 14.11 GOVERNING LAW...................................................-69-
SECTION 14.12 WAIVER OF JURY TRIAL............................................-69-
SECTION 14.13 CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES...................-70-
SECTION 14.14 Execution in Counterparts.......................................-71-
SECTION 14.15 No Recourse Against Other Parties...............................-71-
</TABLE>
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<PAGE> 5
APPENDICES
APPENDIX A Definitions
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<PAGE> 6
SCHEDULES
SCHEDULE 6.01(m) List of Offices of Servicer and Transferor where
Records Are Kept
SCHEDULE 6.01(n) List of Lock-Box Banks and Concentration Bank
SCHEDULE 14.02 Notice Addresses
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<PAGE> 7
EXHIBITS
EXHIBIT 1.02(a) Form of Transfer Request
EXHIBIT 5.01(h) Form of Opinion of Special Counsel for Transaction
Parties
EXHIBIT A Form of Lock Box/Collection Account Agreement
EXHIBIT B Form of Certificate of Financial Officer
EXHIBIT C Form of Monthly Report
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<PAGE> 8
ASSET INTEREST TRANSFER AGREEMENT
Dated as of December 18, 1998
THIS IS ASSET INTEREST TRANSFER AGREEMENT, among:
(1) WPS Receivables Corporation, a Delaware corporation
(together with its successors and permitted assigns, "Transferor"),
(2) WestPoint Stevens Inc., a Delaware corporation
(together with its successors, "WestPoint"), as initial servicer hereunder (in
such capacity, together with any successor servicer appointed pursuant to
Section 8.01, "Servicer"; WestPoint, in its capacity as Servicer, together with
Transferor, each a "Transaction Party" and collectively, the "Transaction
Parties"),
(3) BLUE RIDGE ASSET FUNDING CORPORATION, a Delaware
corporation (together with its successors and assigns, "Transferee"),
(4) WACHOVIA BANK, N.A., a national banking association
("Wachovia"), as administrative agent for Transferee (in such capacity, together
with any successors thereto in such capacity, the "Administrator").
Unless otherwise indicated, capitalized terms used in
this Agreement are defined in Appendix A.
Background
1. Transferor is a wholly-owned direct subsidiary of
WestPoint.
2. WestPoint is a home fashions consumer products
company, with a comprehensive line of branded and licensed products for the
bedroom and bathroom.
3. WestPoint and Transferor have entered into the Sale
Agreement pursuant to which WestPoint has transferred and hereafter will
transfer, to Transferor all of its right, title and interest in and to certain
Receivables and certain related property.
<PAGE> 9
4. Transferor, WestPoint and Chase Manhattan Bank, as
trustee (the "Trustee") for the WestPoint Stevens Receivables Master Trust (the
"Trust") have entered into the Reconveyance Agreement, pursuant to which the
Trustee, on behalf of the Trust, has reconveyed all of the right, title and
interest of the Trust in and to the Receivables to Transferor.
5. Subject to the terms and conditions contained in this
Agreement, Transferor shall transfer to the Administrator, on behalf of
Transferee, and the Administrator shall accept, from time to time an undivided
percentage interest, referred to herein as the Asset Interest, in Pool
Receivables and related property.
6. Transferor and Transferee also desire that, subject
to the terms and conditions of this Agreement, certain of the daily Collections
in respect of the Asset Interest be reinvested in Pool Receivables, which
reinvestment shall constitute part of the Asset Interest.
7. Wachovia has been requested, and is willing, to act
as the Administrator under this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
TRANSFERS AND REINVESTMENTS
SECTION 1.01 Commitments to Transfer; Limits on Transferee's
Obligations. Upon the terms and subject to the conditions of this Agreement
(including, without limitation, Article V), from time to time prior to the
Termination Date, Transferor may request a transfer to the Administrator, on
Transferee's behalf, and the Administrator, on Transferee's behalf, shall
accept, from Transferor ownership interests in Pool Receivables and Related
Assets (each being a "Transfer"); provided that no Transfer shall be made by the
Administrator, on Transferee's behalf, if, after giving effect thereto, (a) the
transfer price of such Transfer exceeds the lesser of (i) the result obtained by
multiplying the Net Pool Balance as of the date of such Transfer by the Advance
Rate and (ii) the Transfer Limit, (b) the Aggregate Outstandings would exceed
the Transfer Limit, or (c) the Asset Interest would exceed 100%; and provided,
further that each Transfer made pursuant to this Section 1.01 shall have a
transfer price equal to at least $1,000,000 and shall be an integral multiple of
$100,000.
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<PAGE> 10
SECTION 1.02 Transfer Procedures; Assignment of
Transferee's Interests.
(a) Transfer Request. Each Transfer from
Transferor by the Administrator, on Transferee's behalf, shall be made on notice
from Transferor to the Administrator received by the Administrator not later
than 12:00 noon (New York City time) two (2) Business Days prior to the date of
such proposed Transfer. Each such notice of a proposed Transfer shall be
substantially in the form of Exhibit 1.02(a) and shall specify, among other
items, the desired amount and date of such Transfer. The Administrator shall
promptly upon receipt notify the Transferee of any such notice.
(b) Funding of Transfer. On the date of each
Transfer, Transferee shall, upon satisfaction of the applicable conditions set
forth in Article V, make available to Transferor the amount of the Transfer in
same day funds by wire transfer to an account of Transferor designated in
writing by Transferor.
(c) Assignment of Asset Interests. Transferor
hereby transfers, assigns and conveys to the Administrator, on Transferee's
behalf, effective on and as of the date of each Transfer and each Reinvestment
by the Administrator, on Transferee's behalf, hereunder the Asset Interest in
the Pool Receivables and Related Assets.
SECTION 1.03 Reinvestments of Certain Collections;
Payment of Remaining Collections.
(a) On the close of business on each day during
the period from the date of the first Transfer to the Termination Date, Servicer
will, out of all Collections received on such day from Pool Receivables and
Related Assets:
(i) set aside and hold in trust for the
benefit of Transferee (or its assigns) that portion of the Collections
attributable to the Asset Interest;
(ii) out of the portion of such
Collections allocated to the Asset Interest pursuant to clause (i),
segregate, set aside and hold in trust for Transferee an amount equal
to the sum of the estimated amount of Earned Discount accrued in
respect of each Asset Tranche (based on rate information provided by
the Administrator pursuant to Section 2.05), all other amounts due to
Transferee or the Administrator hereunder and the Servicer's Fee (in
each case, accrued through such day) and not so previously set aside;
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<PAGE> 11
(iii) apply the Collections allocated to
the Asset Interest pursuant to Section 1.03(a)(i) and not required to
be set aside pursuant to Section 1.03(a)(ii) to a transfer to the
Administrator, on Transferee's behalf, by Transferor of ownership
interests in Pool Receivables and Related Assets (each such purchase
being a "Reinvestment"); provided that:
(A) if after
giving effect to such Reinvestment, (1) the then Asset
Interest would exceed 100% or (2) the Aggregate Outstandings
would exceed the Transfer Limit, then Servicer shall not
reinvest, but shall set aside and hold in trust for the
benefit of Transferee, a portion of such Collections which,
together with other Collections previously set aside and then
so held, shall equal the amount necessary to reduce the Asset
Interest to not more than 100% and the Aggregate Outstandings
to an amount equal to or less than the Transfer Limit; and
(B) if any of
the conditions precedent to Reinvestment set forth in clauses
(a), (b) and (d) of Section 5.02, subject to the proviso set
forth therein, are not satisfied, then Servicer shall not
reinvest any of such remaining Collections, but shall set them
aside and hold them in trust for the benefit of Transferee;
and
(iv) pay to Transferor (A) the remaining
portion of Collections not allocated to the Asset Interest pursuant to
Section 1.03(a)(i), and (B) the Collections applied to Reinvestment
pursuant to Section 1.03(a)(iii).
(b) Unreinvested Collections. Servicer shall segregate,
set aside and hold in trust for the benefit of Transferee all Collections which,
pursuant to Section 1.03(a)(iii), may not be reinvested in the Pool Receivables
and Related Assets. If, prior to the date when such Collections are required to
be paid to the Administrator for the benefit of Transferee pursuant to Section
1.03(c)(iv), the amount of Collections so set aside exceeds the amount, if any,
necessary to reduce the Aggregate Outstandings to an amount equal to or less
than the Transfer Limit and the Asset Interest to not more than 100%, and the
conditions precedent to Reinvestment set forth in clauses (a), (b) and (d) of
Section 5.02, subject to the proviso set forth
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<PAGE> 12
therein, are satisfied, then Servicer shall apply such Collections (or, if less,
a portion of such Collections equal to the amount of such excess) to the making
of a Reinvestment.
(c) Payment of Amounts Set Aside.
(i) Servicer shall pay all amounts of
Collections set aside pursuant to Section 1.03(a)(ii) in respect of
Earned Discount on an Asset Tranche funded by a Liquidity Funding to
the Administrator, on Transferee's behalf, on the last day of the then
current Yield Period for such Asset Tranche as provided in Section
3.01.
(ii) Servicer shall pay all amounts of
Collections set aside pursuant to Section 1.03(a)(ii) in respect of
Earned Discount on any Asset Tranche funded by Commercial Paper Notes
to the Administrator, on Transferee's behalf, on the last day of the
then current CP Tranche Period for such Asset Tranche, as provided in
Section 3.01.
(iii) Servicer shall pay all amounts of
Collections set aside pursuant to Section 1.03(a)(ii) and not applied
pursuant to clauses (i) or (ii) above to the Administrator, on
Transferee's behalf, on each Settlement Date for each Settlement
Period, as provided in Section 3.01.
(iv) Servicer shall pay all amounts set
aside pursuant to Section 1.03(b) to the Administrator for the account
of Transferee (A) on the last day of the then current Yield Period for
any Asset Tranche funded by a Liquidity Funding, as provided in Section
3.01, in an amount not exceeding the Transferee's Tranche Investment of
such Asset Tranche, and (B) on the last day of the then current CP
Tranche Period for any Asset Tranche funded by Commercial Paper Notes,
as provided in Section 3.01, in an amount not exceeding the
Transferee's Tranche Investment of such Asset Tranche; provided,
however, no payment shall be made under clause (B) above unless the
Transferee's Tranche Investments of all Asset Tranches, if any, funded
by Liquidity Fundings shall have been reduced to zero.
(d) Funds Under Sale Agreement. Upon the written request
of the Administrator, on Transferee's behalf, given at any time when (i) based
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<PAGE> 13
on the most recent Monthly Report, the Asset Interest would exceed 100% or the
Aggregate Outstandings would exceed the Transfer Limit, or (ii) a Liquidation
Event or Unmatured Liquidation Event shall have occurred and be continuing,
Transferor shall set aside all funds that under the Sale Agreement would be
applied to repay principal of the Subordinated Notes owing to the Originators.
Transferor may make withdrawals of such funds only for the purposes of (i) at
any time, purchasing Receivables from the Originators in accordance with the
Sale Agreement; (ii) on the Settlement Date for any Settlement Period, making
payments to reduce Transferee's Total Investment in accordance with the last
sentence of Section 3.01(c)(ii), and (iii) on the Settlement Date for any
Settlement Period, if, on the basis of the most recent Monthly Report, and after
giving effect to any payment made to Servicer to reduce Transferee's Total
Investment on such date pursuant to the last sentence of Section 3.01(c)(ii),
the Aggregate Outstandings does not exceed the Transfer Limit and the Asset
Interest does not exceed 100%, and provided that no Liquidation Event or
Unmatured Liquidation Event shall have occurred and be continuing, repaying
principal of the Subordinated Notes in accordance with this Agreement and the
Sale Agreement.
(e) Notwithstanding subsections (a) and
(b) above, if a Liquidation Event has not occurred and is continuing, the daily
calculations, allocations, and segregation specified in such paragraphs shall
not be required, provided that, any amounts otherwise required to be segregated
pursuant to such paragraphs shall be, notwithstanding this subsection (e), held
in trust by the Servicer for the benefit of the Transferee (or its assigns).
SECTION 1.04 Asset Interest
(a) Components of Asset Interest. On any date
the Asset Interest will represent Transferee's undivided percentage ownership
interest in all then outstanding Pool Receivables and all Related Assets with
respect to such Pool Receivables as at such date.
(b) Computation of Asset Interest. On any date,
the Asset Interest will be equal to a percentage, expressed as the following
fraction:
PTI+RR
------
NPB
where:
PTI = the then Transferee's Total Investment;
RR = the then Required Reserve; and
NPB = the then Net Pool Balance;
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<PAGE> 14
provided, however, that the Asset Interest during the Liquidation Period shall
be deemed to equal 100%.
(c) Frequency of Computation. The Asset Interest
shall be computed (i) as provided in Section 3.01(c), as of the Cut-Off Date for
each Settlement Period, and (ii) on each Settlement Date, after giving effect to
the payments made pursuant to Section 3.01. In addition, the Administrator may
require Servicer to provide a Monthly Report, based on the information then
available to Servicer, for purposes of computing the Asset Interest or the
Transfer Limit as of any other date, and Servicer agrees to do so within five
(5) (or three (3), if a Liquidation Event has occurred and is continuing)
Business Days of its receipt of the Administrator's request, provided that
Servicer shall not be required to provide such Monthly Report more frequently
than monthly (or weekly, if the Borrowing Availability is less than $30,000,000
or a Liquidation Event has occurred and is continuing).
SECTION 1.05 Adjustments of Transfer Limit. Transferor
may, upon at least thirty (30) Business Days' prior written notice to the
Administrator, terminate in whole or reduce in part, the unused portion of the
Transfer Limit; provided that each partial reduction of the Transfer Limit shall
be in an amount equal to $5,000,000 or an integral multiple thereof.
SECTION 1.06 Extension of Scheduled Maturity Date. Not
less than 90 days prior to the then existing Scheduled Maturity Date, the
Administrator will, in consultation with Transferor, undertake a review of
Transferor to determine whether the Scheduled Maturity Date may be extended,
during which review Transferor may request such extension. Notwithstanding, the
immediately preceding sentence, neither Transferee nor any Liquidity Bank shall
have a commitment or obligation to extend the Scheduled Maturity Date. If
Transferee and the Liquidity Banks agree, after consultation with the
Administrator and in their sole discretion, to extend the Scheduled Maturity
Date, they shall so advise the Administrator and the Administrator shall notify
Transferor in writing by not later than the date that is 60 days prior to the
then existing Scheduled Maturity Date. In the event the Administrator, on behalf
of Transferee and the Liquidity Banks, shall fail to advise Transferor on or
prior to the date that is 60 days prior to the then existing Scheduled Maturity
Date, Transferee's request to extend the Scheduled Maturity Date shall be deemed
to have been declined. Upon execution by Transferor, the Administrator,
Transferee and the Liquidity Banks of an agreement in writing setting forth the
parties agreement to extend the Scheduled Maturity Date, the "Scheduled Maturity
Date" shall thereupon become the date as specified in such agreement. As of no
date during the term of this Agreement shall the period from such date to the
Scheduled Maturity Date then in effect exceed a period of 364 days.
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<PAGE> 15
ARTICLE II
COMPUTATIONAL RULES
SECTION 2.01 Selection of Asset Tranches. The
Administrator shall, at the reasonable direction of Transferor, and from time to
time for purposes of computing Earned Discount, divide the Asset Interest into
Asset Tranches, and the applicable Earned Discount Rate may be different for
each Asset Tranche. Transferee's Total Investment shall be allocated to each
Asset Tranche by the Administrator, on Transferee's behalf and pursuant to the
reasonable direction of Transferor (unless a Liquidation Event has occurred and
is continuing), to reflect the funding sources for the Asset Interest, so that:
(a) there will be an Asset Tranche equal to the
excess of Transferee's Total Investment over the aggregate amount allocated at
such time pursuant to clause (b) below, which Asset Tranche shall reflect the
portion of the Asset Interest funded by Commercial Paper Notes; and
(b) there will be one or more Asset Tranches,
selected by the Administrator, on Transferee's behalf and at the reasonable
direction of Transferor (unless a Liquidation Event has occurred and is
continuing), reflecting the portion of the Asset Interest funded by outstanding
Liquidity Fundings.
SECTION 2.02 Computation of Transferee's Total Investment
and Transferee's Tranche Investment. In making any determination of
Transferee's Total Investment and any Transferee's Tranche Investment, the
following rules shall apply:
(a) Transferee's Total Investment shall not be
considered reduced by any allocation, setting aside or distribution of any
portion of Collections unless such Collections shall have been actually
delivered hereunder to the Administrator, on Transferee's behalf;
(b) Transferee's Total Investment shall not be
considered reduced by any distribution of any portion of Collections if at any
time such distribution is rescinded or must otherwise be returned for any
reason; and
(c) if there is any reduction in Transferee's
Total Investment, there shall be a corresponding reduction in a Transferee's
Tranche Investment with respect to one or more Asset Tranches selected by the
Administrator, on Transferee's behalf, in its reasonable discretion.
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<PAGE> 16
SECTION 2.03 Computation of Concentration Limits and
Unpaid Balance. The Obligor Concentration Limits, Special Concentration Limits
and the aggregate Unpaid Balance of Pool Receivables of any Obligor and its
Affiliated Obligors (if any) shall be calculated as if such Obligor and its
Affiliated Obligors were one Obligor.
SECTION 2.04 Liquidity Fundings; Computation of Earned
Discount.
