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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER: 0-20850
HAGGAR CORP.
(Exact name of registrant as specified in the charter)
NEVADA 75-2187001
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6113 LEMMON AVENUE
DALLAS, TEXAS 75209
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 352-8481
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS REGISTERED
Common stock Nasdaq National Market System
($0.10 par value per share)
Securities registered pursuant to Section 12(g) of the Act:
NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of December 2, 1996 there were 8,551,382 shares of common stock
outstanding. The aggregate market value of the 7,401,702 shares of the
common stock of Haggar Corp. held by nonaffiliates on such date (based on the
closing price of these shares on the Nasdaq National Market System) was
approximately $131,380,210.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III is incorporated by reference from the
Registrant's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A not later than 120 days after the end of the
fiscal year covered by this report.
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PART I
ITEM 1. BUSINESS
INTRODUCTION.
Haggar Corp., together with its subsidiaries (collectively the
"Company"), designs, manufactures, imports and markets casual and dress men's
apparel products including pants, shorts, suits, sportcoats and shirts.
Products are offered in a wide variety of styles, fabrics, colors and sizes.
The Company's products are sold primarily through approximately
7,000 retail stores operated by its customers, which include major department
stores, specialty stores and mass market retailers throughout the United
States. The Company offers its premium apparel products under the "Haggar"
brand name, and also offers a more moderately priced line of products under
its "Reed St. James" brand name through its mass market retailer division,
The Horizon Group. The Company owns several other trademarks under which it
markets or has marketed its products. In addition, the Company's specialty
label division offers retailers quality products bearing the retailer's own
label.
In each of the last three fiscal years the Company has derived
approximately 99% of its revenues from sales of men's apparel products.
Additional income is derived from the licensing of certain trademarks to
other manufacturers. In 1995, as part of its strategic growth objectives, the
Company began opening and operating retail stores located in retail outlet
malls throughout the United States. As of September 30, 1996, the Company had
opened 28 such stores which market first quality Company products to the
general public. These stores also serve as a retail marketing laboratory for
the Company.
The Company was established in 1926 by J. M. Haggar, Sr., and has
built its reputation by offering high quality, "ready to wear" men's apparel
at affordable prices through innovations in product design, marketing and
customer service. Haggar Clothing Co. is the primary operating subsidiary.
Both Haggar Corp. and Haggar Clothing Co. are incorporated in Nevada.
PRODUCTS AND MAJOR BRANDS.
The Company's apparel products are manufactured with a wide array
of fabrics that emphasize style, comfort, fit and performance. The Company
is well known for its use of "performance fabrics" that maintain a fresh,
neat appearance. The Company's product lines are currently dominated by
natural fiber (wool or cotton) and blended (polyester/wool or
polyester/rayon) fabrics, although the Company also produces some apparel
using a single synthetic (polyester or rayon) fabric.
A significant portion of the Company's apparel lines consists of
basic, recurring styles, which the Company believes are less susceptible to
"fashion obsolescence", as compared with higher fashion apparel lines. Thus,
while the Company strives to offer current fashions and styles, the bulk of
its product lines change relatively little from year to year. This
consistency in product lines enables the Company to operate on a
cost-efficient basis and to more accurately forecast the demand for
particular products.
HAGGAR. The Company's Haggar brands represented 80.4% of total
apparel sales in fiscal 1996. These brands receive widespread recognition
among United States consumers for high quality, affordable men's apparel. The
full range of products offered by the Company is marketed under these brands,
including dress and casual pants, sportcoats, suits, shirts and shorts. The
Company has developed specific product lines under these brands, intended to
keep the Company in the forefront of the trend among men toward more casual
clothing, while maintaining the Company's traditional strength in men's dress
apparel. Examples of these lines include Haggar Wrinkle-Free
Cottons-Registered Trademark- and Haggar City Casuals-TM-. Haggar Wrinkle-Free
Cottons-Registered Trademark- offer all the comfort features of 100% cotton
pants and maintain their neat appearance, without the need for ironing or dry
cleaning. Haggar City Casuals-TM- is a fashionable line of coordinated coats,
vests, pants and shirts designed to meet the need for
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"business casual" and casual social dressing. The Haggar brand is also
licensed to manufacturers of related apparel in categories outside of the
core product lines of the Company.
Haggar branded products are sold nationwide primarily in major
department stores, including J.C. Penney, Mercantile Department Stores, May
Department Stores, Federated Department Stores, Mervyn's California, Belk
Department Stores and Kohl's Department Stores. The Company also markets its
Haggar branded men's clothing through its own retail stores located in 28
outlet malls throughout the United States.
THE HORIZON GROUP. The Company's mass retailer division, The
Horizon Group, markets Reed St. James branded products including dress pants,
casual pants, shorts, suits, sportcoats and shirts. Reed St. James products,
which are offered at lower price points than Haggar brand products, are
generally sold to mass market retailers, such as Wal-Mart, Bradlees and
Venture. The Horizon Group also markets Mustang-Registered Trademark- brand
jeans (featuring basic and fashion cotton jeans and shorts) and Reed Stretch
Jeans. Additionally, the Horizon Group manages the licensing of products
bearing the Reed St. James brand.
SPECIALTY LABELS. In addition to manufacturing products under its
own labels, the Company also manufactures men's apparel for certain of its
customers under the individual store's proprietary label. The specialty
label division generally offers a similar array of products as offered under
the Company's own labels. The Company's specialty label products are
primarily sold to major department stores and mass market merchandisers,
including J.C. Penney and Sears.
INTRODUCTION OF NEW PRODUCTS.
The Company is emphasizing the introduction of new products in
order to capitalize on its brand name recognition and retailer relationships.
While the Company has offered casual products in the past, it has increased
its efforts in this category through aggressive marketing and expansion of
its line of Haggar Wrinkle-Free Cottons-Registered Trademark-, including its
Ultimate Pant-TM-, as well as Haggar City Casuals-TM-. The Company continues
to emphasize its lines of shirts designed to complement its casual product
lines. While there is substantial competition in these markets, the Company
believes that it is well-positioned to take advantage of these market
opportunities. Although the Company introduced a line of boyswear during
fiscal 1994, the Company has decided to refocus those resources toward
further developing its men's clothing lines. After entering the boyswear
category with Haggar Wrinkle-Free Cottons-Registered Trademark-, the Company
determined that the opportunities for growth in this category of branded
products was limited and that margins were not attainable in keeping with the
Company's requirements.
DEPENDENCE ON KEY CUSTOMERS.
The number of major apparel retailers has decreased in recent
years, and the retail apparel industry continues to undergo consolidation.
The Company's five largest customers accounted for 50.8%, 50.7% and 49.7% of
net sales during the fiscal years ending September 30, 1996, 1995 and 1994,
respectively. The Company's largest current customer, J.C. Penney Company,
Inc., accounted for 26.3%, 28.7% and 27.6% of the Company's net sales during
the fiscal years ending September 30, 1996, 1995 and 1994, respectively. No
other customer accounted for more than 10% of consolidated revenues. The
loss of the business of one or more of the Company's largest customers could
have a material adverse effect on the Company's results of operations. The
Company has no long-term commitments or contracts with any of its customers.
COMPETITION.
The apparel industry is highly competitive due to its fashion
orientation, its mix of large and small producers, the flow of imported
merchandise and a wide variety of retailing methods. Competition has been
exacerbated by consolidations and closings of major department store groups.
The Company has many diverse competitors, some of whom have greater marketing
and financial resources than the Company. Intense competition in the apparel
industry can result in significant discounting and lower gross margins.
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The Company is the market leader in sales of men's dress pants,
custom-fit suits (separately sized pants and matching jackets which may be
purchased together to form a suit requiring little or no alteration) and
sportcoats, and holds the number two market share in men's casual pants. The
principal elements of competition in the apparel industry include style,
quality and price of products, brand loyalty, customer service and
advertising. The Company's product innovations such as Haggar Wrinkle-Free
Cottons-Registered Trademark- and Ultimate Pant-TM- as well as value-added
services such as floor-ready merchandise, electronic data interchange,
fixturing and concept shops position it to compete as a market leader. The
Company also believes that its brand recognition, merchandise with relatively
low vulnerability to changing fashion trends and affordable pricing enhance
its competitive position in the apparel industry. Additionally, it feels its
national advertising campaign promotes consumer demand for its products and
enhances its brand and Company image.
DESIGN AND MANUFACTURING.
With limited exceptions, products sold by the Company's various
divisions are manufactured to the designs and specifications (including
fabric selections) of designers employed by those divisions.
During fiscal 1996, approximately 29% of the Company's products
(measured in units) were produced in the United States, with the balance
manufactured in foreign countries. Facilities operated by the Company
accounted for approximately 93% of its domestic-made products with the
remaining 7% being produced by a domestic contract manufacturer. During the
second half of fiscal 1996 the Company terminated its agreement with this
contractor. A portion of all product lines manufactured by the Company are
produced domestically with the exception of shirts. Approximately 27% of the
Company's foreign-made products were manufactured by facilities owned by the
Company in Mexico and the Dominican Republic, with the remaining 73%
manufactured by unaffiliated companies in the Far East, Asia, South America,
Central America, Mexico and the Dominican Republic.
On October 28, 1996, the Company announced its plans to restructure
its worldwide manufacturing capacity by consolidating its three Texas sewing
operations into one facility and shifting a portion of the production to
off-shore locations. This restructuring is expected to begin in 1997 and to
be fully implemented in 1998. It is anticipated that this restructuring will
result in approximately 15% of the Company's products being manufactured in
the United States, with the other 85% manufactured in foreign countries.
(See Item 7.- Managements Discussion and Analysis of Financial Condition and
Results of Operations).
The Company's foreign sourcing operations are subject to various
risks of doing business abroad, including currency fluctuations, quotas and
other regulations relating to imports, natural disasters and, in certain
parts of the world, political or economic instability. Although the
Company's operations have not been materially adversely affected by any of
such factors to date, any substantial disruption of its relationships with
its foreign suppliers could adversely affect its operations. Some of the
Company's imported merchandise is subject to United States Customs duties.
In addition, bilateral agreements between the major exporting countries and
the United States impose quotas which limit the amounts of certain categories
of merchandise that may be imported into the United States. Any material
increase in duty levels, material decrease in quota levels or material
decrease in available quota allocations could adversely affect the Company's
operations.
RAW MATERIALS.
Raw materials used in manufacturing operations consist mainly of
fabrics made from cotton, wool, synthetics and blends of synthetics with
cotton and wool. These fabrics are purchased principally from major textile
producers located in the United States. In addition, the Company purchases
such items as buttons, thread, zippers and trim from a large number of other
suppliers. Five vendors supplied approximately 57% of the Company's fabric
and trim requirements during the fiscal year ended September 30, 1996. The
Company has no long-term contracts with any of its suppliers, but does not
anticipate substantial shortages of raw materials in 1997.
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TRADEMARKS.
The Company owns many federal trademark registrations and has
pending several other trademark applications in the United States Patent and
Trademark Office. The Company has also registered or applied for registration
of a number of trademarks for use on a variety of apparel items in various
foreign countries. The Company regards its trademarks and other proprietary
rights as valuable assets and believes that they have significant value in
the manufacturing and marketing of its products.
The Company seeks to capitalize on consumer recognition and
acceptance of both the Haggar and Reed St. James brands by licensing, both
domestically and internationally, the use of these trademarks on a variety of
products. Typically, the licensee's agreement with the Company gives it the
right to produce, market and sell specified products in a particular country
or region under one of the Company's trademarks. For example, the Company has
granted exclusive domestic licenses to unaffiliated manufacturers for the
production and marketing of men's leather goods, neckwear, sweaters, hosiery
and eyewear under the "Haggar" trademark.
SEASONALITY.
Historically, the Company's business has been seasonal, with higher
sales and income during its second and fourth quarters, just prior to and
during the two peak retail selling seasons for spring and fall merchandise
(see Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations - Seasonality).
BACKLOG.
A substantial portion of the Company's net sales is based on orders
for immediate delivery, or so-called "soft-planning orders", submitted by
apparel retailers (which do not constitute purchase commitments). An
analysis of backlog is not, therefore, necessarily indicative of future net
sales. Retailers' use of such soft-planning orders increases the difficulty
of forecasting demand for the Company's products.
EMPLOYEES.
The Company employs approximately 4,300 persons domestically and
1,700 persons in foreign countries. In 1996, approximately 4,600 employees
were engaged in manufacturing operations and the remainder were employed in
executive, marketing, wholesale and retail sales, product design,
engineering, accounting, distribution and purchasing activities. However,
the Company has announced its decision to consolidate its three Texas sewing
operations into one facility, which may result in the termination of the
employment of a number of its employees engaged in manufacturing operations.
None of its domestic employees are covered by a collective bargaining
agreement with any union. While the Company is not a party to any collective
bargaining agreements covering its foreign employees, applicable labor laws
may dictate minimum wages, fringe benefit requirements and certain other
obligations. The Company believes that relations with its employees are good.
ENVIRONMENTAL REGULATIONS.
Current environmental regulations have not had and, in the opinion
of the Company, assuming the continuation of present conditions, will not
have any material effect on the business, capital expenditures, earnings or
competitive position of the Company.
FINANCIAL INSTRUMENT DERIVATIVES.
The Company does not utilize financial instrument derivatives.
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ITEM 2. PROPERTIES
The Company's principal executive offices are located at 6113
Lemmon Avenue, Dallas, Texas 75209. The general location, use, approximate
size and information with respect to the ownership or lease of the Company's
principal properties currently in use are set forth below:
Approximate Owned/ Lease
Location Use Square Footage Leased Expiration
- --------------------------------------------------------------------------------
Dallas, Texas (1) Headquarters 443,000 Owned
& Distribution
Dallas, Texas (1) Warehouse
& Distribution 157,000 Leased 1998
Fort Worth, Texas Warehouse
& Distribution 660,000 Owned
Dallas, Texas Storage 60,000 Owned
Dallas, Texas Design & Marking 12,000 Owned
Weslaco, Texas Fabric Cutting 115,000 Owned
Weslaco, Texas Manufacturing 95,000 Leased 1999
Weslaco, Texas Warehouse 137,000 Owned
Edinburg, Texas Fabric Cutting &
Manufacturing 121,000 Owned
Brownsville, Texas Manufacturing 95,000 Leased 2002
Leon, Mexico Manufacturing 39,000 Owned
La Romana, Dom. Rep. Manufacturing 41,000 Leased 2001
Higuey, Dom. Rep. Manufacturing 13,000 Leased 2011
Robstown (2) Excess Facility 68,000 Owned
Oklahoma City (2) Excess Facility 95,000 Leased 2001
Waxahachie (2) Excess Facility 17,000 Owned
Various (29 locations) (3) Retail Sales 90,000 Leased 1997 - 2003
(1) As part of the transition to the CSC, the distribution portion of the
headquarters and distribution building was vacated. Management is
currently evaluating potential uses for that space. In addition, a
portion of the operations performed in the leased facility located in
Dallas will be transferred to the CSC during fiscal 1997.
(2) These properties were previously used by the Company as manufacturing
plants but are no longer utilized by the Company. The Company is
profitably subleasing the property in Oklahoma City, Oklahoma to the U.S.
Postal Service.
(3) These properties are the Company's 28 retail stores located in outlet
malls throughout the United States and one outlet store which sells
second quality products. The retail stores range in size from
approximately 2,700 to 4,400 square feet.
All of the properties owned by the Company are free from material
encumbrances, except the Company's fabric cutting facility located at
Weslaco, Texas, which is subject to a lien securing an industrial revenue
bond financing in the amount of $3.0 million. The Company believes that its
existing facilities are well maintained, in good operating condition and
adequate for its present and anticipated levels of operations.
Future manufacturing needs are anticipated to be met through owned
facilities and through the use of outside contractors. The Company's new
Customer Service Center (CSC) in Fort Worth, Texas began to be fully utilized
in the third quarter of fiscal 1996 and is expected to meet the Company's
distribution requirements for the foreseeable future.
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ITEM 3. LEGAL PROCEEDINGS
The Company has been named as a defendant in several legal actions
arising from its normal business activities, including actions brought by
certain terminated employees. Although the amount of any liability that
could arise with respect to these actions cannot be accurately predicted, the
claims and damages alleged, the progress of the litigation date, and past
experience with similar litigation leads the Company to believe that any
liability resulting from these actions will not individually or collectively
have a material adverse effect on the financial position of the Company.
Further, the Company maintains general liability, workers'
compensation, and employer's liability insurance. The Company intends to
pass back the costs associated with lawsuits to its insurance carriers, under
the applicable policies, if any, subject to the deductible limits and other
provisions of those policies.
An additional party seeks to intervene as a plaintiff in the suit
filed on August 31, 1995, in the 103rd Judicial District Court of Cameron
County, Texas, by Ernest Jaramillo, et al. The intervening party, Brian
Riley, who alleges he is the husband of Lynnice W. Henry-Riley, seeks
unspecified actual and punitive damages allegedly resulting from her death
during the storm and roof collapse on May 5, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National Market
System under the symbol "HGGR." The following table sets forth, for the
fiscal quarters indicated, the high and low prices for the Common Stock as
reported by the Nasdaq National Market System and the dividends paid per
common share.
1996 FISCAL QUARTER
-----------------------------------------
1st 2nd 3rd 4th
-----------------------------------------
High 18 3/4 19 16 1/4 14 7/8
Low 15 3/4 11 1/2 12 5/8 12 1/2
Dividend $0.05 $0.05 $0.05 $0.05
1996 FISCAL QUARTER
-----------------------------------------
1st 2nd 3rd 4th
-----------------------------------------
High 27 3/4 26 1/4 22 1/4 20 3/4
Low 20 1/2 19 17 3/4 18
Dividend $0.05 $0.05 $0.05 $0.05
As of November 15, 1996, the Company had approximately 250
stockholders of record and approximately 3,200 beneficial owners.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial information below should be
read in conjunction with the consolidated financial statements of the Company
and notes thereto and "Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations." The selected consolidated
financial information for the five years ended September 30, 1996, is derived
from financial statements of the Company which have been audited by Arthur
Andersen LLP, independent public accountants.