(a) It is the intent of Transferee to fund the
Asset Interest by the issuance of Commercial Paper Notes. If Transferee is
unable, or determines that it is undesirable, to issue Commercial Paper Notes to
fund the Asset Interest, or is unable to repay such Commercial Paper Notes upon
the maturity thereof, Transferee will draw on Liquidity Fundings to fund the
Asset Interest to the extent available.
(b) In making any determination of Earned
Discount, the following rules shall apply:
(i) the Administrator, on
Transferee's behalf, shall determine the Earned Discount accruing with
respect to each Asset Tranche, and each CP Tranche Period therefor (or,
in the case of an Asset Tranche funded by Liquidity Fundings, each
Yield Period), in accordance with the definition of Earned Discount;
(ii) no provision of this
Agreement shall require the payment or permit the collection of Earned
Discount in excess of the maximum permitted by applicable law; and
(iii) Earned Discount for any
Asset Tranche shall not be considered paid by any distribution if at
any time such distribution is rescinded or must otherwise be returned
for any reason.
SECTION 2.05 Estimates of Earned Discount Rate, Fees,
etc. For purposes of determining the amounts required to be set aside by
Servicer pursuant to Section 1.03, the Administrator, on Transferee's behalf,
shall notify Servicer (and, if WestPoint is not Servicer, Transferor) from time
to time of the Transferee's Tranche Investment of each Asset Tranche, the Earned
Discount Rate applicable to
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<PAGE> 17
each Asset Tranche and the rates at which fees and other amounts are accruing
hereunder. It is understood and agreed that (i) the Earned Discount Rate for any
Asset Tranche may change from one applicable Yield Period or CP Tranche Period
to the next, and the Bank Rate used to calculate the Earned Discount Rate may
change from time to time during an applicable Yield Period, (ii) certain rate
information provided by the Administrator to Servicer shall be based upon the
Administrator's good faith estimate, (iii) the amount of Earned Discount
actually accrued with respect to an Asset Tranche during any CP Tranche Period
(or in the case of an Asset Tranche funded by Liquidity Fundings, any Yield
Period) may exceed, or be less than, the amount set aside with respect thereto
by Servicer, and (iv) the amount of fees or other amounts payable which have
accrued hereunder with respect to any Settlement Period may exceed, or be less
than, the amount set aside with respect thereto by Servicer. Failure to set
aside any amount so accrued shall not relieve Servicer of its obligation to
remit Collections to the Administrator, for the benefit of Transferee, with
respect to such accrued amount, as and to the extent provided in Section 3.01.
ARTICLE III
SETTLEMENTS
SECTION 3.01 Settlement Procedures. The parties hereto
will take the following actions with respect to each Settlement Period:
(a) Monthly Report. Servicer shall deliver to
the Administrator, on Transferee's behalf, on the 15th day of each month (or if
such day is not a Business Day, the next succeeding Business Day thereafter)
(each a "Reporting Date")), a Monthly Report; provided, however, that at any
time during which the Borrowing Availability is less than $30,000,000 or a
Liquidation Event has occurred and is continuing, Servicer shall deliver a
Monthly Report at any time and from time to time upon the Administrator's
request (but in no event more frequently than weekly) and, upon the
Administrator's request, each such Monthly Report shall be accompanied by an
electronic file in a form satisfactory to the Administrator.
(b) Earned Discount; Other Amounts Due. On or
before 12:00 noon, Atlanta, Georgia time on the Business Day before the last day
of each CP Tranche Period or Yield Period, as the case may be, the Administrator
shall notify Servicer of the amount of Earned Discount accrued with respect to
any Asset Tranche corresponding to such CP Tranche Period or Yield Period, as
the case may be. Servicer shall pay to the Administrator, for the benefit of
Transferee, the amount of such Earned Discount on the last day of such CP
Tranche Period or Yield Period. On or before 12:00 noon, Atlanta, Georgia time,
on the Business Day before each
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<PAGE> 18
Reporting Date, the Administrator, on Transferee's behalf, shall notify Servicer
of all fees and other amounts accrued and payable by Transferor under this
Agreement during the prior calendar month, (other than amounts described in
Section 3.01(c) below). Servicer shall pay to the Administrator, for the benefit
of Transferee, the amount of fees and other amounts (to the extent of
Collections attributable to the Asset Interest during such Settlement Period) on
the Settlement Date for such month. Such payments shall be made (A) out of
amounts set aside pursuant to Section 1.03 for such payment, (B) in the case of
amounts other than Earned Discount, to the extent that amounts were not set
aside pursuant to Section 1.03 for such payment, out of funds paid by Servicer
to Transferor (which amounts Transferor hereby agrees to pay to Servicer), and
(C) in the case of Earned Discount, to the extent that funds were not set aside
pursuant to Section 1.03 for such payment (because the actual Earned Discount
for such month was greater than the estimated Earned Discount used in
calculating the Asset Interest during such month), out of funds paid by Servicer
to Transferor (which amounts Transferor hereby agrees to pay to Servicer), up to
the aggregate amount of Collections applied to Reinvestment under Section
1.03(a) or (b) during such month.
(c) Asset Interest Computations.
(i) On the Reporting Date for
each Settlement Period, Servicer shall compute, as of the related
Cut-Off Date and based upon the assumptions in the next sentence, (A)
the Asset Interest, (B) the amount of the reduction or increase (if
any) in the Asset Interest since the immediately preceding Cut-Off
Date, (C) the excess (if any) of the Asset Interest over 100%, and (D)
the excess (if any) of the Aggregate Outstandings over the Transfer
Limit. Such calculation shall be based upon the assumptions that
(x) the information in the Monthly Report is correct, and (y)
Collections set aside pursuant to Section 1.03(b) will be paid to the
Administrator, for the benefit of Transferee, on the Settlement Date
for such Settlement Period.
(ii) If, according to the
computations made pursuant to clause (i) above, the Asset Interest
exceeds 100% or the Aggregate Outstandings exceeds the Transfer Limit,
then on the Settlement Date for such Settlement Period, Servicer shall
pay to the Administrator, for the benefit of Transferee, (to the extent
of Collections during the related Settlement Period attributable to all
Asset Tranches and not previously paid to the Administrator) the amount
necessary to reduce the Aggregate Outstandings to the Transfer
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<PAGE> 19
Limit or less and the Asset Interest to not more than 100%, subject,
however, to the proviso to Section 1.03(c)(iv). Such payment shall be
made out of amounts set aside pursuant to Section 1.03 for such purpose
and, to the extent such amounts were not so set aside, the Transferor
hereby agrees to pay such amounts to the Servicer to the extent of
Collections applied to Reinvestment under Section 1.03 during the
relevant Settlement Period.
(iii) In addition to the payments
described in clause (ii) above, during the Liquidation Period, Servicer
shall pay to the Administrator, for the benefit of Transferee, all
amounts set aside pursuant to Section 1.03 (A) on the last day of the
current Yield Period for any Asset Tranche funded by a Liquidity
Funding, in an amount not exceeding the Transferee's Tranche Investment
of such Asset Tranche, and (B) after reduction to zero of the
Transferee's Tranche Investments of the Asset Tranches, if any, funded
by Liquidity Fundings, on the last day of each CP Tranche Period, in an
amount not exceeding the Transferee's Tranche Investment of the Asset
Tranches funded by Commercial Paper Notes.
(d) Order of Application. (i) On each Settlement Date the
Administrator, on Transferee's behalf, shall apply the funds received by the
Administrator pursuant to Section 1.03 and this Section 3.01 to the items
specified in the subclauses below, in the order of priority of such subclauses:
(i) to accrued Earned Discount, plus
any previously accrued Earned Discount not paid;
(ii) to the accrued and unpaid
Servicer's Fee (if Servicer is not Transferor or its Affiliate);
(iii) to the Program Fee and the Unused
Fee accrued during such Settlement Period, plus any previously accrued
Program Fee and the Unused Fee not paid;
(iv) to other accrued and unpaid amounts
owing to Transferee or the Administrator hereunder (except Earned
Discount on any Asset Tranche funded by a Liquidity Funding which has
accrued but is not yet overdue under Section 1.03(c));
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<PAGE> 20
(v) to the purchase price of each
Reinvestment made in accordance with Section 1.03(a)(iii);
(vi) to the reduction of Transferee's
Total Investment, to the extent such reduction is required under
Section 3.01(c); and
(vii) to the accrued and unpaid
Servicer's Fee (if Servicer is Transferor or its Affiliate).
(ii) On and after the Termination Date, the Administrator
shall apply all amounts received by it pursuant to Section 1.03 and this Section
3.01 to the reduction of the Transferee's Total Investment and any other amounts
owed hereunder to Transferee or its assigns and the Administrator.
(e) Non-Distribution of Servicer's Fee. The
Administrator hereby consents (which consent may be revoked at any time after
the occurrence and during the continuance of a Liquidation Event), to the
retention by the Servicer of the amounts (if any) set aside pursuant to Section
1.03 in respect of the Servicer's Fee, in which case no distribution shall be
made in respect of Servicer's Fee pursuant to Section 3.01(d).
(f) Delayed Payment. If on any day described in
this Section 3.01 (or in Section 1.03(c) in respect of accrued Earned Discount
on Asset Tranches funded by Liquidity Fundings or by the issuance of Commercial
Paper Notes), because Collections during the relevant CP Tranche Period or Yield
Period were less than the aggregate amounts payable, Servicer shall not make any
payment otherwise required, the next available Collections in respect of the
Asset Interest shall be applied to such payment, and no Reinvestment shall be
permitted hereunder until such amount payable has been paid in full.
SECTION 3.02 Deemed Collections; Reduction of Transferee's
Total Investment, Etc.
(a) Deemed Collections. If on any day
(i) the Unpaid Balance of any Pool
Receivable is:
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(A) reduced as a
result of any defective, rejected or returned merchandise or
services, any cash discount, incorrect billings, price
rollbacks, freight charge discrepancies or any other
adjustment by any Transaction Party, any Originator or any
Affiliate thereof, or as a result of any tariff or other
governmental or regulatory action, or
(B) reduced or
canceled as a result of a setoff in respect of any claim by
the Obligor thereof (whether such claim arises out of the same
or a related or an unrelated transaction), or
(C) reduced on
account of the obligation of any Transaction Party,
any Originator or any Affiliate thereof to pay to the
related Obligor any rebate or refund, or
(D) less than the
amount included in calculating the Net Pool Balance for
purposes of any Monthly Report (for any reason other than such
Receivable becoming a Defaulted Receivable or Collections
being applied to such Unpaid Balance), or
(ii) any of the representations or
warranties of Transferor set forth in Section 6.01(k) or 6.01(o) were
not true when made with respect to any Pool Receivable, or any of the
representations or warranties of Transferor set forth in Section
6.01(k) or 6.01(o) are no longer true with respect to any Pool
Receivable, or any Pool Receivable is repurchased by any Originator
pursuant to the Sale Agreement,
then, on such day, Transferor shall be deemed to have received a Collection of
such Pool Receivable:
(x) in the case of clause (i) above, in the
amount of such reduction or cancellation or the difference between the actual
Unpaid Balance and the amount included in calculating such Net Pool Balance, as
applicable; and
(y) in the case of clause (ii) above, in the
amount of the Unpaid Balance of such Pool Receivable.
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Collections deemed received by Transferor under this Section 3.02(a) are herein
referred to as "Deemed Collections".
(b) Transferor's Optional Reduction of
Transferee's Total Investment. Subject to subsection (iii) below, Transferor may
at any time elect to reduce the Transferee's Total Investment as follows:
(i) Partial Reductions. If
Transferor elects to reduce the Transferee's Total Investment in part,
but not to zero:
(A) Transferor shall
give the Administrator, on Transferee's behalf, at least five
(5) Business Days' prior written notice of such reduction
(including the amount of such proposed reduction and the
proposed date on which such reduction will commence),
(B) the amount of any
such reduction shall be in an amount of $1,000,000 or an
integral multiple thereof,
(C) on the proposed
date of commencement of such reduction and on each day
thereafter, Servicer shall refrain from reinvesting
Collections pursuant to Section 1.03 until the amount thereof
not so reinvested shall equal the desired amount of reduction,
(D) Servicer shall
hold such Collections in trust for Transferee, pending
payment to the Administrator, as provided in
Section 1.03, and
(E) after giving
effect to such reduction, Transferee's Total Investment will
be at least equal to $25,000,000.
(ii) Reduction to Zero. If Transferor
shall elect to reduce the Transferee's Total Investment to zero:
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(A) Transferor shall
give the Administrator at least 30 days prior written notice
of such reduction, specifying the proposed date on which such
reduction will occur, and
(B) Transferee (and
any Liquidity Bank to the extent any part of the Asset
Interest has been assigned to such Liquidity Bank) shall
reassign and reconvey to Transferor the Asset Interest and
Transferor shall pay to Transferee (or such Liquidity Bank, as
applicable) in consideration thereof, a transfer price equal
to the sum of (i) the then outstanding Transferee's Total
Investment, (ii) all accrued and unpaid Earned Discount, all
amounts owed under the Fee Letter, and all other amounts owed
hereunder (whether or not due or accrued), in each case,
through the date of such reassignment and reconveyance and
payable in immediately available funds. Such reassignment and
reconveyance shall be without representation, warranty or
recourse of any kind, by, on the part of, or against the
Administrator, Transferee or any assignee of Transferee. Upon
payment of the transfer price in accordance with this Section
3.02(b)(ii), the interest of the Administrator, Transferee
and, to the extent applicable, each Liquidity Bank in the Pool
Receivables and Related Assets shall be deemed reassigned and
reconveyed to Transferor and, the Administrator shall execute
all agreements and other documents reasonably requested by
Transferor in order to evidence such reassignment and
reconveyance. Notwithstanding the foregoing, Transferor shall
remain liable for all obligations hereunder which survive
termination of this Agreement.
(iii) Conditions to Reduction. Any
reduction of the Transferee's Total Investment pursuant to this Section
3.02(b) shall be subject to the following conditions precedent:
(A) Transferor shall
use reasonable efforts to attempt to choose a reduction
amount, and the date of commencement thereof, so that
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such reduction shall commence and conclude in the same
Settlement Period, and
(B) Transferor shall
pay all amounts required to be paid by Transferor pursuant to
Section 4.03 in connection with such reduction.
SECTION 3.03 Payments and Computations, Etc.
(a) Payments. All amounts to be paid or deposited
by Transferor or Servicer to the Administrator or any other Person hereunder
(other than amounts payable under Section 4.02) shall be paid or deposited in
accordance with the terms hereof no later than 12:00 noon (Atlanta, Georgia
time) on the day when due in lawful money of the United States of America in
same day funds to the Transferee in care of Wachovia Bank, N.A., ABA #053100494,
Account #8735-098787, for credit: Blue Ridge Asset Funding Corporation,
Reference: WestPoint Stevens Inc., Attention: Deborah Williams (404) 332-4363,
or to such other account at the bank named therein or at such other bank as the
Administrator on behalf of Transferee may designate by written notice to the
Person making such payment.
(b) Late Payments. Transferor or Servicer, as
applicable, shall, to the extent permitted by law, pay to the Person to whom
payment is due, interest on all amounts not paid or deposited when due hereunder
equal to the Default Rate, payable on demand, provided, however, that such
interest rate shall not at any time exceed the maximum rate permitted by
applicable law.
(c) Method of Computation. All computations of
interest, Earned Discount, any fees payable under Section 4.01 and any other
fees payable by Transferor to Transferee or the Administrator hereunder shall be
made on the basis of a year of 360 days for the actual number of days (including
the first day but excluding the last day) elapsed.
SECTION 3.04 Treatment of Collections and Deemed Collections.
Transferor shall forthwith deliver to Servicer all Deemed Collections, and
Servicer shall hold or distribute such Deemed Collections as Earned Discount,
accrued Servicer's Fee, repayment of Transferee's Total Investment, and to other
accrued amounts owing hereunder to the same extent as if such Deemed Collections
had actually been received on the date of such delivery to Servicer. If
Collections are then being paid to the Administrator, on Transferee's behalf, or
its designee, or lock-boxes or accounts directly or indirectly owned or
controlled by the Administrator, Servicer
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shall forthwith cause such Deemed Collections to be paid to the Administrator,
on Transferee's behalf, or its designee or to such lock-boxes or accounts, as
applicable, or as the Administrator shall request. So long as Transferor shall
hold any Collections (including Deemed Collections) required to be paid to
Servicer or the Administrator, it shall segregate such Collections and hold such
Collections in trust and shall clearly mark its records to reflect such trust.
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01 Fees. Transferor shall pay to Transferee certain
fees from time to time in amounts and payable on such dates as are set forth in
the letter dated on or about the date hereof (as amended from time to time, the
"Fee Letter") between Transferor and the Administrator.
SECTION 4.02 Yield Protection.