<TABLE>
Year Ended September 30,
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $ 437,942 $ 448,532 $ 491,235 $ 394,059 $ 380,770
Cost of goods sold 315,351 324,699 345,846 285,540 279,127
Restructuring charge (1) 8,680 1,244 - - 1,151
--------- --------- --------- --------- ---------
Gross profit 113,911 122,589 145,389 108,519 100,492
Selling, general and administrative expenses (113,037) (110,432) (106,258) (87,473) (81,682)
Restructuring charge (1) (5,320) - - - -
Gain from storm damage (2) 1,140 4,807 - - -
Royalty income 2,630 3,049 2,655 2,512 2,034
--------- --------- --------- --------- ---------
Operating income (loss) (676) 20,013 41,786 23,558 20,844
Other income, net 1,563 786 1,510 1,238 2,683
Interest expense (4,293) (4,995) (1,273) (1,506) (3,998)
--------- --------- --------- --------- ---------
Income (loss) from operations before
provision for income taxes (3,406) 15,804 42,023 23,290 19,529
Provision (benefit) for income taxes (986) 5,995 16,342 8,278 7,097
--------- --------- --------- --------- ---------
Net income (loss) (3) (2,420) 9,809 25,681 15,012 12,432
Less: cumulative preferred stock dividends - - - - (1,117)
--------- --------- --------- --------- ---------
Net income (loss) to common stockholders $ (2,420) $ 9,809 $ 25,681 $ 15,012 $ 11,315
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income (loss) per common share (4) $ (0.28) $ 1.14 $ 2.95 $ 1.88 $ 1.95
Cash dividends declared per common share $ 0.20 $ 0.20 $ 0.20 $ 0.10 $ -
Weighted average number of common shares (4) 8,552 8,623 8,700 7,956 5,805
BALANCE SHEET DATA (AT PERIOD END):
Working capital $ 136,172 $ 178,849 $ 130,644 $ 111,679 $ 96,969
Total assets 278,334 315,352 257,298 206,253 170,483
Long-term debt 42,112 78,585 15,032 5,455 28,154
Stockholders' equity 162,482 166,406 158,002 133,399 80,268
</TABLE>
(1) The Company decided to restructure its worldwide manufacturing capacity,
which resulted in $14.0 million in nonrecurring charges in the 1996 fiscal
year. During fiscal years 1995 and 1992, the Company elected to close
certain operating plants, which resulted in $1.2 million in nonrecurring
charges in both fiscal years.
(2) During fiscal year 1995, the Company recognized a gain from the recording
of an insurance claim, net of direct costs, where the insurance claim
arose out of damage to the Company's main distribution center caused by
a severe thunderstorm on May 5, 1995. During fiscal 1996, the Company
recognized an additional $1.1 million gain from storm damage as a result
of collections of insurance proceeds in excess of the September 30, 1995
recorded receivable.
(3) Certain nonrecurring events, including one of the plant closings described
in Note 1 above, the termination of the Company's performance plan, the
gain on the sales of assets, and the recovery of state administrative
sales taxes, had the net effect of increasing fiscal year 1992 net
income after taxes by approximately $60,000.
(4) Based upon the weighted average common shares and share equivalents
outstanding as of the end of each period. In October 1992, the
Company's Board of Directors and stockholders approved a
two-for-three reverse common stock split. Accordingly, all
references with regard to numbers of common shares, related
dividends, and per share data prior to fiscal 1993 have been
restated to reflect the reverse stock split on a retroactive
basis.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated results
of operations and financial condition of Haggar Corp. should be read in
conjunction with the accompanying consolidated financial statements and
related notes contained in "Item 8, Financial Statements and Supplementary
Data" to provide additional information concerning the Company's financial
activities and condition.
RESULTS OF OPERATIONS.
The following table sets forth certain financial data expressed as
a percentage of net sales for each of the fiscal years ended September 30,
1996, 1995 and 1994.
Year Ended September 30,
1996 1995 1994
----- ----- -----
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 72.0 72.4 70.4
Restructuring charge 2.0 0.3 -
----- ----- -----
Gross profit 26.0 27.3 29.6
Selling, general and
administrative expenses (25.8) (24.6) (21.6)
Restructuring charge (1.2) - -
Gain from storm damage 0.2 1.1 -
Royalty income 0.6 0.7 0.5
----- ----- -----
Operating income (loss) (0.2) 4.5 8.5
Other income, net 0.4 0.1 0.3
Interest expense (1.0) (1.1) (0.3)
----- ----- -----
Income (loss) from operations
before provision (benefit)
for income taxes (0.8) 3.5 8.5
Provision (benefit) for taxes (0.2) 1.3 3.3
----- ----- -----
Net income (loss) (0.6)% 2.2% 5.2%
----- ----- -----
----- ----- -----
FISCAL 1996 COMPARED TO FISCAL 1995.
Net sales decreased 2.4% to $437.9 million in fiscal 1996 compared
to net sales of $448.5 million in fiscal 1995. The decrease in net sales
during fiscal 1996 reflects a 1.4% increase in unit sales offset by a 3.7%
decrease in average sales price. During the first half of fiscal 1996, net
sales were adversely affected by decreased holiday sales at retail and severe
weather conditions in the Eastern U.S. which slowed efforts to clear
post-holiday inventories. By comparison, net sales for the first six months
of fiscal 1995 were the highest in the Company's history. During the second
half of fiscal 1996 net sales exceeded the net sales during the same period
in 1995. However, net sales for the second half of fiscal 1995 were
unusually low due to the May 5, 1995 storm damage. Sales volume in the
second half of fiscal 1996 was below expectations because of shipping
difficulties incurred in the Company's new CSC. Despite acceptable initial
test results, under operational conditions the automated shipping systems
within the CSC were unable to accommodate the level of shipment volume
needed. However, the Company was able to overcome most of the shipping
difficulties experienced during the transition into the new CSC during the
fourth quarter of fiscal 1996.
Gross profit as a percent of net sales decreased to 26.0% in 1996
compared to 27.3% in 1995. The decrease in gross profit as a percent of net
sales was primarily due to the manufacturing restructuring charge of $8.7
million which was recorded in the fourth quarter of fiscal 1996. Absent the
manufacturing restructuring charges taken in both years, gross profit in 1996
would have improved to 28%, as compared to 27.6% in fiscal
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1995. However, gross profit in both years was adversely impacted by
inventory and sales price markdowns caused as a resulting from the Company's
efforts to reduce excess inventories.
The manufacturing restructuring charge is the result of the
Company's decision to pursue a strategic move intended to improve gross
margins and profitability in 1997 and beyond by consolidating its three Texas
sewing operations into one facility. When fully implemented, this
restructuring plan will potentially reduce manufacturing costs at current
production levels by $12.0 million to $14.0 million annually. The
restructuring charge was recorded in the fourth quarter of fiscal 1996 and
included an $8.7 million charge to cost of sales related principally to
severance costs for manufacturing employees and a $5.3 million charge to
selling, general and administrative expenses related principally to costs to
resolve various legal issues in connection with the restructuring and prior
plant closings as well as severance for non-manufacturing employees.
Cost savings and other benefits from the announced restructuring of
the Company's manufacturing operations are dependent on the successful and
timely closure of two Texas sewing facilities, successful consolidation of
certain of the operations of the closed plants into the remaining Texas
sewing facility and successful transfer of other operations of the closed
plants to foreign facilities. This restructuring plan could be impeded by
delays in receiving and analyzing information necessary to identify the
facilities to be closed, governmental intervention, changes in regulatory
framework and labor disruptions. Further, the amount of savings expected to
be realized assumes manufacturing production at or above current levels
which, in turn, is dependent upon the demand for the Company's products and
continued improvement of the receiving, inventory control and shipping
functions of the CSC at high volumes.
Selling, general and administrative expenses as a percent of net
sales increased to 25.8% in fiscal 1996 from 24.6% in fiscal 1995. Actual
selling, general and administrative expenses increased $2.6 million to $113.0
million in 1996 compared to $110.4 million in 1995. The primary reasons for
the increase in selling, general and administrative expenses during fiscal
1996 were (i) an increase in depreciation expense of approximately $2.0
million related to the new CSC, (ii) an approximate $8.2 million increase in
distribution costs in 1996 resulting from the use of additional labor in
temporary distribution facilities pending completion of the CSC, and (iii) an
approximate $5.0 million increase in expenses related to the opening and
operations of 20 new retail stores during fiscal 1996. The Company partially
offset these increases by decreasing advertising costs by approximately $6.5
million and decreasing other costs attributable to sales.
Although the Company has overcome most of the shipping difficulties
experienced during the transition into the new CSC, certain systems require
further improvement and the facility has not yet been subjected to the
demands of operations at peak capacity. Achieving higher shipment levels and
the cost efficiencies expected from the CSC will require continued
improvement of the receiving, inventory control and shipping functions of the
CSC. There can be no assurance that remaining issues will not be compounded
or that new difficulties will not be encountered as utilization of the CSC is
increased.
The Company has executed leases for 12 new retail stores opened or
to be opened in fiscal 1997. The Company intends to continue to evaluate the
growth potential for retail outlet malls and may open additional retail
stores as opportunities arise.
The gain from storm damage recorded in fiscal 1995 was the result
of the Company recording a $24.0 million charge in the third quarter of
fiscal 1995 to cover the costs of damage caused by the May 5, 1995, storm.
These costs included the write-down of damaged inventory to its salvage
value, damages to the Company's building and equipment and disaster recovery
charges. In the fourth quarter of fiscal 1995, the Company recorded an
additional $10.2 million of expense related to the write-off of salvage value
of inventory and additional distribution costs. The Company settled its
insurance claim related to inventory damaged during the storm for $35.0
million. The Company recorded $4.0 million for additional claims related to
real and personal property damage suffered on May 5, 1995. The net result
recorded in fiscal 1995 was a $4.8 million gain from storm damage. During
fiscal 1996, the Company received insurance proceeds in the final settlement
of substantially all claims with the Company's insurance carrier related to
the Company's damaged distribution center and warehouse resulting in an
additional $1.1 million gain from storm damage.
12
<PAGE>
Other income increased in fiscal 1996 to $1.6 million from $0.8
million in fiscal 1995, primarily as the result of an approximate $1.6
million gain from the sale of two buildings during 1996. The Company sold
these buildings to dispose of surplus facilities caused by the consolidation
of the shipping operations into the CSC.
FISCAL 1995 COMPARED TO FISCAL 1994.
Net sales decreased 8.7% to $448.5 million in fiscal 1995 compared
to net sales of $491.2 million in fiscal 1994. The decrease was primarily the
result of an 8.4% decrease in the number of units shipped. The decrease in
units shipped was primarily the result of the Company's inability to ship
orders as a result of a severe thunderstorm that struck the Dallas - Fort
Worth metropolitan area on May 5, 1995, causing widespread damage. During the
high winds and heavy rains caused by the thunderstorm, a portion of the roof
over the Company's main distribution center collapsed, which resulted in the
loss of finished goods inventory and other property damage at that location.
The roof collapse hindered the Company's ability to ship product during the
remainder of the year. Additionally, sales for the third and fourth quarters
of fiscal 1995 were affected by a soft retail environment.
Gross profit as a percent of net sales decreased to 27.3% in 1995
compared to 29.6% in 1994. The decrease in gross profit was primarily due to
a $3.0 million markdown on sport shirts and a $1.2 million charge the Company
recorded as a result of closing its Robstown, Texas, manufacturing facility
attributable to severance and related expenses and the fixed costs absorbed
as a result of reducing workdays in the Company's domestic manufacturing
plants.
Selling, general and administrative expenses as a percent of net
sales increased to 24.6% in fiscal 1995 from 21.6% in fiscal 1994. Actual
selling, general and administrative expenses increased $4.1 million to $110.4
million in 1995 compared to $106.3 million in 1994. This increase in
expenditures was primarily the result of additional advertising expense of
$1.5 million and additional distribution costs of $1.6 million. As a result
of the May 5, 1995, storm damage, some of the Company's warehousing and
distribution operations were relocated. While relocation of these operations
had allowed the Company to achieve pre-storm warehousing and distribution
capacity, the fragmenting and decentralizing of the warehousing and
distribution operations resulted in inefficiencies and additional costs.
During the third quarter of 1995, the Company recorded a $24.0
million charge to cover the costs of damage caused by the May 5, 1995, storm.
These costs included the write-down of damaged inventory to its salvage
value, damages to the Company's building and equipment and disaster recovery
charges. In the fourth quarter of fiscal 1995, the Company recorded an
additional $10.2 million of expense related to the write off of salvage value
of inventory and additional distribution costs. The Company settled its
insurance claim related to inventory damaged during the storm for $35.0
million. The Company recorded $4.0 million for additional claims related to
real and personal property damage suffered on May 5, 1995. The net result
recorded in fiscal 1995 was a $4.8 million gain from storm damage.
Other income decreased in fiscal 1995 to $0.8 million from $1.5
million in fiscal 1994. The decrease in other income was the result of lower
dividend and interest income in the 1995 fiscal year.
Interest expense increased from $1.3 million in fiscal 1994 to $5.0
million in fiscal 1995. The increase in interest expense was attributable to
higher average debt outstanding as the result of additional borrowing
required to fund the construction of the Company's new CSC, increased levels
of inventory and other working capital requirements.
INCOME TAXES.
The Company's income tax benefit, as a percent of loss from
operations before income tax, was 28.9% in fiscal 1996. Comparatively, the
Company's income tax provision, as a percent of income from operations before
income tax, was 37.9% and 38.9% in fiscal 1995 and 1994, respectively. For
fiscal 1996, 1995
13
<PAGE>
and 1994 the effective income tax rates differed from the statutory rates
because of state income taxes, tax credits utilized and certain permanent tax
differences. Permanent tax differences in 1994 included a taxable gain on the
sale of certain officer's life insurance policies.
SEASONALITY.
Historically, the Company's business has been seasonal, with
slightly higher sales and income in the second and fourth quarters, just
prior to and during the two peak retail selling seasons for spring and fall
merchandise, which reflects the buying patterns of the Company's customers.
The quarterly data for fiscal 1995 was adversely affected in the third and
fourth quarters by the May 5, 1995, storm damage. The following table
presents certain data for each of the Company's last twelve fiscal quarters.
The quarterly data is unaudited, but gives effect to all adjustments
(consisting of normal recurring adjustments) necessary, in the opinion of
management of the Company, to present fairly the data for such periods (in
thousands, except per share data).
<TABLE>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(1) (1)(2)
<S> <C> <C> <C> <C> <C>
Net sales 1996 $ 98,418 $110,840 $103,769 $124,915
1995 121,033 121,118 85,182 121,199
1994 110,233 118,270 120,188 142,544
Gross profit 1996 27,084 30,100 28,933 27,794
1995 35,353 31,030 21,931 34,275
1994 33,260 36,437 34,611 41,081
Selling, general and administrative expenses 1996 26,629 26,999 26,667 32,742
1995 27,047 27,001 28,794 27,590
1994 24,918 23,928 27,231 30,181
Income (loss) before income taxes 1996 1,614 2,553 1,762 (9,335)
1995 8,607 3,620 (31,116) 34,693
1994 8,501 12,730 8,977 11,815
Net income (loss) 1996 1,004 1,584 1,082 (6,090)
1995 5,336 2,167 (19,737) 22,043
1994 4,452 8,044 5,689 7,496
Net income (loss) per common share and
common share equivalent 1996 $0.12 $0.19 $0.13 $(0.71)
1995 $0.62 $0.25 $(2.30) $2.57
1994 $0.51 $0.92 $0.65 $0.86
</TABLE>
(1) In the third quarter of fiscal 1995 the Company recorded a
$24.0 million loss related to the storm damage incurred at the
distribution facility on May 5, 1995. During the fourth
quarter of fiscal 1995 the Company recorded a gain of $28.8
million due to insurance proceeds received and expected to be
received as a result of the storm damage. These amounts are
included in Gain from Storm Damage in the 1995 statement of
operations.
(2) During the fourth quarter of fiscal 1996 the Company recorded
restructuring charges of $14.0 million related to the decision
to restructure its manufacturing capacity through consolidation
of three Texas sewing facilities into one operation. The
restructuring charges were $8.7 million included as a component
of cost of sales and $5.3 million included as operating expenses.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES.
The Company's trade accounts receivable potentially expose the
Company to concentrations of credit risks as all of its customers are in the
retail apparel industry. The Company performs ongoing credit evaluations of
its customers' financial condition and establishes an allowance for doubtful
accounts based upon factors related to the credit risk of specific customers,
historical trends and other information. The Company's days sales outstanding
remained consistent at 45 days on September 30, 1996 and 1995.
Inventories at the end of fiscal 1996 decreased to $116.4 million
from $138.9 million at the end of fiscal 1995. During fiscal year 1995, the
combination of increased production in anticipation of higher sales and the
decrease in sales actually experienced as a result of the May 5, 1995 disaster
and a softening retail environment resulted in abnormally high inventory levels
as of September 30, 1995. The reduction in inventory levels during fiscal 1996
reflects the Company's ongoing efforts to decrease inventory to a level
commensurate with projected sales.
The Company's ongoing external financing needs are met through an
unsecured revolving credit facility (the "Facility") with certain banks. The
Facility provides the Company with a $100.0 million line of credit. The
amount available under the Facility is limited to the lesser of $100.0
million minus any letter of credit exposure or the borrowing base as defined
in the Facility. During the current fiscal year the Company amended the
Facility to extend the expiration date of the Facility to December 31, 1998.
As of September 30, 1996, the Company had $13.0 million outstanding under the
Facility and had additional borrowing capacity of $77.0 million.