(a) If any Regulatory Change occurring after the
date hereof
(A) shall subject an
Affected Party to any tax, duty or other charge with respect
to the Asset Interest owned by or funded by it, or any
obligations or right to make Transfers or Reinvestments or to
provide funding therefor, or shall change the basis of
taxation of payments to the Affected Party of any Transferee's
Total Investments or Earned Discount owned by, owed to or
funded in whole or in part by it or any other amounts due
under this Agreement in respect of the Asset Interest owned by
or funded by it or its obligations or rights, if any, to make
Transfers or Reinvestments or to provide funding therefor
(except for (1) taxes based on, or measured by, net income, or
changes in the rate of tax on or determined by reference to
the overall net income, of such Affected Party, in each case,
imposed by any jurisdiction in which the overall net income of
such Affected Party is subject to taxation on the date hereof
or the date on which such Affected Party becomes a party
hereto or acquires an interest hereunder, as applicable or,
(2) franchise taxes, taxes on, or in the nature of, doing
business taxes or capital taxes); or
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(B) shall impose,
modify or deem applicable any reserve (including, without
limitation, any reserve imposed by the Federal Reserve Board,
but excluding any reserve included in the determination of
Earned Discount), special deposit, insurance assessment or
similar requirement against any Affected Party in respect of
the assets which are of the type constituting the Asset
Interest, deposits or obligations with or for the account of
any Affected Party or with or for the account of any affiliate
(or entity deemed by the Federal Reserve Board to be an
affiliate) of any Affected Party, or credit extended by any
Affected Party; or
(C) shall change the
amount of capital maintained or required or requested or
directed to be maintained by any Affected Party in respect of
its assets which are of the type constituting the Asset
Interest; or
(D) shall impose any
other condition affecting any Asset Interest owned or funded
in whole or in part by any Affected Party, or its obligations
or rights, if any, to make Transfers or Reinvestments or to
provide funding therefor;
and the result of any of the foregoing is or would be
(x) to increase the cost to, or to impose a
cost on, (1) an Affected Party funding or making or maintaining any
Transfers or Reinvestments, any purchases, reinvestments, or loans or
other extensions of credit under the Liquidity Agreement, or any
commitment of such Affected Party with respect to any of the foregoing,
or (2) the Administrator for continuing its or Transferor's
relationship with Transferee, in each case, in an amount deemed to be
material by such Affected Party,
(y) to reduce the amount of any sum received
or receivable by an Affected Party under this Agreement or under the
Liquidity Agreement, or
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(z) in the reasonable determination of such
Affected Party, to reduce the rate of return on the capital of an
Affected Party as a consequence of its obligations hereunder or arising
in connection herewith to a level below that which such Affected Party
could otherwise have achieved,
then, within thirty (30) days after demand by such Affected Party (which demand
shall be accompanied by a certificate setting forth, in such reasonable detail
as shall reasonably be requested by Transferor, the basis of such demand and the
methodology for calculating, and the calculation of, the amounts claimed by the
Affected Party), Transferor shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
additional or increased cost or such reduction.
(b) Each Affected Party will promptly notify
Transferor and the Administrator of any event of which it has knowledge
(including any future event that, in the judgment of such Affected Party, is
reasonably certain to occur) which will entitle such Affected Party to
compensation pursuant to this Section 4.02. No failure to give or delay in
giving such notification shall adversely affect the rights of any Affected Party
to such compensation; provided that Transferor shall not be required to
compensate any Affected Party pursuant to this Section 4.02 for any increased
costs or reductions incurred more than 60 days prior to the date that such
Affected Party notifies Transferor of the Regulatory Change giving rise to such
increased costs or reductions and of such Affected Party's intention to claim
compensation therefor; provided further that, if the Regulatory Change giving
rise to such increased costs or reductions is retroactive, then the 60-day
period referred to above shall be extended to include the period of retroactive
effect thereof.
(c) In determining any amount provided for or
referred to in this Section 4.02, an Affected Party may use any reasonable
averaging and attribution methods (consistent with its ordinary business
practices) that it (in its reasonable discretion) shall deem applicable. Any
Affected Party when making a claim under this Section 4.02 shall submit to
Transferor the above-referenced certificate as to such additional or increased
cost or reduced return (including calculation thereof in reasonable detail),
which statement shall, in the absence of demonstrable error, be conclusive and
binding upon Transferor.
(d) If any Affected Party requests compensation
under this Section 4.02, then such Affected Party, to the extent applicable,
shall use reasonable efforts to designate a different lending office for funding
its portion of the Asset Interest if, in the judgement of such Affected Party,
such designation (i) would eliminate or reduce amounts payable pursuant to this
Section 4.02 in the future and
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(ii) would not subject such Affected Party to any unreimbursed cost or expense
and would not otherwise be disadvantageous to such Affected Party. Transferor
hereby agrees to pay all reasonable costs and expenses incurred by any Affected
Party in connection with any such designation.
SECTION 4.03 Funding Losses. (a) In the event that Transferee
or any Liquidity Bank shall actually incur any loss or expense (including any
loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by Transferee or such Liquidity Bank to make
any Transfer or Liquidity Funding (as applicable) or maintain any Transfer or
Liquidity Funding (as applicable)) (such loss or expense, "Broken Funding
Costs") as a result of (i) any settlement with respect to Transferee's Tranche
Investment of any Asset Tranche being made on any day other than the scheduled
last day of an applicable CP Tranche Period or Yield Period with respect thereto
(it being understood that the foregoing shall not apply to any portion of the
Transferee's Total Investment that is accruing Earned Discount calculated by
reference to the Alternate Base Rate), or (ii) any Transfer not being made in
accordance with a request therefor under Section 1.02, then, upon written notice
from the Administrator to Transferor and Servicer, Transferor shall pay to
Servicer, and Servicer shall pay to the Administrator for the account of
Transferee or such Liquidity Bank (as applicable), the amount of such Broken
Funding Costs. Such written notice (which shall include the methodology for
calculating, and the calculation of, the amount of such loss or expense, in
reasonable detail) shall, in the absence of demonstrable error, be conclusive
and binding upon the Transferor and Servicer.
(b) In the event Transferor shall be required to pay any
Broken Funding Costs pursuant to Section 4.03(a)(i) in connection with any
required reduction of the Aggregate Outstandings or the Asset Interest pursuant
to the terms hereof, Transferor may, in lieu of paying such Broken Funding
Costs, deposit an amount (the "Defeasance Amount") equal to the amount necessary
to reduce the Aggregate Outstandings and the Asset Interest to the level
otherwise required hereunder to an account in the name of the Administrator,
maintained at Wachovia (the "Collateral Account"). The Administrator shall
invest the proceeds in the Collateral Account in one or more Permitted
Investments as directed by Transferor by written notice to the Administrator,
which Permitted Investments shall have a maturity approximating the time period
until the end of the applicable CP Tranche Period or Yield Period relating to
the Asset Tranche required to be reduced. The sole use of the principal of each
Permitted Investment shall be to satisfy in full the Transferee's Total
Investment and Earned Discount that will be owing at the conclusion of the
applicable CP Tranche Period or Yield Period, and Transferor is entitled only to
such interest as may be generated by the Permitted Investments. In addition, (i)
the Administrator will
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purchase each Permitted Investment at the price offered to it in the usual
course of its business; (ii) Transferor shall not be entitled to interest for
any period of time for which the Administrator is unable to invest a Defeasance
Amount in a Permitted Investment; (iii) the Administrator makes no
representation with respect to the nominal or real rate of return associated
with any Permitted Investment to be purchased hereunder; (iv) Transferor shall
bear all risks relating to the real return that each Permitted Investment may
generate; (iv) Transferor may not require the Administrator to sell any
Permitted Investment prior to its date of maturity; (v) the Administrator shall
not make any payments of interest to Transferor prior to the termination of the
applicable CP Tranche Period or Yield Period; and (vi) Transferor shall be
responsible for the payment of all taxes associated with the interest payable on
each Permitted Investment.
ARTICLE V
CONDITIONS OF TRANSFERS
SECTION 5.01 Conditions Precedent to Initial Transfer. The
initial Transfer pursuant to this Agreement is subject to the condition
precedent that the Administrator, on Transferee's behalf, shall have received,
on or before the date of such initial Transfer, the following each (unless
otherwise indicated) dated such date and in form and substance reasonably
satisfactory to the Administrator:
(a) Executed counterparts to this Agreement, duly
executed by each of the parties hereto;
(b) The Sale Agreement, duly executed by the
parties thereto and a copy of each document delivered pursuant to Section 4.1
thereof;
(c) A certificate of the Secretary or Assistant
Secretary of each Transaction Party certifying (i) the Articles or Certificate
of Incorporation of such Transaction Party, duly certified by the Secretary of
State of such Transaction Party's state of incorporation, as of a recent date
acceptable to Administrator, on Transferee's behalf, (ii) a copy of the by-laws
of such Transaction Party, (iii) the names and true signatures of the officers
of such Transaction Party authorized on its behalf to sign this Agreement and
the other Transaction Documents to be delivered by it hereunder (on which
certificate the Administrator and Transferee may conclusively rely until such
time as the Administrator, on Transferee's behalf, shall receive from such
Transaction Party a revised certificate meeting the requirements of this
subsection (c)(iii)) and (iv) a copy of the resolutions of the Board of
Directors of such
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Transaction Party approving the Transaction Documents to be delivered by it and
the transactions contemplated hereby and thereby;
(d) Copies of good standing certificates for each
Transaction Party, issued as of a recent date acceptable to the Administrator,
on Transferee's behalf, by the Secretaries of State of the state of
incorporation of such Transaction Party and the state where such Transaction
Party's principal place of business is located;
(e) (i) Proper financing statements (Form UCC-1),
in such form as the Administrator, on Transferee's behalf, may reasonably
request, naming each Originator as the debtor and seller of the Pool Receivables
originated by it and Related Assets, Transferor as the secured party and
purchaser thereof and Transferee as assignee, duly executed by each party and
(ii) proper financing statements (Form UCC-1), in such form as the
Administrator, on Transferee's behalf, may reasonably request, naming Transferor
as the debtor and transferor of an undivided percentage interest in the Pool
Receivables and Related Assets and the Administrator, on behalf of Transferee,
as the secured party and transferee thereof, duly executed by each party, or
other, similar instruments or documents, as may be necessary or, in the opinion
of the Administrator, on Transferee's behalf, desirable under the UCC or any
comparable law of all appropriate jurisdictions to perfect the sale by the
Originators to Transferor of, and Transferee's undivided percentage interest in,
the Pool Receivables and Related Assets;
(f) Search reports from a Person satisfactory to
the Administrator (i) listing all effective financing statements that name any
Transaction Party and any Originator as debtor and that are filed in the
jurisdictions in which filings were made pursuant to Section 5.01(e) and in such
other jurisdictions that the Administrator shall reasonably request, together
with copies of such financing statements (none of which, except for any of the
financing statements described in Section 5.01(e) shall cover any Pool
Receivables or Related Assets), and (ii) listing all tax liens and judgment
liens (if any) filed against any debtor referred to in clause (i) above in the
jurisdictions described therein and showing no evidence of such liens;
(g) A copy of the Subordinated Note, duly executed
by Transferor;
(h) Favorable opinions of Weil, Gotshal & Manges
LLP, counsel to the Transaction Parties and the Originators, in substantially
the form of Exhibit 5.01(h);
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(i) A favorable opinion of Weil, Gotshal & Manges
LLP, counsel to the Transaction Parties and the Originators, as to:
(i) the existence of a "true sale" of
the Pool Receivables from the Originators to Transferor under the Sale
Agreement; and
(ii) the inapplicability of the
doctrine of substantive consolidation to Transferor and WestPoint in
connection with any bankruptcy proceeding involving any Transaction
Party;
(j) Favorable opinions of Sutherland, Asbill and
Brennan LLP, as to Georgia UCC perfection and priority matters;
(k) A pro forma Monthly Report, prepared as of
November 30, 1998;
(l) A report in form and substance satisfactory to
the Administrator, on Transferee's behalf, from the Initial Due Diligence
Contractor as to a pre-closing due diligence completed by the Initial Due
Diligence Contractor;
(m) The Liquidity Agreement, in form and substance
satisfactory to the Administrator, on Transferee's behalf, duly executed by
Transferee, the Liquidity Agent and each Liquidity Bank;
(n) with respect to WestPoint, a consolidated
balance sheet, income statement and statement of shareholders' equity as at
December 31, 1997, together with a certification of the vice president,
controller, chief financial officer, treasurer or assistant treasurer of
WestPoint in the form attached hereto as Exhibit B;
(o) An executed copy of a Lock Box/Collection
Account Agreement with respect to each Lock-Box Account and the Concentration
Account;
(p) An executed copy of the Reconveyance Agreement,
in form and substance satisfactory to the Administrator, on Transferee's behalf,
duly executed by the parties thereto;
(q) A notice relating to the initial Transfer
hereunder, substantially in the form of Exhibit 1.02(a);
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(r) Executed copies of any third-party consents or
releases (including, without limitation, any UCC-3 termination statements)
necessary or in the Administrator's discretion advisable in connection with any
Transaction Party's or any Originator's execution, delivery and performance of
any Transaction Document to which it is a party; and
(s) Such other agreements, instruments,
certificates, opinions and other documents as the Administrator may reasonably
request.
SECTION 5.2 Conditions Precedent to All Transfers and
Reinvestments. Each Transfer (including the initial Transfer) and each
Reinvestment shall be subject to the further conditions precedent that on the
date of such Transfer or Reinvestment the following statements shall be true
(and Transferor, by accepting the proceeds of such Transfer or by receiving the
proceeds of such Reinvestment, and each other Transaction Party, upon such
acceptance or receipt by Transferor, shall be deemed to have certified that):
(a) the representations and warranties contained in
Section 6.01 are correct on and as of such day as though made on and as of such
day and shall be deemed to have been made on such day,
(b) no event has occurred and is continuing, or
would result from such Transfer or Reinvestment, that constitutes a Liquidation
Event or Unmatured Liquidation Event,
(c) after giving effect to each proposed Transfer or
Reinvestment, the Aggregate Outstandings will not exceed the Transfer Limit and
the Asset Interest will not exceed 100%;
(d) the Termination Date shall not have occurred,
(e) in the case of a Transfer, the Administrator
shall have timely received an appropriate notice of the proposed Transfer in
accordance with Section 1.02(a), and
(f) the Administrator shall have received such
other documents as it may have reasonably requested in accordance with Section
7.02(k);
provided, however, the absence of the occurrence and continuance of an Unmatured
Liquidation Event shall not be a condition precedent to any Reinvestment or any
Transfer on any day which does not cause the Transferee's Total Investment,
after
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giving effect to such Reinvestment or Transfer, to exceed the Transferee's
Total Investment as of the opening of business on such day.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01 Representations and Warranties of Transaction
Parties. Each Transaction Party represents and warrants as to itself, as of the
date hereof and as of each day throughout the term of this Agreement, as
follows:
(a) Organization and Good Standing; Ownership.
Each Transaction Party has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of its incorporation,
with the corporate power and authority to own its properties and to conduct its
business as such properties are presently owned and such business is presently
conducted. Transferor had at all relevant times, and now has, all necessary
power, authority, and legal right to acquire and own the Pool Receivables and
Related Assets.
(b) Due Qualification. Each Transaction Party is
duly qualified to do business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business requires such
qualification, licenses or approvals, except where the failure to be so
qualified or have such licenses or approvals could not reasonably be expected to
have a Material Adverse Effect.
(c) Power and Authority; Due Authorization. Each
Transaction Party (i) has all necessary corporate power, authority and legal
right (A) to execute and deliver this Agreement and the other Transaction
Documents to which it is a party and to perform its obligations hereunder and
thereunder, (B) in the case of Servicer, to service the Receivables and the
Related Assets in accordance with the Credit and Collection Policy, this
Agreement and the Sale Agreement, and (C) in the case of Transferor, to
transfer, assign and convey the Asset Interest on the terms and conditions
herein provided, (ii) has duly authorized by all necessary corporate action the
execution, delivery and performance of this Agreement and the other Transaction
Documents to which it is a party and, in the case of Transferor, the sales and
assignments described in clause (i)(C) above and (iii) has duly executed and
delivered this Agreement and each other Transaction Document to which such
Transaction Party is a party.
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(d) Valid Sale; Binding Obligations. (i) This
Agreement constitutes a valid sale, transfer, and assignment of the Asset
Interest (or a valid grant of a security interest in the Receivables and Related
Assets) to the Administrator on Transferee's behalf, enforceable against
creditors of, and purchasers from, Transferor, and (ii) this Agreement and each
other Transaction Document signed by such Transaction Party constitutes, a
legal, valid and binding obligation of such Transaction Party, enforceable
against such Transaction Party in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws from time to time in effect affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the
transactions contemplated by this Agreement and the other Transaction Documents
to which such Transaction Party is a party and the fulfillment of the terms
hereof and thereof will not (i) conflict with, result in any breach of any of
the terms and provisions of, or constitute (with or without notice or lapse of
time or both) a default under, the articles or certificate of incorporation or
by-laws of such Transaction Party, or any indenture, loan agreement, receivables
purchase agreement, mortgage, deed of trust, or other agreement or instrument to
which such Transaction Party is a party or by which it or any of its properties
is bound, (ii) result in the creation or imposition of any Lien upon any of such
Transaction Party's properties pursuant to the terms of any such indenture, loan
agreement, receivables purchase agreement, mortgage, deed of trust, or other
agreement or instrument, other than this Agreement and the other Transaction
Documents, or (iii) violate any law or any order, rule, or regulation applicable
to such Transaction Party of any court or of any federal, state or foreign
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over such Transaction Party or any of its properties.