The Company's Haggar UK subsidiary maintains a $2.1 million line of
credit with a bank in the United Kingdom to fund its operating activities. At
September 30, 1996, approximately $2.1 million was outstanding under this
line of credit. The line of credit has been partially collateralized by an
approximate $1.6 million letter of credit from the Company and is payable
upon demand. Interest under the line is payable at 1% above the bank's base
rate.
Subsequent to September 30, 1996, the Company reached an agreement
in principle with its joint venturer, Coats Viyella Plc, to dissolve and
wind-up the joint venture of the two firms in the United Kingdom. The
Company intends to continue to market Haggar-Registered Trademark- apparel in
the United Kingdom, including Northern Ireland, and the Republic of Ireland.
In the first quarter of fiscal 1995, the Company completed the sale
and issuance of $25.0 million in senior notes. The proceeds from the notes
were used to partially fund the construction of the Company's new CSC.
Significant terms of the senior notes include a maturity date of ten years
from the date of issuance, interest payable semi-annually and annual
principal payments beginning in the fourth year. The interest rate on the
senior notes is fixed at 8.49%. The terms and conditions of the note purchase
agreement governing the senior notes include restriction on the sale of
assets, limitations on additional indebtedness and the maintenance of certain
net worth requirements. The balance of the approximately $37.2 million cost
of the CSC was financed with internally generated funds and bank borrowings.
The Company sold all of its investments in preferred stock and
equity securities during the second quarter of fiscal 1996 for approximately
$5.0 million. The proceeds from the sale were used to reduce borrowings
under the Company's line of credit. The sale of these securities resulted in
realized losses of $0.5 million.
The Company provided cash from operating activities for the fiscal
year ended September 30, 1996 of $45.6 million, primarily as a result of the
reduction in inventory of $22.6 million, as well as the collection of
insurance proceeds of $23.9 million related to the damage from the May 5,
1995 storm. Additionally, the Company used cash in investing activities of
$7.1 million during fiscal 1996, the result of purchases of property, plant,
and equipment of $16.1 million primarily in conjunction with the opening of
retail stores during the fiscal year. The Company had 28 retail stores open
at the end of the 1996 fiscal year compared to eight at the end of fiscal
1995. Furthermore, cash flows used in financing activities of $37.8 million
for the 1996 fiscal year were
15
<PAGE>
primarily the result of a net reduction in long-term debt of $36.4 million.
Comparatively, the Company used cash in operating activities of $35.4 million
for the fiscal year ended September 30, 1995, primarily due to the increase
in insurance receivable of $24.0 million and increase in inventory of $21.3
million, both a result of the May 5, 1995 storm damage to its facilities.
During fiscal 1995, the Company used cash in investing activities of $27.6
million primarily resulting from the purchase of $30.6 million in property,
plant, and equipment as the construction of the CSC was nearing completion.
Additionally, cash flows provided by financing activities of $62.6 million
were due to a net increase in long-term debt of $63.6 million during fiscal
1995. For the fiscal year ended September 30, 1994, the Company used $6.4
million in operating activities primarily the result of a $41.5 million
increase in inventory, perpetuated by increased sales and offset by a $19.0
million increase in accounts payable. Furthermore, during fiscal 1994, the
Company used cash in investing activities of $18.7 million by purchasing
$15.4 million in property, plant, and equipment and net purchases of $8.8
million in marketable securities. Cash flows provided by financing activities
of $9.8 million during fiscal 1994 were primarily the result of a net
increase in long-term debt of $9.5 million.
The Company believes that the cash flow generated from operations
and the funds available under the foregoing credit facilities will be
adequate to meet its working capital and related financing needs for the
foreseeable future.
Inflation did not materially impact the Company in 1996, 1995 or 1994.
NEW ACCOUNTING STANDARDS.
In October 1995, the Financial Accounting Standards Board issued
SFAS No. 123, "Accounting for Stock-Based Compensation." As a result of this
statement, the Company will begin to provide additional disclosures related
to its stock based compensation plans in its 1997 financial statements.
Adoption of SFAS No. 123 will not have a material effect on the Company's
financial position or results of operations. The Company adopted the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-lived
Assets," in 1995 which did not have a material effect on the Company's
financial position or results of operations.
MANAGEMENT INFORMATION SYSTEM.
The Company is planning to modify its current management
information systems with a software system that will be used to manage, among
other things, customer service, order allocation, billing to customers and
calculations of commissions for the Company's sales associates. The Company
expects this system to improve operational efficiencies and facilitate future
growth. The new management information software is presently being tested
and implementation is currently scheduled for the last half of December 1996
or during the second quarter of fiscal year 1997. However, implementation
could be postponed to facilitate further testing, if required. Although the
Company has tested and will continue to test the system prior to
implementation, testing alone cannot provide assurance that the system will
perform in all aspects as anticipated in an operational environment. The
Company's operations could be disrupted if the transition to the system is
not completed smoothly or if the system does not perform as expected.
16
<PAGE>
FORWARD LOOKING STATEMENTS.
This report contains certain forward-looking statements. In
addition, from time to time the Company may issue press releases and other
written communications, and representatives of the Company may make oral
statements, which contain forward-looking information. Except for historical
information, matters discussed in such oral and written communications are
forward-looking statements that involve risks and uncertainties which could
cause actual results to differ materially from those in such forward-looking
statements.
Risks and uncertainties inherent to the Company's line of business
include such factors as natural disasters, general economic conditions, the
performance of the retail sector in general and the apparel industry in
particular, the competitive environment, consumer acceptance of new products,
and the success of advertising, marketing and promotional campaigns.
Additional risks and uncertainties which could cause the Company's actual
results to differ from those contained in any forward-looking statements are
discussed elsewhere herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Public Accountants, Financial Statements
and Notes to Financial Statements follow.
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Haggar Corp.:
We have audited the accompanying consolidated balance sheets of Haggar Corp.
(a Nevada corporation) and subsidiaries as of September 30, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended September 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Haggar Corp. and subsidiaries
as of September 30, 1996 and 1995, and the results of their operations and
their cash flows for each of the three years in the period ended September 30,
1996, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
-----------------------------------
Arthur Andersen LLP
Dallas, Texas
November 1, 1996
18
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Year Ended September 30,
----------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $ 437,942 $ 448,532 $ 491,235
Cost of goods sold 315,351 324,699 345,846
Restructuring charge 8,680 1,244 -
---------- ---------- ----------
Gross profit 113,911 122,589 145,389
Selling, general and administrative expenses (113,037) (110,432) (106,258)
Restructuring charge (5,320) - -
Gain from storm damage 1,140 4,807 -
Royalty income 2,630 3,049 2,655
---------- ---------- ----------
Operating income (loss) (676) 20,013 41,786
Other income, net 1,563 786 1,510
Interest expense (4,293) (4,995) (1,273)
---------- ---------- ----------
Income (loss) from operations before provision
(benefit) for income taxes (3,406) 15,804 42,023
Provision (benefit) for income taxes (986) 5,995 16,342
---------- ---------- ----------
Net income (loss) to common stockholders $ (2,420) $ 9,809 $ 25,681
---------- ---------- ----------
---------- ---------- ----------
Net income (loss) per common share and common
share equivalent $ (0.28) $ 1.14 $ 2.95
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common shares
and common share equivalents outstanding 8,552 8,623 8,700
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
19
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30,
-----------------------
1996 1995
---------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 2,944 $ 2,230
Accounts receivable, net 74,556 66,967
Inventories 116,356 138,907
Deferred tax benefit 12,410 12,828
Insurance receivable 100 23,990
Other current assets 3,546 4,288
---------- ---------
Total current assets 209,912 249,210
Property, plant, and equipment, net 65,760 56,616
Marketable securities -- 4,630
Other assets 2,662 4,896
---------- ---------
$ 278,334 $ 315,352
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,596 $ 26,448
Accrued liabilities 34,524 27,776
Accrued wages and other
employee compensation 3,447 3,343
Accrued workers' compensation expense 5,895 7,233
Accrued health insurance expense 2,541 2,708
Federal income taxes payable 1,189 771
Short-term borrowings 2,067 1,635
Current portion of long-term debt 481 447
---------- ---------
Total current liabilities 73,740 70,361
Long-term debt 42,112 78,585
---------- ---------
Total liabilities 115,852 148,946
Stockholders' equity:
Common stock - par value $0.10 per share; 25,000,000
shares authorized and 8,560,636 shares issued
in 1996 and 1995 856 856
Additional paid-in capital 41,641 41,641
Unrealized loss on marketable securities -- (206)
Retained earnings 119,986 124,116
---------- ---------
162,483 166,407
Less - Treasury stock, 9,254 shares at par value (1) (1)
---------- ---------
Total stockholders' equity 162,482 166,406
---------- ---------
$ 278,334 $ 315,352
---------- ---------
---------- ---------
The accompanying notes are an integral part of these
consolidated financial statements.
20
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
Common Stock Unrealized
------------------ Additional Loss on Total
$0.10 Par Value Paid-In Marketable Retained Treasury Stockholders'
Shares $ Capital Securities Earnings Stock Equity
------------------ ---------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
September 30, 1993 8,507,736 $851 $40,514 $ - $ 92,035 $ (1) $133,399
Common stock
issuance 38,369 4 857 - - - 861
Common stock
dividends declared
($0.20 per share) - - - - (1,700) - (1,700)
Unrealized loss
on marketable
securities - - - (239) - - (239)
Net income - - - - 25,681 - 25,681
------------------------------------------------------------------------------------
BALANCE,
September 30, 1994 8,546,105 855 41,371 (239) 116,016 (1) 158,002
Common stock
issuance 14,531 1 270 - - - 271
Common stock
dividends declared
($0.20 per share) - - - - (1,709) - (1,709)
Recovery of unrealized
loss on marketable
securities - - - 33 - - 33
Net income - - - - 9,809 - 9,809
------------------------------------------------------------------------------------
BALANCE,
September 30, 1995 8,560,636 856 41,641 (206) 124,116 (1) 166,406
Common stock
dividends declared
($0.20 per share) - - - - (1,710) - (1,710)
Realized loss
on marketable
securities - - - 206 - - 206
Net loss - - - - (2,420) - (2,420)
------------------------------------------------------------------------------------
BALANCE,
September 30, 1996 8,560,636 $856 $41,641 $ - $119,986 $ (1) $162,482
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
21
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
Year Ended September 30,
-------------------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (2,420) $ 9,809 $ 25,681
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,839 3,268 3,158
(Gain) loss on disposal of property, plant, and equipment (1,608) 144 (190)
Net (gain) loss on sale of marketable securities 542 (117) 179
Changes in assets and liabilities -
Accounts receivable, net (7,589) 13,117 (9,097)
Inventories 22,551 (21,343) (41,541)
Insurance receivable 23,890 (23,990) -
Current deferred tax benefit 288 (1,872) (274)
Other current assets 148 (23) (91)
Accounts payable (2,852) (12,403) 18,956
Accrued liabilities and federal income taxes payable 6,999 1,448 (2,339)
Accrued wages and other employee compensation 104 (3,259) 45
Accrued workers' compensation expense (1,338) (214) (813)
Minority interest - - (32)
--------- --------- --------
Net cash provided by (used in) operating activities 45,554 (35,435) (6,358)
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment, net (16,070) (30,613) (15,448)
Proceeds from sale of property, plant, and equipment, net 1,695 - -
Purchases of marketable securities - - (22,020)
Proceeds from the sale of marketable securities 5,018 3,156 13,243
Proceeds from the sale of officers' life insurance policies - - 4,856
(Increase) decrease in other assets 2,234 (130) 650
--------- --------- --------
Net cash used in investing activities (7,123) (27,587) (18,719)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from short-term borrowings 432 501 1,134
Proceeds from issuance of long-term debt 422,000 517,000 51,000
Payments on long-term debt (458,439) (453,423) (41,509)
Payments of cash dividends (1,710) (1,709) (1,700)
Net proceeds from the issuance of common stock - 271 861
--------- --------- --------
Net cash provided by (used in) financing activities (37,717) 62,640 9,786
--------- --------- --------
Increase (decrease) in cash and cash equivalents 714 (382) (15,291)
Cash and cash equivalents, beginning of period 2,230 2,612 17,903
--------- --------- --------
Cash and cash equivalents, end of period $ 2,944 $ 2,230 $ 2,612
--------- --------- --------
--------- --------- --------
Supplemental disclosure of cash flow information
Cash paid (received) for:
Interest, net of amounts capitalized $ 3,350 $ 3,275 $ 549
Income taxes, net $ (1,359) $ 9,236 $ 20,544
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
22
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Haggar Corp. and subsidiaries (the "Company") designs, manufactures,
imports, and markets men's apparel products including pants, shorts, suits,
sportcoats, and shirts. The Company's products are sold to retail stores
throughout the United States including major department stores, specialty
stores and mass market retailers. The Company offers its premium apparel
products under the "Haggar" brand name, and also offers a more moderately
priced line of products under its "Reed St. James" brand name through its
mass market retailer division, The Horizon Group. In addition, the Company's
specialty label division offers retailers quality products bearing the
retailer's own label. The Company's Haggar Direct, Inc. subsidiary was formed
in 1995 for the purpose of developing and operating retail stores located in
retail outlet malls throughout the United States. The Company's foreign
operations are conducted through Haggar UK, which markets the Company's
branded products in Europe. Additionally, the Company derives royalty income
from the use of its "Haggar" and "Reed St. James" trademarks by manufacturers
of various products that the Company does not produce. The Company is
headquartered in Dallas, Texas, with manufacturing facilities in Texas,
Mexico and the Dominican Republic.
The consolidated financial statements include the accounts of Haggar
Corp., Haggar Clothing Co. ("Clothing Co."), which is the main operating
subsidiary, Haggar Direct, Inc., Haggar UK, and all other subsidiaries of
Clothing Co. All significant intercompany transactions and balances have been
eliminated in consolidation.
The accompanying consolidated financial statements reflect the
application of certain accounting policies as described below and in the
remaining notes.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with original maturities of three months or less to
be cash equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are net of allowances for doubtful accounts of
$900,000 and $1,201,000 at September 30, 1996 and 1995, respectively.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by SFAS No. 105, "Disclosure of
Information about Financial Instruments with Off-Balance Sheet Risk and
Financial Instruments with Concentrations of Credit Risk," consist primarily
of trade accounts receivable. The Company's customers are not concentrated in
any specific geographic region but are concentrated in the apparel industry.
One customer accounted for 26.3%, 28.7% and 27.6% of the Company's net sales
during the year ended September 30, 1996, 1995 and 1994, respectively. No
other customer accounted for more than 10% of consolidated revenues. The loss
of the business of one or more of the Company's largest customers could have
a material adverse effect on the Company's results of operations. The Company
performs ongoing credit evaluations of its customers' financial condition.
The Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends, and
other information.
23
<PAGE>
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market, and consisted of the following at September 30, 1996 and 1995 (in
thousands):
1996 1995
-------- --------
Piece goods $ 23,335 $ 22,260
Trimming and supplies 5,991 11,808
Work-in-process 13,248 27,614
Finished garments 73,782 77,225
-------- --------
$116,356 $138,907
-------- --------
-------- --------
Work-in-process and finished garments inventories consisted of materials,
labor and manufacturing overhead.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, stated at cost, consisted of the
following at September 30, 1996 and 1995 (in thousands):
1996 1995
-------- --------
Land $ 3,428 $ 3,476
Buildings 29,878 11,902
Furniture, fixtures and equipment 80,786 55,205
Leasehold improvements 11,856 9,015
Construction in progress 369 31,198
-------- --------
Total 126,317 110,796
Less: Accumulated depreciation
and amortization (60,557) (54,180)
-------- --------
Net property, plant, and equipment $ 65,760 $ 56,616
-------- --------
-------- --------
During 1995, the Company adopted SFAS No. 121, "Accounting for
Impairment of Long-lived Assets." The adoption of SFAS No. 121 has not had a
significant impact on the Company's financial position or results of
operations.
DEPRECIATION AND AMORTIZATION
The Company provides for depreciation and amortization using
accelerated and straight-line methods by charges to operations in amounts
which allocate the cost of the assets over their estimated useful lives, as
follows:
Estimated
Asset Classification Useful Life
-------------------- -----------
Buildings 15-40
Furniture, fixtures, and equipment 5-7
Leasehold improvements Life of Lease
24
<PAGE>
FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 107, "Disclosure about Fair Value
of Financial Instruments," which requires the disclosure of the fair market
value of off- and on-balance sheet financial instruments. The carrying value
of all financial instruments, including marketable securities, long-term
debt, and cash and temporary cash investments, approximates their fair value
at year-end.
The FASB issued SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which addresses the accounting and reporting
requirements for both investments in equity securities that have readily
determinable fair values and for all investments in debt securities. During
the second quarter of fiscal 1996, the Company sold all of its investments in
preferred stock and equity securities. The proceeds from the sale were used
to reduce borrowings under the Company's line of credit. Comparatively, the
Company had net investments in preferred stocks of approximately $5,224,000,
as of September 30, 1995. These investments were classified as
available-for-sale securities and were reported at their fair value as of
September 30, 1995, with unrealized gains and losses excluded from earnings
and reported as a separate component of stockholders' equity, net of tax.
Realized gains and losses on investments in preferred stocks are
determined on a specific identification basis. During fiscal 1996 the
Company recognized realized losses of $542,000. During fiscal 1995 realized
losses of $6,000 were offset by realized gains of $123,000. The net effect of
these gains and losses is reflected in Other income, net in the accompanying
Consolidated Statements of Operations. There were no gross unrealized losses
as of September 30, 1996. Gross unrealized losses as of September 30, 1995,
were approximately $335,000. Accordingly, the Company established a
valuation allowance to reduce stockholders' equity as of September 30, 1995,
by $206,000, net of a $129,000 deferred income tax benefit during fiscal 1995.
The Company earned $167,000, $621,000, and $1,166,000 in dividend and
interest income during fiscal 1996, 1995, and 1994, respectively, on
marketable securities and other investments.