(f) No Proceedings. There are no proceedings or
investigations pending, or, to such Transaction Party's knowledge, threatened,
before any court, regulatory body, arbitrator, administrative agency, or other
tribunal or governmental instrumentality (i) asserting the invalidity of this
Agreement or any other Transaction Document to which such Transaction Party is a
party, (ii) seeking to prevent the sale and assignment of the Receivables and
the related rights and other property with respect thereto under the Sale
Agreement or the Reconveyance Agreement or of the Asset Interest under this
Agreement or the consummation of any of the other transactions contemplated by
this Agreement or any other Transaction Document to which such Transaction Party
is a party or (iii) that could reasonably be expected to have a Material Adverse
Effect of the type described in clauses (ii), (iii), and (iv) of the definition
of "Material Adverse Effect." There are no proceedings or
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investigations pending as of the date hereof, or, to such Transaction Party's
knowledge, threatened as of the date hereof, before any court, regulatory body,
arbitrator, administrative agency, or other tribunal or governmental
instrumentality that could reasonably be expected to have a Material Adverse
Effect of the type described in clause (i) of the definition of "Material
Adverse Effect."
(g) Bulk Sales Act. No transaction contemplated
hereby requires compliance with any bulk sales act or similar law.
(h) Government Approvals. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution, delivery and
performance by such Transaction Party of this Agreement and each other
Transaction Document to which it is a party, except, in the case of Transferor,
for (i) the filing of the UCC financing statements referred to in Article V, and
(ii) the filing of any UCC continuation statements and amendments from time to
time required in relation to any UCC financing statements filed in connection
with this Agreement, as provided in Section 8.05, all of which, at the time
required in Article V or Section 8.05, as applicable, shall have been duly made
(except in the case of any such UCC statement referred to in Article V, in which
case such UCC statement shall have been duly made within a reasonable time after
the date hereof) and shall be in full force and effect.
(i) Financial Condition. The consolidated balance
sheets of WestPoint and its consolidated Subsidiaries as at December 31, 1997,
and the related statements of income and shareholders' equity of WestPoint and
its consolidated Subsidiaries for the fiscal year then ended, certified by Ernst
& Young, LLP, independent certified public accountants, copies of which have
been furnished to the Administrator, fairly present in all material respects the
consolidated financial condition of WestPoint and its consolidated Subsidiaries
as at such date and the consolidated results of the operations of WestPoint and
its consolidated Subsidiaries for the period ended on such date, all in
accordance with GAAP consistently applied. As of the date hereof, there has been
no material adverse change in the financial condition, business or operations of
WestPoint and its consolidated Subsidiaries since the date of such financial
statements. On the date hereof, Transferor is, and on the date of each Transfer
and Reinvestment (both before and after giving effet to such Transfer or
Reinvestment), Transferor shall be solvent.
(j) Use of Proceeds. No funds obtained by such
Transaction Party under this Agreement or any other Transaction Document will be
used (i) for a purpose that violates or will conflict with or contravene any of
Regulations T, U and X promulgated by the Board of Governors of the Federal
Reserve System from time
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to time or (ii) to acquire any security in any transaction that is subject to
Section 13 or 14 of the Securities and Exchange Act of 1934, as amended.
(k) Quality of Title.
(i) Each Pool Receivable, together
with the Related Assets, is owned by Transferor free and clear of any
Lien (other than any Lien arising solely as the result of any action
taken by Transferee (or any assignee thereof) or by the Administrator).
When the Administrator, on behalf of Transferee, makes a Transfer or
Reinvestment, it shall have acquired and shall at all times thereafter
continuously maintain a valid and perfected first priority undivided
percentage ownership interest to the extent of the Asset Interest in
each Pool Receivable and each Related Asset with respect thereto, free
and clear of any Lien (other than any Lien arising as the result of any
action taken by Transferee (or any assignee thereof) or by the
Administrator).
(ii) No currently effective financing
statement or other instrument similar in effect covering any Pool
Receivable, any interest therein or the Related Assets with respect
thereto is on file in any recording office except such as may be filed
(1) in favor of the Originators in accordance with any Contract, (2) in
favor of Transferor in connection with the Sale Agreement or (3) in
favor of Transferee or the Administrator in accordance with this
Agreement or in connection with any Lien arising solely as the result
of any action taken by Transferee (or any assignee thereof) or by the
Administrator.
(l) Accuracy of Information. No information
heretofore or contemporaneously furnished in writing (if prepared by such
Transaction Party, or to the extent information therein was supplied by such
Transaction Party) by or on behalf of such Transaction Party to the
Administrator or the Transferee for purposes of, pursuant to, or in connection
with, this Agreement and any other Transaction Document or any transaction
contemplated hereby or thereby was, and no other such written information
furnished by such Transaction Party to the Administrator or Transferee will be,
inaccurate in any material respect as of the date it was furnished or (except as
otherwise disclosed to the Administrator or Transferee at such time) as of the
date as of which such information is dated or certified, or contained or will
contain any material misstatement of fact or omitted or will omit to state any
material
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fact necessary to make such information not materially misleading, in light of
the circumstances under which such information was furnished.
(m) Offices. The principal places of business and
chief executive offices of Servicer and Transferor are located at the respective
addresses set forth on Schedule 14.02, and the offices where Servicer and
Transferor keep all their books, records and documents evidencing Pool
Receivables, the related Contracts and all purchase orders and other agreements
related to such Pool Receivables are located at the addresses specified in
Schedule 6.01(m) (or at such other locations, notified to the Administrator, on
Transferee's behalf, in accordance with Section 7.01(f), in jurisdictions where
all action required by Section 8.05 has been taken and completed).
(n) Lock-Box Accounts and Concentration Account.
The names and addresses of all the Lock-Box Banks and the Concentration Bank,
together with the account numbers of the Lock-Box Accounts and the Concentration
Account at such Lock-Box Banks or Concentration Bank (as applicable), are
specified in Schedule 6.01(n) (or have been notified to and approved by the
Administrator, on Transferee's behalf, in accordance with Section 7.03(d)).
Transferor or the Servicer has instructed (or has caused the Originators to
instruct) all Obligors to pay all Collections directly to a segregated lock-box
identified on Schedule 6.01(n). All proceeds remitted to any such lock-box will
be deposited directly by the applicable Lock-Box Bank into a Lock-Box Account
and all such funds deposited to the Lock-Box Accounts will be transferred daily
to the Concentration Account. Each lock-box identified on Schedule 6.01(n) and
each Lock-Box Account is subject to a Lock-Box/Collection Account Agreement that
is in full force and effect and exclusive dominion and control of each such
lock-box and Lock-Box Account has been transferred to Transferor. Transferor has
not granted any Person, other than the Administrator as contemplated by this
Agreement, any currently effective right of dominion and control of any such
lock-box or Lock-Box Account or the Concentration Account, or the right to take
dominion and control of any such lock-box or Lock-Box Account or the
Concentration Account at a future time or upon the occurrence of a future event.
Each Transaction Party has and maintains accounting, administrative and
operating procedures that permit identification of the Collections.
(o) Eligible Receivables. Each Receivable included
in the Net Pool Balance as an Eligible Receivable is an Eligible Receivable on
such date.
(p) Year 2000 Compliance. Each Transaction Party
has conducted a review and assessment of its and its Subsidiaries' computer
applications and made inquiry of its key suppliers, vendors and customers with
respect to the Year
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2000 Problem and, based on that review and inquiry, such Transaction Party
believes that the Year 2000 Problem will not result in a Material Adverse
Effect.
(q) Compliance with Credit and Collection Policy.
With respect to each Pool Receivable, each of Transferor, Servicer and each
Originator has complied in all material respects with the Credit and Collection
Policy.
(r) Payments to Originators. With respect to each
Receivable transferred to Transferor by the Originators pursuant to the Sale
Agreement, Transferor has given reasonably equivalent value to each Originator
in consideration for the Receivables originated by it and the Related Assets
with respect thereto and such transfer was not made for or on account of
antecedent debt. No transfer by any Originator of any Receivable is or may be
voided under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. ss.ss.
101 et. seq.), as amended.
(s) Net Pool Balance. On each Settlement Date,
after giving effect to the payments made under Section 3.01(c), the Net Pool
Balance is at least equal to the sum of (i) the Transferee's Total Investment,
plus (ii) the Required Reserve. On each day other than a Settlement Date, if
the Net Pool Balance is less than the sum of (i) the Transferee's Total
Investment, plus (ii) the Required Reserve, the Borrowing Availability is at
least equal to $30,000,000.
(t) Names. In the past five years, Transferor has
not used any corporate names, trade names or assumed names other than the name
in which it has executed this Agreement.
(u) Ownership of Transferor. WestPoint owns,
directly or indirectly, 100% of the issued and outstanding capital stock of
Transferor, free and clear of any Lien. Such capital stock is validly issued,
fully paid and nonassessable, and there are no options, warrants or other rights
to acquire securities of Transferor.
(v) Investment Company. Transferor is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended from time to time, or any successor statute.
(w) Taxes. Such Transaction Party has filed all
material tax returns and reports required by law to have been filed by it and
has paid all taxes and governmental charges thereby shown to be owing, except
any such taxes which are not yet delinquent or are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with generally accepted accounting principles shall have been set
aside on its books.
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(x) Compliance with Applicable Laws. Such
Transaction Party is in compliance, in all respects, with the requirements of
all applicable laws, rules, regulations, and orders of all governmental
authorities (including, without limitation, Regulation Z, laws, rules and
regulations relating to usury, truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection practices and
privacy and all other consumer laws, if any, applicable to the Pool Receivables
and related Contracts), except where such noncompliance, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
ARTICLE VII
GENERAL COVENANTS OF TRANSACTION PARTIES
SECTION 7.01 Affirmative Covenants of Transaction Parties.
From the date hereof until the Final Payout Date, unless the Administrator shall
otherwise consent in writing:
(a) Compliance With Laws, Etc. Each Transaction
Party will comply with all applicable laws, rules, regulations and orders,
including those with respect to the Pool Receivables and related Contracts and
other agreements related thereto, except where the failure to so comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(b) Preservation of Corporate Existence. Each
Transaction Party will preserve and maintain its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and qualify
and remain qualified in good standing as a foreign corporation in each
jurisdiction where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualification could reasonably be expected to have a
Material Adverse Effect.
(c) Reviews. Each Transaction Party will at any
time and from time to time, at such Transaction Party's expense, upon not less
than five (5) Business Days' notice (unless a Liquidation Event has occurred and
is continuing (or the Administrator, on Transferee's behalf, reasonably believes
in good faith that a Liquidation Event has occurred and is continuing), in which
case one (1) Business Days' notice shall be required) during regular business
hours, permit the Administrator, on Transferee's behalf, or any of its agents or
representatives, (i)(A) to examine and make copies of and abstracts from all
books, records and documents (including, without limitation, computer tapes and
disks) in the possession or under the control of such Transaction Party relating
to Pool Receivables and the Related Assets, including,
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without limitation, the Contracts and purchase orders and other agreements
related thereto, and (B) to visit the offices and properties of such Transaction
Party for the purpose of examining such materials described the foregoing clause
(A), and discussing matters relating to Pool Receivables and the Related Assets
or such Transaction Party's financial condition, performance hereunder or under
any other Transaction Document or performance under any Contract, in each case,
with any of the officers or employees of such Transaction Party having knowledge
of such matters; (ii) to meet with the independent auditors of such Transaction
Party to review with such auditors the books and records of such Transaction
Party with respect to the Pool Receivables and Related Assets; and (iii) without
limiting the provisions of clause (i) or (ii) next above, from time to time, at
the expense of such Transaction Party, permit certified public accountants or
other auditors acceptable to the Administrator to conduct a review of such
Transaction Party's books and records with respect to the Pool Receivables and
Related Assets; provided, that, so long as no Liquidation Event has occurred and
is continuing, (x) such reviews shall not be done more than four (4) times in
any one calendar year and (y) the Transaction Parties shall only be responsible
for the costs and expenses of one such review in any one calendar year.
(d) Keeping of Records and Books of Account.
Servicer will maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing Pool
Receivables in the event of the destruction of the originals thereof), and keep
and maintain, all documents, books, records and other information reasonably
necessary or advisable for the collection of all Pool Receivables (including,
without limitation, records adequate to permit the daily identification of
outstanding Unpaid Balances by Obligor and related debit and credit details of
the Pool Receivables).
(e) Performance and Compliance with Receivables and
Contracts. Each Transaction Party will, at its expense, timely and fully
perform and comply with all provisions, covenants and other promises required
to be observed by it under the Contracts and all other agreements related to
the Pool Receivables and the Related Assets, the breach of which provisions,
covenants or promises could reasonably be expected to have a Material Adverse
Effect.
(f) Location of Records. Each Transaction Party
will keep its principal place of business and chief executive office, and the
offices where it keeps its records concerning or related to the Pool Receivables
at the address(es) of Servicer and Transferor referred to in Section 6.01(m) or,
upon 30 days' prior written notice to the Administrator, at such other locations
in jurisdictions where all action required by Section 8.05 shall have been taken
and completed.
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(g) Credit and Collection Policies. Each
Transaction Party will comply in all material respects with the Credit and
Collection Policy in regard to each Pool Receivable and all related Contracts.
(h) Sale Agreement. Transferor will (i) perform
and comply with all of its covenants and agreements set forth in the Sale
Agreement, (ii) enforce the rights and remedies accorded to Transferor under
the Sale Agreement, and (iii) enforce the performance by the Originators of
their respective obligations under the Sale Agreement.
(i) Collections. The Servicer shall instruct (or
shall cause Transferor to instruct) all Obligors to pay all Collections directly
to a segregated lock-box identified on Schedule 6.01(n). Transferor shall cause
(i) all proceeds remitted to any such lock-box to be deposited directly by the
applicable Lock-Box Bank into a Lock-Box Account, (ii) all proceeds deposited to
any Lock-Box Account to be transferred daily to the Concentration Account, and
(iii) each such lock-box and Lock-Box Account to be subject at all times to a
Lock-Box/Collection Account Agreement that is in full force and effect.
Transferor shall not grant any Person, other than the Administrator as
contemplated by Section 8.05 of this Agreement, dominion and control of any such
lock-box or Lock-Box Account or the Concentration Account, or the right to take
dominion and control of any such lock-box or Lock-Box Account or the
Concentration Account at a future time or upon the occurrence of a future event.
Transferor shall maintain accounting, administrative and operating procedures
that permit identification of the Collections.
(j) Ownership Interest of Transferor. Transferor
shall take all necessary action to vest legal and equitable title to the
Receivables and the Related Assets purchased under the Sale Agreement
irrevocably in Transferor, free and clear of any Liens other than Liens in favor
of the Administrator on behalf of Transferee and its assigns (including, without
limitation, the filing of all financing statements or other similar instruments
or documents necessary under the UCC of all appropriate jurisdictions (or any
comparable law) to perfect Transferor's interest in such Receivables and Related
Assets and such other action to perfect, protect or more fully evidence the
interest of Transferor as the Administrator may reasonably request).
(k) Ownership Interest of Transferee. Transferor
shall take all necessary action to establish and maintain, in favor of the
Administrator on behalf of Transferee, a valid and perfected first priority
undivided percentage ownership or security interest in all Pool Receivables and
the Related Assets to the full extent contemplated herein, free and clear of any
Liens other than Liens in favor of the Administrator on behalf of Transferee and
its assigns (including, without limitation,
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the filing of all financing statements or other similar instruments or documents
necessary under the UCC of all appropriate jurisdictions (or any comparable law)
to perfect the Administrator's and Transferee's interest in such Pool
Receivables and Related Assets and such other action to perfect, protect or more
fully evidence the interest of the Administrator and Transferee as Transferee or
the Administrator may reasonably request).
(l) Payments under Sale Agreement. With respect to
each Receivable purchased by Transferor from the Originators, such sale shall be
effected under, and in strict compliance with the terms of the Sale Agreement,
including, without limitation, the terms relating to the amount and timing of
payments to be made to the Originators in respect of the purchase price for such
Receivable.
(m) Year 2000 Compliance. Each Transaction Party
will use its best efforts to meet the milestones contained in its Year 2000 Plan
and will use its best efforts to have all hardware and software systems of such
Transaction Party and its Subsidiaries Year 2000 Compliant and Ready (including
all internal and external testing) on or before June 30, 1999.
(n) Marking of Data Processing Reports. Transferor
will on or prior to December 24, 1998 (and shall deliver to the Administrator on
or before such date a certificate of an authorized officer certifying compliance
with this subsection (n)) place on its computer systems and records which store
information relating to and which evidence the Pool Receivables, and take all
steps reasonably necessary to ensure that there shall remain on such computer
systems and records the following legend (or the substantive equivalent
thereof): THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO WPS RECEIVABLES
CORPORATION PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT, DATED AS OF DECEMBER
18, 1998, AS AMENDED FROM TIME TO TIME, BETWEEN WESTPOINT STEVENS INC. AND WPS
RECEIVABLES CORPORATION; AND AN OWNERSHIP AND SECURITY INTEREST IN THE
RECEIVABLES DESCRIBED HEREIN AND IN SUCH RECEIVABLES PURCHASE AGREEMENT HAS BEEN
GRANTED AND ASSIGNED TO WACHOVIA BANK, N.A., AS ADMINISTRATOR ON BEHALF OF BLUE
RIDGE ASSET FUNDING CORPORATION, PURSUANT TO AN ASSET INTEREST TRANSFER
AGREEMENT, DATED AS OF DECEMBER 18, 1998, AMONG WPS RECEIVABLES CORPORATION,
BLUE RIDGE ASSET FUNDING CORPORATION, AND WACHOVIA BANK, N.A., AS THE
ADMINISTRATOR.
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SECTION 7.02 Reporting Requirements of Transaction Parties.
From the date hereof until the Final Payout Date, unless the Administrator, on
Transferee's behalf, shall otherwise consent in writing:
(a) Quarterly Financial Statements-WestPoint.
WestPoint will furnish to the Administrator (whether or not WestPoint is then
acting as Servicer hereunder), as soon as available and in any event within 50
days after the end of each of the first three quarters of each fiscal year of
WestPoint, copies of its consolidated balance sheets and related statements of
income and statements of cash flow, showing the financial condition of WestPoint
and its consolidated Subsidiaries as of the close of such fiscal quarter and the
results of its operations and the operations of such Subsidiaries during such
fiscal quarter and the then elapsed portion of the fiscal year, together with an
officer's certificate in the form attached hereto as Exhibit B executed by the
controller, chief financial officer or treasurer of WestPoint.
(b) Annual Financial Statements-WestPoint.
WestPoint will furnish to the Administrator (whether or not WestPoint is then
acting as Servicer hereunder) as soon as available and in any event within 95
days after the end of each fiscal year of WestPoint, copies of its consolidated
balance sheets and related statements of income and statements of cash flow,
showing the financial condition of WestPoint and its consolidated Subsidiaries
as of the close of such fiscal year and the results of its operations and the
operations of such Subsidiaries during such year, all audited by Ernst & Young,
LLP or other independent public accountants of recognized national standing
reasonably acceptable to the Administrator and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to the effect
that such consolidated financial statements fairly present the financial
condition and results of operations of WestPoint on a consolidated basis (except
as noted therein) in accordance with GAAP consistently applied.
(c) Year 2000 Notices. Each Transaction Party will
deliver to the Administrator on behalf of Transferee:
(i) Simultaneously with the delivery
of each set of annual and quarterly financial statements referred to in
subsections (a) and (b) above, a statement of the chief executive
officer, chief financial officer, controller, treasurer, assistant
treasurer or chief technology officer to the effect that nothing has
come to their attention to cause them to believe that such Transaction
Party's Year 2000 Plan milestones have not been met in a manner such
that such Transaction Party's and its Subsidiaries' hardware and
software systems will not be Year 2000 Compliant and Ready in
accordance with its Year 2000 Plan; and
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(ii) Within five (5) Business Days
after such Transaction Party becomes aware of any deviations from its
Year 2000 Plan which would cause compliance with such Year 2000 Plan to
be delayed or not achieved, a statement of the chief executive officer,
chief financial officer, controller, treasurer, assistant treasurer or
chief technology officer setting forth the details thereof and the
action which such Transaction Party is taking or proposes to take with
respect thereto.
(d) Reports to Holders and Exchanges. In addition
to the reports required by subsections (a) and (b) above, promptly upon the
Administrator's request, WestPoint will furnish to the Administrator, on
Transferee's behalf, copies of any reports specified in such request which
WestPoint sends to any of its securityholders, and any reports or registration
statements that WestPoint files with the Securities and Exchange Commission or
any national securities exchange other than registration statements relating to
employee benefit plans and to registrations of securities for selling
securities.
(e) ERISA. Promptly after the filing or receiving
thereof, each Transaction Party will furnish to the Administrator, on
Transferee's behalf, copies of all reports and notices with respect to any
Reportable Event defined in Article IV of ERISA which any Transaction Party
files under ERISA with the Internal Revenue Service, the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or which such Transaction
Party receives from the Pension Benefit Guaranty Corporation.
(f) Liquidation Events, etc. As soon as possible
and in any event within three (3) Business Days after obtaining knowledge of the
occurrence of any Liquidation Event or any Unmatured Liquidation Event that is
not reasonably likely to be cured, each Transaction Party will furnish to the
Administrator, on Transferee's behalf, a written statement of the chief
financial officer, controller, treasurer, assistant treasurer or chief
accounting officer of such Transaction Party setting forth details of such event
and the action that such Transaction Party has taken or will take with respect
thereto.
(g) Litigation; Judgements. As soon as possible
and in any event within ten (10) Business Days of any Transaction Party's
knowledge thereof, such Transaction Party will furnish to the Administrator, on
Transferee's behalf,
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notice of (i) any litigation, investigation or proceeding which may exist at any
time which could reasonably be expected to have a Material Adverse Effect, (ii)
any development in previously disclosed litigation which development could
reasonably be expected to have a Material Adverse Effect, (iii) as to Servicer,
the entry of one or more judgements or decrees against Servicer for the payment
of money in the aggregate amount of $10,000,000 or more and which is not covered
by insurance or as to which the insurance carrier has denied its responsibility
and (iv) as to Transferor the entry of any judgement or decree against
Transferor for the payment of money.
(h) Review of Pool Receivables. As soon as
available and in any event by the end of each fiscal year of Transferor
commencing with Transferor's fiscal year ending December 31, 1999, Transferor
will furnish to the Administrator, on Transferee's behalf, a report, prepared by
a Person reasonably acceptable to the Administrator, as of the end of such
fiscal year, substantially in the form of the report delivered pursuant to
Section 5.01(l) and covering such other matters as the Administrator may
reasonably request in order to protect the interests of the Administrator or
Transferee under or as contemplated by this Agreement; provided that Transferor
shall not be required to furnish a report pursuant to this Section 7.02(h) for
its fiscal year ending December 31, 1999 unless the Scheduled Maturity Date
shall have been extended during such year pursuant to Section 1.06.
(i) Change in Business or Credit and Collection
Policy. At least ten (10) Business Days prior to its effective date, each
Transaction Party will furnish to the Administrator, on Transferee's behalf,
notice of (i) any material change in the character of such Transaction Party's
business, and (ii) any material change in the Credit and Collection Policy.
(j) Ratings. Within one Business Day of obtaining
knowledge thereof, each Transaction Party will furnish to the Administrator, on
Transferee's behalf, notice of any downgrading or withdrawal of any rating of
WestPoint's senior secured debt by any rating agency.
(k) Other. Promptly, from time to time, each
Transaction Party will furnish to the Administrator, on Transferee's behalf,
such other information, documents, records or reports respecting the Pool
Receivables or the condition or operations, financial or otherwise, of such
Transaction Party as the Administrator may from time to time reasonably request
in order to protect the interests of the Administrator or Transferee or any
Affected Party under or as contemplated by this Agreement.
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SECTION 7.03 Negative Covenants of Transaction Parties. From
the date hereof until the Final Payout Date, without the prior written consent
of the Administrator:
(a) Sales, Liens, Etc. (i) No Transaction Party
will, except as otherwise provided herein and in the other Transaction
Documents, sell, assign (by operation of law or otherwise) or otherwise dispose
of, or create or suffer to exist any Lien upon or with respect to, any Pool
Receivable or any Related Asset, or any interest therein, or any account to
which any Collections of any Pool Receivable are sent, or any right to receive
income or proceeds from or in respect of any of the foregoing and (ii) Servicer
will not assert any interest in the Pool Receivables, except as Servicer.
(b) Extension or Amendment of Receivables. No
Transaction Party will, except as otherwise permitted in Section 8.02(c),
extend, amend or otherwise modify the terms of any Pool Receivable, or amend,
modify or waive any material term or condition of any Contract related thereto
in any way that materially adversely affects the collectibility of any Pool
Receivable or the Administrator's and Transferee's rights therein.
(c) Change in Business or Credit and Collection
Policy. No Transaction Party will make or permit to be made any change in the
character of its business or in the Credit and Collection Policy that would, in
either case, impair the collectibility of any significant portion of the Pool
Receivables or otherwise materially adversely affect the interests or remedies
of the Administrator or Transferee under this Agreement or any other Transaction
Document, unless with respect to any material change in accounting policies
relating to Receivables, such change is made in accordance with GAAP.
(d) Change in Payment Instructions to Obligors. No
Transaction Party will add or terminate any bank as a Lock-Box Bank or as the
Concentration Bank from those listed in Schedule 6.01(n) or make any change in
its instructions to Obligors regarding payments to be made to Transferor or
Servicer or payments to be made to any Lock-Box Bank or the Concentration
Account (except for a change in instructions solely for the purpose of directing
Obligors to make such payments to another existing Lock-Box Bank or
Concentration Bank), unless (i) the Administrator shall have received at least
ten (10) days' prior written notice of such addition, termination or change and
(ii) with respect to the addition of a new Lock-Box Account, Lock-Box Bank or
Concentration Account, the Administrator shall have received a duly executed
Lock-Box/Collection Account Agreement with each new Lock-Box Bank or
Concentration Bank.
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(e) Deposits to Lock-Box Accounts and Concentration
Account. No Transaction Party will deposit or otherwise credit, or cause or
permit to be so deposited or credited, to any Lock-Box Account or Concentration
Account, any cash or cash proceeds other than Collections of Pool Receivables.
(f) Changes to Other Documents. Transferor will
not enter into any amendment, waiver or modification of, or supplement to, the
Sale Agreement, the Transferor's Certificate of Incorporation or the
Transferor's Bylaws.
(g) Issuances of Equity; Restricted Payments by
Transferor. Transferor will not (i) issue or otherwise transfer any of the
capital stock of Transferor to any Person other than WestPoint, (ii) purchase or
redeem any shares of the capital stock of Transferor, (iii) declare or pay any
dividends thereon (other than stock dividends), make any distribution to
stockholders or set aside any funds for any such purpose, except that Transferor
may declare or pay dividends or make distributions to its stockholders if, both
before and after giving effect to such payment, the Aggregate Outstandings do
not exceed the Transfer Limit, the Asset Interest does not exceed 100% and
Transferor's net worth (determined in accordance with GAAP) is not less than
$4,800,000 (iv) pay any principal amount of any Subordinated Note, except that
Transferor may pay all or a portion of such principal amount on the Settlement
Date for any Settlement Period, after making any payment required to be made by
Transferor on such Settlement Date in accordance with the last sentence of
Section 3.01(c)(ii) and Section 3.01(c)(iii) if after giving effect to such
payment the Aggregate Outstandings do not exceed the Transfer Limit and the
Asset Interest does not exceed 100% and Transferor's net worth (determined in
accordance with GAAP) is not less than $4,800,000.
(h) Transferor Indebtedness. Transferor will not
incur or permit to exist any indebtedness or liability on account of deposits or
advances or for borrowed money or for the deferred purchase price of any
property or services or in connection with any securitization of receivables,
except (A) indebtedness of Transferor to the Originators incurred in accordance
with the Sale Agreement, (B) indebtedness of Transferor to Transferee and its
assigns pursuant to the terms of this Agreement, (C) current accounts payable
arising under the Transaction Documents and not overdue and (D) other current
accounts payable arising in the ordinary course of business and not overdue, in
an aggregate amount at any time outstanding not to exceed $4,500.
(i) Negative Pledges. No Transaction Party will
enter into or assume any agreement (other than this Agreement and the other
Transaction
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Documents) prohibiting the creation or assumption of any Lien upon any Pool
Receivables or Related Assets, whether now owned or hereafter acquired, except
as contemplated by the Transaction Documents, or otherwise prohibiting or
restricting any transaction contemplated hereby or by the other Transaction
Documents.
(j) Change of Name. Transferor will not change its
name, any trade name or corporate structure, or commence the use of any new
trade name unless it has given the Administrator at least 30 days' prior written
notice thereof and has taken all steps necessary to continue the perfection of
the Administrator's and Transferee's interest, including the filing of
amendments to the UCC financing statements filed pursuant to Section 5.01(e).
(k) Mergers, Consolidations, Dispositions and
Acquisitions.
(i) WestPoint will not merge into or
consolidate with any other Person, or permit any other Person to merge
into or consolidate with it, or purchase, lease or otherwise acquire
(in one transaction or a series of transactions) all or substantially
all of the assets of any other Person (whether directly by purchase,
lease or other acquisition of all or substantially all of the assets of
such Person or indirectly by purchase or other acquisition of all or
substantially all of the capital stock of such other Person) or sell,
transfer or otherwise assign (in one transaction or a series of
transactions) all or substantially all of WestPoint's assets (or
capital stock) to any other Person, except, in each case, as and to the
extent permitted under the Credit Agreement.
(ii) Transferor will not merge into or
consolidate with any other Person, or permit any other Person to merge
into or consolidate with it, or purchase, lease or otherwise acquire
(in one transaction or a series of transactions) all or substantially
all of the assets of any other Person (whether directly by purchase,
lease or other acquisition of all or substantially all of the assets of
such Person or indirectly by purchase or other acquisition of all or
substantially all of the capital stock of such other Person), or sell,
transfer or otherwise assign (in one transaction or a series of
transactions) all or substantially all of Transferor's assets (or
capital stock) to any other Person other than the acquisition of the
Pool Receivables and Related Assets pursuant to the Sale Agreement and
the sale of an interest in the Pool Receivables and Related Assets
hereunder.
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(l) Pool Receivables Not to be Evidenced by
Promissory Notes. No Transaction Party will take any action to cause or permit
any Pool Receivable to become evidenced by any "instrument" (as defined in the
applicable UCC) , except in connection with the collection of any such Pool
Receivable which is overdue provided that the original of such instrument is
delivered to the Administrator, duly endorsed.
(m) Net Receivables Balance. Transferor shall not
permit the Net Pool Balance to be less than an amount equal to the sum of (i)
the Transferee's Total Investment plus (ii) the Required Reserve at any time
when the Borrowing Availability is less than $30,000,000
SECTION 7.04 Separate Corporate Existence of Transferor. Each
Transaction Party hereby acknowledges that Transferee and the Administrator are
entering into the transactions contemplated hereby in reliance upon Transferor's
identity as a legal entity separate from WestPoint and its other Affiliates.
Therefore, each Transaction Party shall take all steps specifically required by
this Agreement or reasonably required by the Administrator to continue
Transferor's identity as a separate legal entity and to make it apparent to
third Persons that Transferor is an entity with assets and liabilities distinct
from those of its WestPoint and Affiliates, and is not a division of WestPoint
or any other Person. Without limiting the foregoing, each Transaction Party will
take such actions as shall be required in order that:
(i) Transferor will be a limited
purpose corporation whose primary activities are restricted in its
certificate of incorporation to purchasing or otherwise acquiring from
the Originators, owning, holding, granting security interests, or
selling interests, in Receivables in the Receivables Pool and Related
Assets, entering into agreements for the selling or transferring and
servicing of the Receivables Pool, and conducting such other activities
as it deems necessary or appropriate to carry out its primary
activities;
(ii) Not less than one member of
Transferor's Board of Directors (the "Independent Director") shall be
an individual who is not at such time, and shall not have been at any
time during the preceding three years (and is not an associate, as
defined below, of), (x) a director, officer, employee or affiliate of
WestPoint or any of its subsidiaries or affiliates, or of any major
creditor (as hereinafter defined) thereof, or (y) the direct, indirect
or beneficial owner at the time of such individual's appointment as an
Independent Director or at any time thereafter while serving as an
Independent Director, of
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common stock of WestPoint, or (z) a relative of any person described in
the foregoing clauses (x) or (y). For purposes of this paragraph (ii),
(A) the term "major creditor" shall mean a financial institution to
which WestPoint or any of its subsidiaries or affiliates has
outstanding indebtedness for borrowed money in a sum sufficiently large
as would reasonably be expected to influence the judgment of the
Independent Director adversely to the interest of Transferor when its
interests are adverse to those of WestPoint or any of its subsidiaries
or affiliates, (B) the term "affiliate of a person" means a person that
directly, or indirectly through one or more intermediaries, controls or
is controlled by, or is under common control with, the person
specified, and (C) the term "associate," when used to indicate a
relationship with any person, means (1) a corporation or organization
of which such person is an officer, director or partner or is, directly
or indirectly, the beneficial owner of ten percent or more of any class
of equity securities, (2) any trust or other estate in which such
person serves as trustee or in a similar capacity, and (3) any spouse,
parent, sibling, child, niece, nephew or cousin of such person or any
spouse of any of the foregoing.
(iii) The certificate of incorporation
of Transferor shall provide that (a) at least one member of
Transferor's Board of Directors shall be an Independent Director, (b)
Transferor shall not, without the affirmative vote of 100% of the
members of its Board of Directors, institute proceedings to be
adjudicated bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against it, or file a petition
seeking or consent to reorganization or relief under any applicable
federal or state law relating to bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction whether now or hereinafter in effect,
or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or similar official) of Transferor or a
substantial part of its property, or make any assignment for the
benefit of creditors, or admit in writing its inability to pay its
debts generally as they become due, or take corporate action in
furtherance of any such action, and (c) the provisions described in
clauses (a) and (b) of this paragraph (iii), cannot be amended without
the prior written consent of the Independent Director;
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(iv) The Independent Director shall
not at any time serve as a trustee in bankruptcy for Transferor or any
Affiliate thereof;
(v) Any employee, consultant or agent
of Transferor will be compensated from Transferor's funds for services
provided to Transferor. Transferor will not engage any agents other
than its attorneys, auditors and other professionals, and a servicer
and any other agent contemplated by the Transaction Documents for the
Receivables Pool, which servicer will be fully compensated for its
services by payment of the Servicer's Fee, and certain organizational
expenses in connection with the formation of Transferor;
(vi) Transferor will contract with
Servicer to perform for Transferor all operations required on a daily
basis to service the Receivables Pool. Transferor will pay Servicer the
Servicer's Fee pursuant hereto. Transferor will not incur any material
indirect or overhead expenses for items shared with WestPoint (or any
other Affiliate thereof) which are not reflected in the Servicer's Fee.