OTHER ASSETS
Other assets consisted of the following at September 30, 1996 and 1995
(in thousands):
1996 1995
------ ------
Cash surrender value of life insurance $ 780 $2,837
Long-term deferred tax benefit 594 546
Equipment projects-in-progress 123 658
Other 1,165 855
------ ------
Total other assets $2,662 $4,896
------ ------
------ ------
MINORITY INTEREST
In September 1993, the Company established a subsidiary, Haggar
UK, for the purpose of expanding its operations in the United Kingdom. The
Company contributed approximately $30,000 to obtain a 51% interest in the
subsidiary. The assets and liabilities of Haggar UK have been reflected in
the consolidated financial statements as of September 30, 1996, and September
30, 1995. As cumulative net losses from the initial operations of the
subsidiary have exceeded contributed capital, there has been no minority
interest reflected in the consolidated balance sheets as of September 30,
1996 and 1995.
During fiscal 1994, the Haggar UK subsidiary established a line
of credit with a bank to fund operating activities. Available borrowing
capacity under the line of credit is approximately $2,100,000, and
approximately $2,067,000 and $1,635,000 was outstanding as of September 30,
1996 and 1995, respectively.
25
<PAGE>
Interest is payable at 1% above the bank's base rate, as defined (6.75% at
September 30, 1996). The line of credit has been partially collateralized by
an approximate $1.6 million letter of credit from the Company and is payable
upon demand.
REVENUE RECOGNITION
Revenue is recognized upon product shipment to customers.
ADVERTISING
Production costs of commercials and programming are charged to
operations in the year first aired. The costs of other advertising,
promotion and marketing programs are charged to operations in the year
incurred.
OTHER INCOME
Other income consisted of the following for the years ended September
30, 1996, 1995 and 1994 (in thousands):
1996 1995 1994
------ ----- ------
Gain (loss) on sale of assets, net $1,608 $(144) $ 190
Interest income 61 81 328
Investment income (loss), net (436) 657 659
Other 330 192 333
------ ----- ------
Total other income, net $1,563 $ 786 $1,510
------ ----- ------
------ ----- ------
NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT
Net income per common share and common share equivalent is calculated by
dividing net income applicable to common stock by the weighted average shares
of common stock and common stock equivalents outstanding. Common stock
equivalents represent the effect, if any, of the assumed purchase of common
shares, using the treasury stock method, pursuant to a stock repurchase
agreement and common stock options issued under a long-term incentive plan.
Common stock equivalents have been determined in 1996, 1995 and 1994 using a
common stock market price of $14.50, $21.26 and $28.32, respectively, per
share.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. INCOME TAXES
The components of the provision (benefit) for income taxes are as
follows for the years ended September 30, 1996, 1995 and 1994 (in thousands):
1996 1995 1994
----- ------- -------
Current federal income tax $(347) $ 7,473 $14,994
Deferred federal income tax (595) (2,212) (274)
State income tax (44) 734 1,622
----- ------- -------
Provision (benefit) for income taxes $(986) $ 5,995 $16,342
----- ------- -------
----- ------- -------
26
<PAGE>
Temporary differences and carryforwards which give rise to a significant
portion of net deferred income tax assets are as follows (in thousands):
1996 1995
------- -------
Deferred income tax assets:
Workers' compensation accrual $ 2,063 $ 2,531
Inventory cost capitalization
and valuation 3,741 6,080
Allowances for
accounts receivable 315 420
Health and life insurance accrual 982 1,236
Accrual for system development - 560
Interest capitalization 915 490
Reserve for reorganization 4,900 -
Other 1,388 3,357
------- -------
14,304 14,674
Less - Valuation allowance (250) (250)
------- -------
14,054 14,424
Deferred income tax liability:
Prepaid insurance (1,050) (1,050)
------- -------
Net deferred income tax asset 13,004 13,374
Less - Current deferred tax benefit 12,410 12,828
------- -------
Long-term deferred tax benefit $ 594 $ 546
------- -------
------- -------
The provision (benefit) for income taxes was different than the amount
computed using the statutory federal income tax rate for the reasons set
forth in the following table (in thousands):
1996 1995 1994
------- ------ -------
Tax computed at the
statutory rate $(1,045) $5,531 $14,708
State income taxes (44) 734 1,622
Tax credits utilized (96) (491) (449)
Gain on sale of life insurance
policies - - 791
------- ------ -------
Other 199 221 (330)
------- ------ -------
$ (986) $5,995 $16,342
------- ------ -------
------- ------ -------
3. INSURANCE RECEIVABLE
On May 5, 1995, a severe thunderstorm struck the Dallas - Fort Worth
metropolitan area causing widespread damage. During the high winds and heavy
rains caused by these thunderstorms, a portion of the roof over the Company's
main distribution center collapsed. The Company has received a $35,000,000
insurance settlement related to the inventory and approximately $5,100,000
related to real and personal property damaged during the storm. As of
September 30, 1995, the Company had received $15,000,000 of the $35,000,000
insurance inventory claim. At that point in time, the claims for real and
other personal property damage had not yet been submitted to the insurance
carrier. Accordingly, a receivable of $20,000,000 related to the uncollected
portion of the inventory claim and approximately $4,000,000 related to the
estimated real and other personal property claim is reflected in the
accompanying balance sheet as of September 30, 1995.
The insurance proceeds received and expected to be received in 1995 as a
result of the storm damage are included in Gain from Storm Damage in the
accompanying 1995 statement of operations. Such proceeds have been offset by
approximately $34,000,000 in expenses related specifically to the storm
damage, including approximately $24,000,000 of damaged inventory, $4,000,000
of additional distribution costs, and $6,000,000 of property and equipment
damage and other disaster recovery costs. Collections in excess of the
recorded receivable
27
<PAGE>
resulted in a $1,100,000 gain from the settlement of the real and other
personal property claims for the year ended September 30, 1996.
4. LONG-TERM DEBT
Long-term debt consisted of the following at September 30, 1996 and 1995
(in thousands):
1996 1995
------- -------
Borrowings under revolving
credit line $13,000 $49,000
Industrial Development Revenue
Bonds with interest at a rate equal
to that of high-quality, short-term,
tax-exempt obligations, as defined
(3.85% at September 30, 1996),
payable in annual installments of
$100 to $200, and a final payment
of $2,000 in 2005, secured by
certain buildings and equipment 2,900 3,000
Allstate notes 25,000 25,000
Other 1,693 2,032
------- -------
42,593 79,032
Less - Current portion 481 447
------- -------
$42,112 $78,585
------- -------
------- -------
Net assets mortgaged or subject to lien under the Industrial Development
Revenue Bonds totaled approximately $1,400,000 at September 30, 1996.
As of September 30, 1996, the Company had a revolving credit line
agreement (the "Agreement") with certain banks. During 1996, the Agreement
was amended to extend the maturity date to December 31, 1998. The Company had
additional available borrowing capacity of approximately $77,000,000 under
this Agreement at September 30, 1996. The Company incurred approximately
$211,000 in commitment fees related to the available borrowing capacity
during the year ended September 30, 1996. The interest rates for the year
ended September 30, 1996, ranged from 6.03% to 8.75%, and the weighted
average interest rate for the year was 7.7%. The facility will mature
December 31, 1998, with a one year renewal at the option of the banks and is
unsecured, except that the Company is prohibited from pledging its accounts
receivables and inventories during the term of the Agreement. The Agreement
contains limitations on incurring additional indebtedness and requires the
maintenance of certain financial ratios. In addition, the Agreement requires
the Company and Clothing Co., the Company's main operating subsidiary, to
maintain tangible net worth, as defined, in excess of $149,000,000 and
$55,000,000, respectively, as of September 30, 1996. For fiscal years after
1996, the Agreement requires the Company to maintain a tangible net worth in
excess of the tangible net worth of the preceding fiscal year plus 50% of the
Company's consolidated net income. The Agreement prohibits the payment of any
dividend if either a default exists or the fixed charge ratio, as defined, is
less than 1.10 to 1.00 after giving effect to such a dividend.
In the first quarter of fiscal 1995, the Company completed the sale and
issuance of $25,000,000 in senior notes (the "Allstate notes"). Proceeds from
the notes were used to partially fund the construction of the Company's new
CSC. Significant terms of the senior notes include a maturity date of ten
years from the date of issuance, interest payable semi-annually and annual
principal payments beginning in the fourth year. The interest rate on the
senior notes is fixed at 8.49%. The terms and conditions of the note purchase
agreement governing the senior notes include restriction on the sale of
assets, limitations on additional indebtedness, and the maintenance of
certain net worth requirements.
28
<PAGE>
Principal payments due during the next five years on debt are as follows
(in thousands):
Years Ending September 30, Amount
-------------------------- -------
1997 $ 481
1998 322
1999 16,854
2000 3,870
2001 3,888
Thereafter 17,178
-------
$42,593
-------
-------
5. LEASES AND OTHER COMMITMENTS
OPERATING LEASES
The Company leases certain of its manufacturing, computer and automotive
equipment under agreements which expire at various dates through 2010 and
which contain options to renew at various terms. The following is a schedule
of future minimum rental payments required under operating leases at
September 30, 1996 (in thousands):
Years Ending September 30, Amount
-------------------------- -------
1997 $ 6,031
1998 4,479
1999 3,549
2000 2,395
2001 1,557
Thereafter 1,414
-------
$19,425
-------
-------
Rental expense was $6,410,000, $4,896,000 and $4,316,000 in the years
ended September 30, 1996, 1995 and 1994, respectively.