To the extent, if any, that Transferor (or any other Affiliate thereof)
share items of expenses not reflected in the Servicer's Fee, for legal,
auditing and other professional services and directors' fees, such
expenses will be allocated to the extent practical on the basis of
actual use or the value of services rendered, and otherwise on a basis
reasonably related to the actual use or the value of services rendered,
it being understood that WestPoint shall pay all expenses relating to
the preparation, negotiation, execution and delivery of the Transaction
Documents, including, without limitation, legal, rating agency and
other fees;
(vii) Transferor's operating expenses
will not be paid by any other Transaction Party or other Affiliate of
Transferor;
(viii) Transferor will have its own
stationery;
(ix) The books of account, financial
reports and corporate records of Transferor will be maintained
separately from those of WestPoint and each other Affiliate of
Transferor;
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(x) Any financial statements of any
Transaction Party or Affiliate thereof which are consolidated to
include Transferor will contain detailed notes clearly stating that (A)
all of Transferor's assets are owned by Transferor, and (B) Transferor
is a separate corporate entity with its own separate creditors that
will be entitled to be satisfied out of Transferor's assets prior to
any value in Transferor becoming available to Transferor's equity
holders; and the accounting records and the published financial
statements of WestPoint or any of its Affiliates will clearly show
(which, solely in the case of published financial statements, may be by
footnote) that, for accounting purposes, the Pool Receivables and
Related Assets have been sold by the Originators to the Transferor;
(xi) Transferor's assets will be
maintained in a manner that facilitates their identification and
segregation from those of WestPoint and the other Affiliates;
(xii) Each Affiliate of Transferor will
strictly observe corporate formalities in its dealings with Transferor,
and, except as permitted pursuant to this Agreement with respect to
Collections, funds or other assets of Transferor will not be commingled
with those of any of its Affiliates;
(xiii) No Affiliate of Transferor will
maintain joint bank accounts with Transferor or other depository
accounts with Transferor to which any such Affiliate (other than in its
capacity as the Servicer hereunder or under the Sale Agreement) has
independent access;
(xiv) No Affiliate of Transferor shall,
directly or indirectly, name Transferor or enter into any agreement to
name Transferor as a direct or contingent beneficiary or loss payee on
any insurance policy covering the property of any Affiliate of
Transferor;
(xv) Each Affiliate of Transferor will
maintain arm's length relationships with Transferor, and each Affiliate
of Transferor that renders or otherwise furnishes services or
merchandise to Transferor will be compensated by Transferor at market
rates for such services or merchandise;
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(xvi) No Affiliate of Transferor will be,
nor will it hold itself out to be, responsible for the debts of
Transferor or the decisions or actions in respect of the daily business
and affairs of Transferor. WestPoint and Transferor will immediately
correct any known misrepresentation with respect to the foregoing and
they will not operate or purport to operate as an integrated single
economic unit with respect to each other or in their dealing with any
other entity;
(xvii) Transferor will keep correct and
complete books and records of account and minutes of the meetings and
other proceedings of its stockholder and board of directors, as
applicable, and the resolutions, agreements and other instruments of
Transferor will be continuously maintained as official records by
Transferor; and
(xviii) Each of Transferor, on the one
hand, and each Originator, on the other hand, will conduct its business
solely in its own corporate name and in such a separate manner so as
not to mislead others with whom they are dealing; provided that,
subject to Section 8.03(a), Servicer may service the Pool Receivables
in its own name.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01 Designation of Servicer.
(a) WestPoint as Initial Servicer. The
servicing, administering and collection of the Pool Receivables shall be
conducted by the Person designated as Servicer hereunder from time to time in
accordance with this Section 8.01. Until the Administrator, on Transferee's
behalf, gives to WestPoint a Successor Notice, WestPoint is hereby designated
as, and hereby agrees to perform the duties and obligations of, Servicer
pursuant to the terms hereof.
(b) Successor Notice: Servicer Transfer Events.
Upon the occurrence and during the continuance of a Liquidation Event, the
Administrator may, by written notice to WestPoint (a "Successor Notice"),
designate a new Servicer (a "Servicer Transfer Event"). Upon WestPoint's receipt
of a Successor Notice, WestPoint agrees that it will terminate its activities as
Servicer hereunder in a manner that the Administrator believes will facilitate
the transition of the performance of such activities to the new Servicer, and
the Administrator (or its designee) shall assume
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each and all of WestPoint's obligations to service and administer the Pool
Receivables, on the terms and subject to the conditions herein set forth, and
WestPoint shall use its best efforts to assist the Administrator (or its
designee) in assuming such obligations. Without limiting the foregoing, each of
WestPoint and Transferor agrees, at its expense, to use its best efforts to
provide the new Servicer with access (including, to the extent necessary
licenses, sub-licenses and/or assignments of contracts), whether or not at the
offices and properties of WestPoint, to all computer software (including its
servicing software, NMC, and its claims software, CHICOR), necessary or useful
in collecting or billing Receivables, solely for use in collecting and billing
Pool Receivables.
(c) Subcontracts. Servicer may, without the
prior consent of the Administrator, subcontract with any other Person for
servicing, administering or collecting an immaterial amount of the Pool
Receivables, provided that Servicer shall remain liable for the performance of
the duties and obligations of Servicer pursuant to the terms hereof and such
subservicing arrangement may be terminated at the Administrator's request, on
Transferee's behalf, at anytime after a Successor Notice has been given.
SECTION 8.02 Duties of Servicer.
(a) Appointment; Duties in General. Each of
Transferor, Transferee and the Administrator hereby appoints the Servicer, as
from time to time designated pursuant to Section 8.01, as its agent to enforce
its rights and interests in and under the Pool Receivables, the Related Assets
and the related Contracts. Servicer shall take or cause to be taken all such
actions as may be necessary or advisable to collect each Pool Receivable from
time to time, all in accordance with applicable laws, rules and regulations,
with reasonable care and diligence, and in accordance with the Credit and
Collection Policy.
(b) Allocation of Collections; Segregation.
Servicer shall segregate and set aside for the account of Transferor and
Transferee their respective allocable shares of the Collections of Pool
Receivables in accordance with Section 1.03. If instructed by the Administrator,
on Transferee's behalf, after the occurrence of a Liquidation Event, Servicer
shall segregate and deposit into the Concentration Account, Transferee's share
of Collections of Pool Receivables, on the second Business Day following receipt
by Servicer of such Collections in immediately available funds.
(c) Modification of Receivables. So long as no
Liquidation Event and no Unmatured Liquidation Event shall have occurred and be
continuing,
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WestPoint, while it is Servicer, may, in accordance with the Credit and
Collection Policy, (i) extend the maturity or adjust the Unpaid Balance of any
Defaulted Receivable as WestPoint may reasonably determine to be appropriate to
maximize Collections thereof, and (ii) adjust the Unpaid Balance of any
Receivable to reflect the reductions or cancellations described in the first
sentence of Section 3.02(a).
(d) Documents and Records. Each Transaction
Party shall deliver to Servicer, and Servicer shall hold in trust for Transferor
and Transferee in accordance with their respective interests, all documents,
instruments and records (including, without limitation, computer tapes or disks)
that evidence or relate to Pool Receivables.
(e) Certain Duties to Transferor. Servicer shall
in accordance with Section 1.03, turn over to Transferor (i) that portion of
Collections of Pool Receivables representing Transferor's undivided percentage
interest therein and (ii) the Collections of any Receivable which is not a Pool
Receivable. Servicer, if other than WestPoint or any other Transaction Party or
Affiliate thereof, shall, as soon as practicable upon demand, deliver to
Transferor all documents, instruments and records in its possession that
evidence or relate to Receivables of Transferor other than Pool Receivables, and
copies of documents, instruments and records in its possession that evidence or
relate to Pool Receivables, whereupon Transferor shall hold such documents,
instruments and records in trust for the benefit of itself and Transferee in
accordance with their respective interests therein.
(f) Termination. Servicer's authorization under
this Agreement shall terminate upon the Final Payout Date.
(g) Power of Attorney. Transferor hereby grants
to Servicer an irrevocable power of attorney, with full power of substitution,
coupled with an interest, to take in the name of Transferor all steps which are
necessary or advisable to endorse, negotiate or otherwise realize on any writing
or other right of any kind held or transmitted by Transferor or transmitted or
received by Transferee (whether or not from Transferor) in connection with any
Pool Receivable.
SECTION 8.03 Rights of the Administrator.
(a) Notice to Obligors. At any time when a
Liquidation Event or a Servicer Transfer Event has occurred and is continuing,
the Administrator may notify the Obligors of Pool Receivables, or any of them,
of the ownership of the Asset Interest by Transferee.
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(b) Notice to Lock-Box Banks and Concentration Bank. The
Administrator is hereby authorized, upon the occurrence of a Liquidation Event
or a Servicer Transfer Event, to give notice to the Lock-Box Banks as provided
in the Lock-Box/Collection Account Agreements, of the transfer to the
Administrator of dominion and control over the lock-boxes and related accounts
to which the Obligors of Pool Receivables make payments. Transferor and Servicer
hereby transfer to the Administrator, effective when the Administrator shall
give such notice, the exclusive dominion and control over such lock-boxes and
accounts, and shall take any further action that the Administrator may
reasonably request to effect such transfer.
(c) Rights on Servicer Transfer Event. At any time
following the designation of a Servicer other than WestPoint pursuant to Section
8.01:
(i) The Administrator may direct the
Obligors of Pool Receivables, or any of them, to pay all amounts
payable under any Pool Receivable directly to the Administrator or its
designee.
(ii) Any Transaction Party shall, at the
Administrator's request and at such Transaction Party's expense, give
notice of Transferee's ownership and security interests in the Pool
Receivables to each Obligor of Pool Receivables pursuant to Section
8.03(a) and direct that payments be made directly to the Administrator
or its designee.
(iii) Each Transaction Party shall, at
the Administrator's request, (A) assemble all of the documents,
instruments and other records (including, without limitation, computer
programs, tapes and disks) which evidence the Pool Receivables, the
Related Assets and the related Contracts, or which are otherwise
necessary or desirable to collect such Pool Receivables, and make the
same available to the successor Servicer at a place selected by the
Administrator, and (B) segregate all cash, checks and other instruments
received by it from time to time constituting Collections in a manner
acceptable to the Administrator and promptly upon receipt, remit all
such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the successor Servicer.
(iv) Each Transaction Party and
Transferee hereby authorizes the Administrator, on Transferee's behalf,
and grants to the Administrator an irrevocable power of attorney (which
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shall terminate on the Final Payout Date), to take any and all steps in
such Transaction Party's name and on behalf of such Transaction Party
and Transferee which are necessary or desirable, in the determination
of the Administrator, to collect all amounts due under any and all Pool
Receivables, including, without limitation, endorsing any Transaction
Party's name on checks and other instruments representing Collections
and enforcing such Pool Receivables and the related Contracts.
SECTION 8.04 Responsibilities of Transaction Parties. Anything herein
to the contrary notwithstanding:
(a) Contracts. Each Transaction Party shall remain
responsible for performing all of its obligations (if any) under the Contracts
related to the Pool Receivables and under the related agreements to the same
extent as if the Asset Interest had not been sold hereunder, and the exercise by
the Administrator or its designee of its rights hereunder shall not relieve any
Transaction Party from such obligations.
(b) Limitation of Liability. The Administrator and
Transferee shall not have any obligation or liability with respect to any Pool
Receivables, Contracts related thereto or any other related agreements, nor
shall any of them be obligated to perform any of the obligations of any
Transaction Party or any Originator or any Affiliate thereof.
SECTION 8.05 Further Action Evidencing Transfers and Reinvestments.
(a) Further Assurances. Each Transaction Party agrees
that from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action that the
Administrator or its designee may reasonably request in order to perfect,
protect or more fully evidence the Transfers hereunder and the resulting Asset
Interest, or to enable Transferee or the Administrator or its designee to
exercise or enforce any of their respective rights hereunder or under any
Transaction Document in respect thereof. Without limiting the generality of the
foregoing, each Transaction Party will:
(i) upon the reasonable request of the
Administrator, execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate; and
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(ii) mark its computer systems and
records which store information relating to and which evidence such
Pool Receivables and related Contracts with a legend, acceptable to the
Administrator, evidencing that the Asset Interest has been sold in
accordance with this Agreement.
(b) Additional Financing Statements; Performance
by Administrator. Each Transaction Party hereby authorizes the Administrator, on
Transferee's behalf, or its designee to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Pool Receivables and the Related Assets now
existing or hereafter arising in the name of any Transaction Party. If any
Transaction Party fails to promptly execute and deliver within 10 days to the
Administrator, on Transferee's behalf, any financing statement or continuation
statement or amendment thereto or assignment thereof reasonably requested by the
Administrator, on Transferee's behalf, each Transaction Party hereby authorizes
the Administrator, on Transferee's behalf, to execute such statement on behalf
of such Transaction Party. If any Transaction Party fails to perform any of its
agreements or obligations under this Agreement, the Administrator or its
designee may (but shall not be required to) itself perform, or cause performance
of, such agreement or obligation, and the reasonable expenses of the
Administrator or its designee incurred in connection therewith shall be payable
by the Transaction Parties as provided in Section 14.05.
(c) Continuation Statements; Opinion. Without
limiting the generality of Section 8.05(a), Transferor will, not earlier than
six (6) months and not later than three (3) months prior to the fifth
anniversary of the date of filing of the financing statements referred to in
Section 5.01(e) or any other financing statement filed pursuant to this
Agreement or in connection with any Transfer hereunder, if the Final Payout Date
shall not have occurred:
(i) execute and deliver and file or
cause to be filed an appropriate continuation statement with respect to
such financing statement; and
(ii) deliver or cause to be delivered to
the Administrator an opinion of the counsel for Transaction Parties, in
form and substance reasonably satisfactory to the Administrator,
confirming and updating the opinions delivered pursuant to Section
5.01(h) (to the extent such opinion relates to the validity of the
security interest created hereunder) and Section 5.01(j) to the effect
that the Asset Interest hereunder continues to be a valid and perfected
ownership or security interest, subject to no other Liens of record
except as provided herein or otherwise permitted hereunder.
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ARTICLE IX
SECURITY INTEREST
SECTION 9.01 Grant of Security Interest. To secure all
obligations of Transferor arising in connection with this Agreement and each
other Transaction Document, whether now or hereafter existing, due or to become
due, direct or indirect, or absolute or contingent, including, without
limitation, all Indemnified Amounts, payments on account of Collections received
or deemed to be received and fees, in each case pro rata according to the
respective amounts thereof, Transferor hereby assigns and pledges to the
Administrator and its successors and assigns, for the benefit of the Secured
Parties, and hereby grants to the Administrator, for the benefit of the Secured
Parties, a security interest in, all of Transferor's right, title and interest
now or hereafter existing in, to and under (a) all the Pool Receivables and
Related Assets (and including specifically any undivided interest therein
retained by Transferor hereunder), (b) the Sale Agreement and the other
Transaction Documents and (c) all proceeds of any of the foregoing.
SECTION 9.02 Further Assurances. The provisions of Section
8.05 shall apply to the security interest granted under Section 9.01 as well as
to the Transfers, Reinvestments and all the Asset Interests hereunder.
SECTION 9.03 Remedies. Upon the occurrence of a Liquidation
Event, the Administrator shall have, with respect to the collateral granted
pursuant to Section 9.01, and in addition to all other rights and remedies
available to the Administrator under this Agreement and the other Transaction
Documents or other applicable law, all the rights and remedies of a secured
party upon default under the UCC.
ARTICLE X
LIQUIDATION EVENTS
SECTION 10.01 Liquidation Events. The occurrence and
continuation of any of the following events shall be "Liquidation Events"
hereunder:
(a) (i) Servicer (if any Transaction Party or
Affiliate thereof is Servicer) shall fail to perform or observe any term,
covenant or agreement that is an obligation of Servicer hereunder (other than as
referred to in clause (ii) below or in other paragraphs of this Section 10.01)
and such failure shall remain unremedied for five (5) Business Days or (ii)
Servicer or Transferor shall fail to make any payment or
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deposit to be made by it hereunder when due in respect of Earned Discount or the
Transferee's Total Investment or interest accruing at the Default Rate, or any
Transaction Party shall fail to observe, perform or comply with Section 7.02 or
(iii) Servicer or Transferor shall fail to make any payment or deposit to be
made by it hereunder other than as described in the foregoing clause, (ii) and
such failure shall remain unremedied for three (3) Business Days; or
(b) (i) Any representation or warranty made or
deemed to be made by any Transaction Party (or any of its officers) under this
Agreement (other than any representation or warranty set forth in Sections 6.01
(k), (l) and (o)) or any other Transaction Document or other information or
report delivered pursuant hereto or thereto shall prove to have been false or
incorrect in any material respect when made; or (ii) any representation or
warranty made or deemed to be made by any Transaction Party (or any of its
officers) in Sections 6.01 (k), (l) and (o) shall prove to have been false or
incorrect in any material respect when made and such inaccuracy remains
unremedied for five (5) Business Days; or
(c) Any Transaction Party shall fail to perform
or observe any term, covenant or agreement contained in this Agreement or any of
the other Transaction Documents (other than as described in Section 10.01(a)) on
its part to be performed or observed and any such failure shall remain
unremedied for five (5) Business Days; or
(d) WestPoint or any other Originator shall (1)
fail to pay any principal or interest, regardless of amount, due in respect of
any Indebtedness when the aggregate unpaid principal amount is in excess of
$10,000,000, when and as the same shall become due and payable or (2) fail to
observe or perform any term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing any Indebtedness (including any
guaranty of such Indebtedness) if the effect of any failure referred to in this
clause (2) is to cause such Indebtedness to become due prior to its stated
maturity; or
(ii) Transferor shall (1) fail to pay
any principal or interest, regardless of amount, due in respect of any
Indebtedness when and as the same shall become due and payable or (2) fail to
observe or perform any term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing any Indebtedness (including any
guaranty of such Indebtedness) if the effect of any failure referred to in this
clause (2) is to cause, or permit the holder or holders of such Indebtedness or
a trustee on its or their behalf (with or without the giving of notice, the
lapse of time or both) to cause, such Indebtedness to become due prior to its
stated maturity; or
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(e) An Event of Bankruptcy shall have occurred
with respect to Servicer, any Originator or any Transaction Party or any
Subsidiary of any of them; or
(f) The Dilution Ratio at any Cut-Off Date
exceeds 5.25%; or
(g) The Default Ratio at any Cut-Off Date
exceeds 1.0%; or
(h) The Delinquency Ratio at any Cut-Off Date
exceeds 1.25%; or
(i) On any Settlement Date, after giving effect
to the payments made under Section 3.01(c), (i) the Asset Interest exceeds 100%
or (ii) sum of the Aggregate Outstandings exceeds the Transfer Limit and in each
case, such excess remains unremedied for three (3) Business Days; or
(j) The Borrowing Availability shall equal less
than $30,000,000 at any time when the Net Pool Balance is less than the sum of
(i) Transferee's Total Investment, plus (ii) the Required Reserve; or
(k) Any Transaction Party is subject to a Change
in Control other than as permitted under the Credit Agreement; or
(l) The Internal Revenue Service shall file
notice of a lien pursuant to Section 6323 of the Internal Revenue Code with
regard to any of the Pool Receivables or Related Assets and such lien shall not
have been released within seven (7) days, or the Pension Benefit Guaranty
Corporation shall, or shall indicate its intention to, file notice of a lien
pursuant to Section 4068 of the Employee Retirement Income Security Act of 1974
with regard to any of the Pool Receivables or Related Assets; or
(m) the Servicer, any Originator or Transferor
shall make any material and adverse change in the policies as to origination of
Receivables or in the Credit and Collection Policy, except with the prior
written consent of the Administrator; or
(n) the Administrator, on behalf of Transferee,
for any reason, does not have a valid, perfected first priority interest in the
Pool Receivables and the Related Assets; or
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(o) (i) a final judgment or judgments shall be
rendered against WestPoint or any other Originator for the payment of money with
respect to which an aggregate amount in excess of $10,000,000 is not covered by
insurance and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to levy upon assets or properties of
WestPoint or such Originator to enforce any such judgment; or (ii) a final
judgment or judgments shall be rendered against Transferor for the payment of
money; or
(p) any of the following events or conditions,
if such event or condition could reasonably be expected to have a Material
Adverse Effect: (i) any "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA and Section 412 of the Code, whether or not
waived, shall exist with respect to any Plan, or any lien shall arise on the
assets of any Consolidated Party or any ERISA Affiliate in favor of the PBGC or
a Plan; (ii) an ERISA Event shall occur with respect to a Single Employer Plan,
which is, in the reasonable opinion of the Administrator, likely to result in
the termination of such Plan for purposes of Title IV of ERISA; (iii) an ERISA
Event shall occur with respect to a Multiemployer Plan or Multiple Employer
Plan, which is, in the reasonable opinion of the Administrator, likely to result
in (A) the termination of such Plan for purposes of Title IV of ERISA, or (B)
any Consolidated Party or any ERISA Affiliate incurring liability in connection
with a withdrawal from, reorganization of (within the meaning of Section 4241 of
ERISA), or insolvency or (within the meaning of Section 4245 of ERISA) such
Plan; or (iv) any prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall
occur which may subject any Consolidated Party or any ERISA Affiliate to any
liability under Section 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of
the Code, or under any agreement or other instrument pursuant to which any
Consolidated Party or any ERISA Affiliate has agreed or is required to indemnify
any person against any such liability; or
(q) an Event of Default shall occur under the
Sale Agreement.
SECTION 10.02 Remedies.
(a) Optional Liquidation. Upon the occurrence of
a Liquidation Event (other than a Liquidation Event described in Section
10.01(e)), the Administrator shall, at the request, or may with the consent, of
Transferee, by notice to Transferor declare the Termination Date to have
occurred and the Liquidation Period to have commenced.
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(b) Automatic Liquidation. Upon the occurrence
of a Liquidation Event described in Section 10.01(e), the Termination Date shall
occur and the Liquidation Period shall commence automatically.
(c) Additional Remedies. Upon any Termination
Date pursuant to this Section 10.02, no Transfers or Reinvestments thereafter
will be made, and the Administrator, the Transferee and Wachovia shall have, in
addition to all other rights and remedies under this Agreement or otherwise, all
other rights and remedies provided under the UCC of each applicable jurisdiction
and other applicable laws, which rights shall be cumulative.
ARTICLE XI
THE ADMINISTRATOR
SECTION 11.01 Authorization and Action. Pursuant to agreements
entered into with the Administrator, Transferee has appointed and authorized the
Administrator (or its designees) to take such action as agent on its behalf and
to exercise such powers under this Agreement as are delegated to the
Administrator by the terms hereof, together with such powers as are reasonably
incidental thereto.
SECTION 11.02 Administrator's Reliance, Etc. The Administrator
and its directors, officers, agents or employees shall not be liable for any
action taken or omitted to be taken by it or them in good faith under or in
connection with the Transaction Documents (including, without limitation, the
servicing, administering or collecting of Pool Receivables as Servicer pursuant
to Section 8.01), except for its or their own breach of the applicable terms of
the Transaction Documents or its or their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, the Administrator:
(a) may consult with legal counsel (including counsel for Transferor),
independent certified public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (b)
makes no warranty or representation to Transferee or any other holder of any
interest in Pool Receivables and shall not be responsible to Transferee or any
such other holder for any statements, warranties or representations made by any
Transaction Party in or in connection with any Transaction Document; (c) shall
not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of any Transaction Document on the
part of any Transaction Party or to inspect the property (including the books
and records) of any Transaction Party; (d) shall not be responsible to
Transferee or any other holder of any interest in Pool Receivables for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of any Transaction Document; and (e) shall incur no liability
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under or in respect of this Agreement by acting upon any notice (including
notice by telephone where permitted herein), consent, certificate or other
instrument or writing (which may be by facsimile or telex) in good faith
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 11.03 Wachovia and Affiliates. Wachovia and any of its
Affiliates may generally engage in any kind of business with any Transaction
Party or any obligor, any of their respective Affiliates and any Person who may
do business with or own securities of any Transaction Party or any Obligor or
any of their respective Affiliates, all as if Wachovia was not the
Administrator, and without any duty to account therefor to Transferee or any
other holder of an interest in Pool Receivables, but in any event subject to
Section 14.07.
ARTICLE XII
ASSIGNMENT OF PURCHASER'S INTEREST
SECTION 12.01 Restrictions on Assignments.
(a) No Transaction Party may assign its rights,
or delegate its duties hereunder or any interest herein without the prior
written consent of the Administrator. Transferee may not assign its rights
hereunder (although it may delegate its duties hereunder to the extent expressly
indicated herein) or the Asset Interest (or any portion thereof) to any Person
without the prior written consent of Transferor, which consent shall not be
unreasonably withheld; provided, however, that Transferee may assign all or any
part of its rights and interests in the Transaction Documents, together with all
or any part of its interest in the Asset Interest, to any Liquidity Bank,
Wachovia, or any Affiliate thereof, or to any "bankruptcy remote" special
purpose entity, the business of which is administered by Wachovia or any
Affiliate thereof (which assignee shall then be subject to this Article XII).
The Administrator agrees to discuss the addition of any party as a Liquidity
Bank with Transferor prior to such addition.
(b) Transferor agrees to advise the
Administrator within five (5) Business Days after notice to Transferor of any
proposed assignment by Transferee of the Asset Interest (or any portion
thereof), not otherwise permitted under Section 12.01(a), of Transferor's
consent or non-consent to such assignment, and if it does not consent, the
reasons therefor. If Transferor does not consent to such assignment, Transferee
may immediately or at any time thereafter assign such Asset Interest (or portion
thereof) to any Person or Persons permitted under Section 12.01(a).
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SECTION 12.02 Rights of Assignee. Upon the assignment by
Transferee in accordance with this Article XII, the assignee receiving such
assignment shall have all of the rights of Transferee with respect to the
Transaction Documents and the Asset Interest (or such portion thereof as has
been assigned).
SECTION 12.03 Terms and Evidence of Assignment. Any assignment
of the Asset Interest (or any portion thereof) to any Person which is otherwise
permitted under this Article XII shall be upon such terms and conditions as
Transferee and the assignee may mutually agree, and may be evidenced by such
instrument(s) or document(s) as may be satisfactory to Transferee, the
Administrator and the assignee.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01 Indemnities by Transferor.
(a) General Indemnity. Without limiting any
other rights which any such Person may have hereunder or under applicable law,
Transferor hereby agrees to indemnify each of Wachovia, both individually and as
the Administrator, Transferee, the Liquidity Banks, the Liquidity Agent, each of
their respective Affiliates, and all successors, transferees, participants and
assigns and all officers, directors, shareholders, controlling persons,
employees and agents of any of the foregoing (each an "Indemnified Party"),
forthwith on demand, from and against any and all damages, losses, claims,
liabilities, judgments and related costs and expenses, including reasonable
attorneys' fees and disbursements (all of the foregoing being collectively
referred to as "Indemnified Amounts") awarded against or incurred by any of them
arising out of or relating to the Transaction Documents or the ownership or
funding of the Asset Interest or in respect of any Pool Receivable or any
Contract, excluding, however, (a) resulting from gross negligence or willful
misconduct on the part of such Indemnified Party or (b) recourse (except as
otherwise specifically provided in this Agreement) to Transferor for non-payment
of the Pool Receivables due to credit problems of the Obligors thereof. Without
limiting the foregoing, Transferor shall indemnify each Indemnified Party for
Indemnified Amounts arising out of or relating to:
(i) the transfer by any Transaction
Party of any interest in any Receivable other than the transfer of
Receivables and related property by the Originators to Transferor
pursuant to the Sale Agreement, the transfer of an Asset Interest to
Transferee pursuant to this Agreement and the grant of a security
interest to Transferee pursuant to Section 9.01;
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(ii) any representation or warranty made
by any Transaction Party (or any of its officers) under or in
connection with this Agreement or any other Transaction Document or any
other information or report delivered by or on behalf of any
Transaction Party pursuant hereto or thereto, which shall have been
false, incorrect or misleading in any material respect when made or
deemed made or delivered, as the case may be;
(iii) the failure by any Transaction
Party to comply with any applicable law, rule or regulation with
respect to any Pool Receivable or the related Contract, or the
nonconformity of any Pool Receivable or the related Contract with any
such applicable law, rule or regulation;
(iv) the failure to vest and maintain
vested in Transferee and its assigns (or the Administrator on behalf of
Transferee) an undivided percentage ownership or security interest, to
the extent of the Asset Interest, in the Receivables in, or purporting
to be in, the Receivables Pool, free and clear of any Lien, other than
any Lien arising solely as a result of an act of Transferee or the
Administrator, whether existing at the time of any Transfer or
Reinvestment of such Asset Interest or at any time thereafter;
(v) the failure to file, or any delay
in filing, financing statements or other similar instruments or
documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Receivables in, or purporting to be
in, the Receivables Pool, whether at the time of any Transfer or
Reinvestment or at any time thereafter;
(vi) any dispute, claim, offset or
defense (other than discharge in bankruptcy) of the Obligor to the
payment of any Receivable in, or purporting to be in, the Receivables
Pool (including, without limitation, a defense based on such
Receivables or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms), or any other claim resulting from the sale of the
merchandise or services related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
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(vii) any matter described in clause (i)
or (ii) of Section 3.02(a);
(viii) any failure of any Transaction
Party, as Servicer or otherwise, to perform its duties or obligations
in accordance with the provisions of Article III or Article VIII;
(ix) any products liability claim
arising out of or in connection with merchandise or services that are
the subject of any Pool Receivable;
(x) any claim of breach by any
Transaction Party of any related Contract with respect to any Pool
Receivable;
(xi) any tax or governmental fee or
charge (but not including taxes upon or measured by net income), all
interest and penalties thereon or with respect thereto, and all
out-of-pocket costs and expenses, including the reasonable fees and
expenses of counsel in defending against the same, which may arise by
reason of the purchase or ownership of any Asset Interest, or any other
interest in the Pool Receivables or in any goods which secure any such
Pool Receivables; and
(xii) amounts in respect of Dilution to
the extent such amounts exceed the Dilution Reserve.
(b) Contest of Tax Claim; After-Tax Basis. If
any Indemnified Party shall have notice of any attempt to impose or collect any
tax or governmental fee or charge for which indemnification will be sought from
any Transaction Party under Section 13.01(a)(xi), such Indemnified Party shall
give prompt and timely notice of such attempt to Transferor and Transferor shall
have the right, at its expense, to participate in any proceedings resisting or
objecting to the imposition or collection of any such tax, governmental fee or
charge. Indemnification hereunder shall be in an amount necessary to make the
Indemnified Party whole after taking into account any tax consequences to the
Indemnified Party of the payment of any of the aforesaid taxes (including any
deduction) and the receipt of the indemnity provided hereunder or of any refund
of any such tax previously indemnified hereunder, including the effect of such
tax, deduction or refund on the amount of tax measured by net income or profits
which is or was payable by the Indemnified Party.
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(c) Contribution. If for any reason the
indemnification provided above in this Section 13.01 is unavailable to an
Indemnified Party or is insufficient to hold an Indemnified Party harmless, then
Transferor shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect not only the relative benefits received by such
Indemnified Party on the one hand and Transferor on the other hand but also the
relative fault of such Indemnified Party as well as any other relevant equitable
considerations.
SECTION 13.02 Indemnities by Servicer. Without limiting any
other rights which any Indemnified Party may have hereunder or under applicable
law, the Servicer hereby agrees to indemnify each of the Indemnified Parties
forthwith on demand, from and against any and all Indemnified Amounts awarded
against or incurred by any of them arising out of or relating to the Servicer's
performance of, or failure to perform, any of its obligations under or in
connection with any Transaction Document, or any representation or warranty made
by Servicer (or any of its officers) under or in connection with any Transaction
Document or any other information or report delivered by or on behalf of
Servicer, which shall have been false, incorrect or misleading in any material
respect when made or deemed made or delivered, as the case may be, or the
failure of the Servicer to comply with any applicable law, rule or regulation
with respect to any Pool Receivable or the related Contract. Notwithstanding the
foregoing, in no event shall any Indemnified Party be awarded any Indemnified
Amounts (a) to the extent determined by a court of competent jurisdiction to
have resulted from gross negligence or willful misconduct on the part of such
Indemnified Party or (b) recourse for (except as otherwise specifically provided
in this Agreement) to Servicer for non-payment of the Pool Receivables due to
the credit problems of the Obligors thereof.
If for any reason the indemnification provided above in this
Section 13.02 (and subject to the exceptions set forth therein) is unavailable
to an Indemnified Party or is insufficient to hold an Indemnified Party
harmless, then the Servicer shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by such Indemnified Party on the one hand and the Servicer on the other
hand but also the relative fault of such Indemnified Party as well as any other
relevant equitable considerations.
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ARTICLE XIV
MISCELLANEOUS
SECTION 14.01 Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by any Transaction
Party therefrom shall in any event be effective unless the same shall be in
writing and signed by (a) each Transaction Party, the Administrator and the
Transferee (with respect to an amendment), or (b) the Administrator and the
Transferee (with respect to a waiver or consent by them) or any Transaction
Party (with respect to a waiver or consent by it), as the case may be, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. The parties acknowledge that, before
entering into such an amendment or granting such a waiver or consent, Transferee
may also be required to obtain the approval of some or all of the Liquidity
Banks or to obtain confirmation from certain rating agencies that such
amendment, waiver or consent will not result in a withdrawal or reduction of the
ratings of the Commercial Paper Notes.
SECTION 14.02 Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (including facsimile communication) and shall be personally delivered
or sent by express mail or courier or by certified mail, postage prepaid, or by
facsimile, to the intended party at the address or facsimile number of such
party set forth on Schedule 14.02 or at such other address or facsimile number
as shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective, (a) if
personally delivered or sent by express mail or courier or if sent by certified
mail, when received, and (b) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means.
SECTION 14.03 No Waiver; Remedies. No failure on the part of
the Administrator, any Affected Party, any Indemnified Party, Transferee or any
other holder of the Asset Interest (or any portion thereof) to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law. Without limiting the foregoing, Wachovia, individually, and as
Administrator, and each Liquidity Bank is hereby authorized by Transferor, upon
the occurrence of a Liquidation Event, to the fullest extent permitted by law,
to set off and apply any and all deposits (general or special, time or demand
provisional or final) at any time held and other indebtedness at any
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time owing by Wachovia and such Liquidity Bank to or for the credit or the
account of Transferor, now or hereafter existing under this Agreement, to
amounts owed to the Administrator, any Affected Party, any Indemnified Party or
Transferee, or their respective successors and assigns.
SECTION 14.04 Binding Effect; Survival. This Agreement shall
be binding upon and inure to the benefit of each Transaction Party, the
Administrator, Transferee and their respective successors and assigns, and the
provisions of Section 4.02 and Article XIII shall inure to the benefit of the
Affected Parties and the Indemnified Parties, respectively, and their respective
successors and assigns; provided, however, nothing in the foregoing shall be
deemed to authorize any assignment not permitted by Section 12.01. This
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until the Final Payout Date. The rights and remedies with respect to any breach
of any representation and warranty made by Transferor pursuant to Article VI and
the indemnification and payment provisions of Article XIII and Sections 4.02,
14.05, 14.06, 14.07, 14.08 and 14.15 shall be continuing and shall survive any
termination of this Agreement.
SECTION 14.05 Costs, Expenses and Taxes. In addition to its
obligations under Article XIII, Transaction Parties jointly and severally agree
to pay on demand:
(a) all costs and expenses incurred by the
Administrator, any Liquidity Bank, the Transferee and their respective
Affiliates in connection with:
(i) the negotiation, preparation,
execution and delivery of this Agreement and the other Transaction
Documents, any amendment of or consent or waiver under any of the
Transaction Documents which is requested or proposed by any Transaction
Party (whether or not consummated), or the enforcement by any of the
foregoing Persons of, or any actual breach of, this Agreement or any of
the other Transaction Documents, including, without limitation, the
reasonable fees and expenses of counsel to any of such Persons incurred
in connection with any of the foregoing or in advising such Persons as
to their respective rights and remedies under any of the Transaction
Documents in connection with any of the foregoing, and
(ii) the administration (including
periodic auditing as provided for herein) of this Agreement and the
other Transaction Documents, including, without limitation, all
reasonable
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out-of-pocket expenses (including reasonable fees and expenses of
independent accountants), incurred in connection with any review of any
Transaction Party's books and records either prior to the execution and
delivery hereof or pursuant to Section 7.01(c)(iii) or 7.02(j) provided
that such amounts shall not include any amount relating to the general
overhead expenses of any party hereto; and
(b) all stamp and other taxes and fees payable
or determined to be payable in connection with the execution, delivery, filing
and recording of this Agreement or the other Transaction Documents (and the
Transaction Parties, jointly and severally, agree to indemnify each Indemnified
Party against any liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees).
SECTION 14.06 No Proceedings. Servicer hereby agrees that it
will not institute against Transferor, or join any Person in instituting against
Transferor, and each Transaction Party, Servicer and Wachovia (individually or
as Administrator) each hereby agrees that it will not institute against
Transferee, or join any other Person in instituting against Transferee, any
insolvency proceeding (namely, any proceeding of the type referred to in the
definition of Event of Bankruptcy) so long as any Commercial Paper Notes issued
by Transferee shall be outstanding or there shall not have elapsed one year plus
one day since the last day on which any such Commercial Paper Notes shall have
been outstanding.
SECTION 14.07 Confidentiality of Transferor Information.
(a) Confidential Transferor Information. Each
party hereto (other than the Transaction Parties) acknowledges that certain of
the information provided to such party by or on behalf of the Transaction
Parties in connection with this Agreement and the transactions contemplated
hereby is or may be confidential, and each such party severally agrees that,
unless WestPoint shall otherwise agree in writing, and except as provided in
Section 14.07(b), such party will not disclose to any other person or entity any
nonpublic information provided by any Transaction Party or obtained by such
party in connection herewith, including:
(i) any information regarding, or
copies of, any nonpublic financial statements, reports, schedules and
other information furnished by any Transaction Party to Transferee or
the Administrator (A) prior to the date hereof in connection with such
party's due diligence relating to the Transaction Parties and the
transactions contemplated hereby, or (B) pursuant to Section 3.01,
5.01, 6.01(i), 7.01(c) or 7.02, or
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(ii) any other information regarding any
Transaction Party which is designated by any Transaction Party to such
party in writing as confidential,
(the information referred to above, whether furnished by any Transaction Party
or any attorney for or other representative thereof (each a "Transferor
Information Provider"), is collectively referred to as the "Transferor
Information"); provided, however, "Transferor Information" shall not include any
information which is or becomes generally available to the general public or to
such party on a non-confidential basis from a source other than any Transferor
Information Provider, or which was known to such party on a non-confidential
basis prior to its disclosure by any Transferor Information Provider.
(b) Disclosure. Notwithstanding Section
14.07(a), each party may disclose any Transferor Information:
(i) to any of such party's independent
attorneys, consultants and auditors, and to any dealer or placement
agent for Transferee's commercial paper, who (A) in the good faith
belief of such party, have a need to know such Transferor Information,
and (B) are informed by such party of the confidential nature of the
Transferor Information and the terms of this Section 14.07 and has
agreed, verbally or otherwise, to be bound by the provisions of this
Section 14.07,
(ii) to any Liquidity Bank, any actual
or potential assignees of, or participants in, any rights or
obligations of Transferee, any Liquidity Bank or the Administrator
under or in connection with this Agreement who has agreed to be bound
by the provisions of this Section 14.07,
(iii) to any rating agency that maintains
a rating for Transferee's commercial paper or is considering the
issuance of such a rating, for the purposes of reviewing the credit of
Transferee in connection with such rating,
(iv) to any other party to this
Agreement (and any independent attorneys, consultants and auditors of
such party), for the purposes contemplated hereby,
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(v) as may be required by any
municipal, state, federal or other regulatory body having or claiming
to have jurisdiction over such party, in order to comply with any law,
order, regulation, regulatory request or ruling applicable to such
party,
(vi) subject to Section 14.07(c), in the
event such party is legally compelled (by interrogatories, requests for
information or copies, subpoena, civil investigative demand or similar
process) to disclose such Transferor Information, or
(vii) in connection with the enforcement
of this Agreement or any other Transaction Document.
In addition, Transferee and the Administrator may disclose on a "no name" basis
to any actual or potential investor in Transferee's Commercial Paper Notes
information regarding the nature of this Agreement, the basic terms hereof
(including without limitation the amount and nature of Transferee's commitment
and Transferee's Total Investment with respect to the Asset Interest and any
other credit enhancement provided by any Transaction Party hereunder), the
nature, amount and status of the Pool Receivables, and the current and/or
historical ratios of losses to liquidations and/or outstandings with respect to
the Receivables Pool.
(c) Legal Compulsion. In the event that any party hereto
(other than any Transaction Party) or any of its representatives is requested,
or becomes legally compelled (by interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process), to disclose
any of the Transferor Information, such party will (or will cause its
representative to):
(i) provide WestPoint with prompt
written notice so that (A) WestPoint may seek a protective order or
other appropriate remedy, or (B) WestPoint may, if it so chooses, agree
that such party (or its representatives) may disclose such Transferor
Information pursuant to such request or legal compulsion; and
(ii) unless WestPoint agrees that such
Transferor Information may be disclosed, make a timely objection to the
request or compulsion to provide such Transferor Information on the
basis that such Transferor Information is confidential and subject to
the agreements contained in this Section 14.07.
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In the event such protective order or remedy is not obtained, or WestPoint
agrees that such Transferor Information may be disclosed, such party will
furnish only that portion of the Transferor Information which (in such party's
good faith judgment) is legally required to be furnished and will exercise
reasonable efforts to obtain reliable assurance that confidential treatment will
be afforded the Transferor Information.
(d) This Section 14.07 shall survive termination
of this Agreement.
SECTION 14.08 Confidentiality of Program Information.
(a) Confidential Information. Each party hereto
acknowledges that Wachovia, individually and in its capacity as Administrator,
regards the structure of the transactions contemplated by this Agreement to be
proprietary, and each such party agrees that:
(i) it will not disclose without the
prior consent of Wachovia (other than to the directors, employees,
auditors, counsel or affiliates (collectively, "representatives") of
such party, each of whom shall be informed by such party of the
confidential, nature of the Program Information (as defined below) and
of the terms of this Section 14.08), (A) any information regarding the
pricing in, or copies of, this Agreement, any other Transaction
Document or any transaction contemplated hereby or thereby, (B) any
information regarding the organization, business or operations of
Transferee generally or the services performed by Wachovia as the
Administrator for Transferee, or (C) any information which is furnished
by Wachovia to such party and which is designated by Wachovia to such
party in writing or otherwise as confidential or not otherwise
available to the general public (the information referred to in clauses
(A), (B) and (C) is collectively referred to as the "Program
Information"); provided, however, that such party may disclose any such
Program Information (I) to any other party to this Agreement (and any
independent attorneys, consultants and auditors of any such party) for
the purposes contemplated hereby, (II) as may be required by any
municipal, state, federal or other regulatory body having or claiming
to have jurisdiction over such party, including, without limitation,
the Securities and Exchange Commission, (III) in order to comply with
any law, order, regulation, regulatory request or ruling applicable to
such party, (IV) subject to Section 14.08(c), in the event such party
is legally compelled (by interrogatories, requests for information or
copies, subpoena,
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civil investigative demand or similar process) to disclose any such
Program Information, or (V) in financial statements as required by
GAAP;
(ii) it will use the Program Information
solely for the purposes of evaluating, administering and enforcing the
transactions contemplated by this Agreement and making any necessary
business judgments with respect thereto; and
(iii) it will, upon demand, return (and
cause each of its representatives to return) to Wachovia, all documents
or other written material received from Wachovia in connection with
(a)(i)(B) or (C) above and all copies thereof made by such party which
contain the Program Information.
(b) Availability of Confidential Information.
This Section 14.08 shall be inoperative as to such portions of the Program
Information which are or become generally available to the public or such party
on a non-confidential basis from a source other than Wachovia or were known to
such party on a non-confidential basis prior to its disclosure by Wachovia.
(c) Legal Compulsion to Disclose. In the event
that any party or anyone to whom such party or its representatives transmits the
Program Information is requested or becomes legally compelled (by
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process) other than in the case of clause (II)
of the proviso to Section 14.08(a)(i) to disclose any of the Program
Information, such party will
(i) provide Wachovia with prompt
written notice so that Wachovia may seek a protective order or other
appropriate remedy and/or, if it so chooses, agree that such party may
disclose such Program Information pursuant to such request or legal
compulsion; and
(ii) unless Wachovia agrees that such
Program Information may be disclosed, make a timely objection to the
request or confirmation to provide such Program Information on the
basis that such Program Information is confidential and subject to the
agreements contained in this Section 14.08.
-68-
<PAGE> 76
In the event that such protective order or other remedy is not obtained, or
Wachovia agrees that such Program Information may be disclosed, such party will
furnish only that portion of the Program Information which (in such party's good
faith judgment) is legally required to be furnished and will exercise reasonable
efforts to obtain reliable assurance that confidential treatment will be
accorded the Program Information.
(d) Survival. This Section 14.08 shall
survive termination of this Agreement.
SECTION 14.09 Captions and Cross References. The various
captions (including, without limitation, the table of contents) in this
Agreement are provided solely for convenience of reference and shall not affect
the meaning or interpretation of any provision of this Agreement. Unless
otherwise indicated, references in this Agreement to any Section, Appendix,
Schedule or Exhibit are to such Section of or Appendix, Schedule or Exhibit to
this Agreement, as the case may be, and references in any Section, subsection,
or clause to any subsection, clause or subclause are to such subsection, clause
or subclause of such Section, subsection or clause.
SECTION 14.10 Integration. This Agreement and the other
Transaction Documents contain a final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
shall constitute the entire understanding among the parties hereto with respect
to the subject matter hereof, superseding all prior oral or written
understandings.
SECTION 14.11 GOVERNING LAW. THIS AGREEMENT, INCLUDING THE
RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE
INTERESTS OF PURCHASER IN THE RECEIVABLES OR RELATED PROPERTY IS GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 14.12 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER TRANSACTION
DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT
-69-
<PAGE> 77
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
ARISING FROM ANY BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL NOT BE TRIED BEFORE A JURY.
SECTION 14.13 CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES.
EACH PARTY HEREBY ACKNOWLEDGES AND AGREES THAT:
(A) IT IRREVOCABLY (I) SUBMITS TO THE
JURISDICTION, FIRST, OF ANY UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL
JURISDICTION IS NOT AVAILABLE, OF ANY GEORGIA STATE COURT, IN EITHER CASE
SITTING IN FULTON COUNTY, GEORGIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, (II) AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
ONLY IN SUCH GEORGIA STATE OR FEDERAL COURT AND NOT IN ANY OTHER COURT, (III)
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING, (IV)
CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SPECIFIED
IN SECTION 14.02; AND (V) TO THE EXTENT ALLOWED BY LAW, AGREES THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS SECTION 14.13 SHALL AFFECT PURCHASER'S
OR THE ADMINISTRATOR'S RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING ANY ACTION OR PROCEEDING AGAINST TRANSFEROR OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTIONS.
(B) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
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<PAGE> 78
ATTACHMENT IN AID TO EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, IT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER OR IN CONNECTION WITH THIS AGREEMENT.
SECTION 14.14 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by the different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement.
SECTION 14.15 No Recourse Against Other Parties. The
obligations of the Transferee under this Agreement are solely the corporate
obligations of the Transferee. No recourse shall be had for the payment of any
amount owing by the Transferee under this Agreement or for the payment by the
Transferee of any fee in respect hereof or any other obligation or claim of or
against the Transferee arising out of or based upon this Agreement, against
Wachovia or against any employee, officer, director, incorporator or stockholder
of the Transferee. For purposes of this Section 14.15, the term "Wachovia" shall
mean and include Wachovia Bank, N.A. and all affiliates thereof and any
employee, officer, director, incorporator, stockholder or beneficial owner of
any of them; provided, however, that the Transferee shall not be considered to
be an affiliate of the Wachovia for purposes of this paragraph. Each of the
Transferor, the Servicer and the Administrative Agent agrees that the Transferee
shall be liable for any claims that such party may have against the Transferee
only to the extent the Transferee has excess funds after providing for payment
of the Commercial Paper Notes and to the extent such assets are insufficient to
satisfy the obligations of the Transferee hereunder, the Transferee shall have
no liability with respect to any amount of such obligations remaining unpaid and
such unpaid amount shall not constitute a claim against the Transferee. Any and
all claims against the Transferee or the Administrative Agent shall be
subordinate to the claims of the holders of Commercial Paper and the Liquidity
Banks (other than the Administrator).
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 79
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective duly authorized officers, as of the date first
above written.
WPS RECEIVABLES CORPORATION,
as Transferor
By: /s/ Nelson Griffith
----------------------------------------------
Name: J. Nelson Griffith
Title: Vice President/Assistant Treasurer
WESTPOINT STEVENS INC.,
as initial Servicer
By: /s/ Nelson Griffith
----------------------------------------------
Name: J. Nelson Griffith
Title: Controller
BLUE RIDGE ASSET FUNDING
CORPORATION, as Transferee
By: /s/ Victoria A. Dudley
----------------------------------------------
Name: Victoria A. Dudley
Title: Attorney-In-Fact, Senior Vice President of
Wachovia Bank, N.A.
WACHOVIA BANK, N.A.,
as Administrator
By: /s/ Victoria A. Dudley
----------------------------------------------
Name: Victoria A. Dudley
Title: Senior Vice President
<PAGE> 1
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%
J.P. Stevens Enterprises, Inc. Delaware 100%
Alamac Holdings Inc. Delaware 100%
Liebhardt Inc. Delaware 100%
WestPoint Stevens (Asia) Inc. British Virgin Islands 100%
WestPoint Stevens (Japan) Inc. Japan 100%
WestPoint Stevens Stores Inc. Georgia 100%
WestPoint Stevens (UK) Limited England 100%
WestPoint Stevens (Europe) Limited England 100%
Lexward Properties Limited England 100%
P.J. Flower Inc. New Jersey 100%
DPC Associates Limited England & Wales 100%
WPS Receivables Corporation Delaware 100%
WPSI Inc. Delaware 100%
</TABLE>
<PAGE> 1
EXHIBIT 23.1
WESTPOINT STEVENS INC.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-69209, Form S-8 No. 333-63339, Form S-8 No. 33-85718, Form S-8
No. 33-95580 and Form S-8 No. 333-27913) pertaining to (i) the Retirement
Savings Value Plan For Employees of WestPoint Stevens Inc. and Retirement
Savings Value Plan For Employees of Liebhardt Inc., (ii) the 1995 Key Employee
Stock Bonus Plan, (iii) the Retirement Savings Value Plan For Employees of
WestPoint Stevens Inc., (iv) the 1995 Key Employee Stock Bonus Plan and (v) the
Omnibus Stock Incentive Plan, respectively, of our report dated February 9,
1999, 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, 1998.
/s/ Ernst & Young LLP
Columbus, Georgia
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE CONSOLIDATED
BALANCE SHEET FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 527
<SECURITIES> 0
<RECEIVABLES> 89,337
<ALLOWANCES> 19,251
<INVENTORY> 381,022
<CURRENT-ASSETS> 469,686
<PP&E> 1,211,031
<DEPRECIATION> 434,092
<TOTAL-ASSETS> 1,391,211
<CURRENT-LIABILITIES> 291,508
<BONDS> 1,275,000
0
0
<COMMON> 709
<OTHER-SE> (488,161)
<TOTAL-LIABILITY-AND-EQUITY> 1,391,211
<SALES> 1,778,991
<TOTAL-REVENUES> 1,778,991
<CGS> 1,304,231
<TOTAL-COSTS> 1,304,231
<OTHER-EXPENSES> 968
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105,677
<INCOME-PRETAX> 141,678
<INCOME-TAX> 51,125
<INCOME-CONTINUING> 90,553
<DISCONTINUED> 0
<EXTRAORDINARY> (50,621)
<CHANGES> 0
<NET-INCOME> 39,932
<EPS-PRIMARY> .69
<EPS-DILUTED> .67
</TABLE>