COMMITMENTS AND CONTINGENCIES
The Company had approximately $17,378,000 in outstanding letters of
credit at September 30, 1996, primarily in connection with certain
self-insurance agreements and certain inventory purchases of the Company.
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and suits in the
aggregate will not have a material adverse effect on the Company's financial
position or the results of operations of the future periods.
6. RELATED PARTY TRANSACTIONS
The Company paid $136,000, $327,000 and $298,000 to certain stockholders
primarily for rent on a building in the years ended September 30, 1996, 1995
and 1994, respectively.
29
<PAGE>
7. RESTRUCTURING CHARGES
The Company decided to restructure its worldwide manufacturing
capacity, including consolidation of its three Texas sewing operations into
one facility. The cost of this restructure, recorded in the year ended
September 30, 1996, was estimated to be $14,000,000 of which $8,680,000 is
included in cost of sales and consisting principally of severance costs for
manufacturing employees and $5,320,000 is included in operating expenses
related principally to costs to resolve various legal issues in connection
with the restructuring and prior plant closings as well as severance for
non-manufacturing employees. This restructuring is expected to begin in 1997
and be fully implemented in 1998.
In fiscal 1995, the Company closed its Robstown, Texas, manufacturing
plant. The cost of closing this plant, recorded in the year ended September
30, 1995, was approximately $1,244,000, which is included in cost of sales in
the accompanying Statements of Operations in the year ended September 30,
1995.
8. EMPLOYEE BENEFIT PLANS
The Company provides a Profit Sharing and Savings Plan (the "Plan") to
substantially all eligible employees of the Company, as defined.
Discretionary profit sharing contributions, made by the Company, are
allocated to eligible plan participants based on their respective
compensation. The profit sharing contributions vest according to a defined
vesting schedule. Full vesting occurs at the end of seven years of service or
upon retirement, death, or disability of plan participants. Participants may
contribute from 1% to 10% of their compensation to the Plan under Internal
Revenue Code Section 401(k) ("401(k) Contributions"). The Company may make
discretionary matching contributions in an amount equal to 50% of each
participant's 401(k) Contribution. Participant 401(k) Contributions and the
Company's matching 401(k) Contributions are 100% vested at the date they are
contributed. The Company contributed approximately $700,000, $2,000,000 and
$2,000,000 for each of the years ended September 30, 1996, 1995 and 1994,
respectively.
The Company also has an Employee Benefits Trust (the "Trust") to
provide eligible employees of the Company, as defined, with certain welfare
benefits. Trust contributions are made by the Company as defined by the trust
agreement. The Company contributed approximately $10,378,000, $9,100,000 and
$8,939,000 to the Trust for the years ended September 30, 1996, 1995 and
1994, respectively.
In December 1990, SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," was issued to establish
standards of financial accounting and reporting for an employer that provides
postretirement benefits other than pensions to its employees. Although the
Company provides welfare benefits to a limited number of eligible retired
employees, as defined, such benefits have been insignificant for the years
ended September 30, 1996, 1995 and 1994. Additionally, such benefits are
expected to be insignificant in future years.
On June 28, 1993, the Company established a noncompensatory employee
stock purchase plan to provide employees with a convenient way to acquire
Company stock through payroll deductions. Substantially all employees meeting
limited employment qualifications may participate in the stock purchase plan.
30
<PAGE>
LONG-TERM INCENTIVE PLAN
The Company, during the first quarter of fiscal 1993, adopted a
long-term incentive plan which authorizes the grant of stock options to key
employees. The options vest over a period of three to five years and expire
ten years from the date of grant. The options are issued at an exercise price
not less than the fair market value of the Company's common stock on the date
of the grant. The long-term incentive plan allows for 1,300,000 shares to be
granted. The following table summarizes the changes in common stock options
in fiscal 1996, 1995 and 1994:
Shares Range of prices
-------- ----------------
Options outstanding
as of September 30, 1993 383,000 $16.50 to $19.25
Options granted 304,000 $18.25 to $37.88
Options exercised (10,000) $16.50 to $18.25
Options canceled (9,600) $16.50
-------- ----------------
Options outstanding as
of September 30, 1994 667,400 $16.50 to $37.88
Options granted 244,000 $21.50 to $23.00
Options exercised (14,531) $19.25 to $24.13
Options canceled (32,401) $16.50 to $21.50
-------- ----------------
Options outstanding as
of September 30, 1995 864,468 $16.50 to $37.88
Options granted 109,000 $12.13 to $16.50
Options canceled (7,000 $16.50 to $18.25
-------- ----------------
Options outstanding as
of September 30, 1996 966,468 $12.13 to $37.88
-------- ----------------
-------- ----------------
Options available for grant
as of September 30, 1996 309,001
Options exercisable as of
September 30, 1996 466,770
9. SUBSEQUENT EVENTS
Subsequent to September 30, 1996, the Company declared a cash
dividend of $0.05 per share payable to the stockholders of record on October
28, 1996. The dividend of approximately $428,000 was paid on November 11,
1996.
Also subsequent to September 30, 1996, the Company reached an
agreement in principle with its joint venturer, Coats Viyella Plc, to
dissolve and wind-up the joint venture of the two firms in the United
Kingdom. The Company intends to continue to market Haggar-Registered
Trademark- apparel in the United Kingdom, including Northern Ireland, and the
Republic of Ireland.
31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Haggar Corp.:
We have audited in accordance with generally accepted auditing standards the
consolidated financial statements of Haggar Corp. (a Nevada corporation) and
subsidiaries included in this Form 10-K and have issued our report thereon
dated November 1, 1996. Our audits were made for the purpose of forming an
opinion on the basic consolidated financial statements taken as a whole.
Schedules I and II are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing procedures
applied in the audits of the basic consolidated financial statements and, in
our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
------------------------------
Arthur Andersen LLP
Dallas, Texas
November 1, 1996
32
<PAGE>
SCHEDULE I
Page 1 of 2
HAGGAR CORP. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
HAGGAR CORP. (PARENT COMPANY)
BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS)
1996 1995
---------- ----------
ASSETS:
Investment in subsidiaries $ 65,545 $ 72,840
Due from subsidiaries - 4,129
Note receivable from Haggar Clothing Co. 100,632 92,706
---------- ----------
$ 166,177 $ 169,675
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Dividend payable and other current liabilities $ 3,052 $ 3,063
Due to subsidiaries 643 -
---------- ----------
Total current liabilities 3,695 3,063
STOCKHOLDERS' EQUITY:
Common stock 856 856
Additional paid-in capital 41,641 41,641
Retained earnings 119,986 124,116
Less - treasury stock (1) (1)
---------- ----------
Total stockholders' equity 162,482 166,612
---------- ----------
$ 166,177 $ 169,675
---------- ----------
---------- ----------
33
<PAGE>
SCHEDULE I
Page 2 of 2
HAGGAR CORP. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
HAGGAR CORP. (PARENT COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(IN THOUSANDS)
1996 1995 1994
------- ------- --------
Equity in earnings of subsidiaries $(7,296) $ 5,011 $ 22,258
Interest income 7,928 7,497 5,349
Income tax expense (3,052) (2,699) (1,926)
------- ------- --------
Net income $(2,420) $ 9,809 $ 25,681
------- ------- --------
------- ------- --------
34
<PAGE>
SCHEDULE II
HAGGAR CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
AS OF SEPTEMBER 30, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
Balance at Charges to Balance at
Beginning of Costs and Deductions End of
Period Expenses (1) Period
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
September 30, 1996:
Allowance for doubtful accounts $1,201 $(686) $ 385 $ 900
September 30, 1995:
Allowance for doubtful accounts 1,284 792 (875) 1,201
September 30, 1994:
Allowance for doubtful accounts 1,156 640 (512) 1,284
</TABLE>
(1) Amounts deemed uncollectible and recoveries of previously reserved amounts.
35
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Part III, Item 10 is incorporated by
reference from the Registrant's definitive proxy statement to be filed with
the Commission pursuant to Regulation 14A not later than 120 days after the
end of the fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Part III, Item 11 is incorporated by
reference from the Registrant's definitive proxy statement to be filed with
the Commission pursuant to Regulation 14A not later than 120 days after the
end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Part III, Item 12 is incorporated by
reference from the Registrant's definitive proxy statement to be filed with
the Commission pursuant to Regulation 14A not later than 120 days after the
end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Part III, Item 13 is incorporated by
reference from the Registrant's definitive proxy statement to be filed with
the Commission pursuant to Regulation 14A not later than 120 days after the
end of the fiscal year covered by this report.
36
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K.
(a) (1) FINANCIAL STATEMENTS
Pages
Report of Independent Public Accountants. 18
Consolidated Statements of Operations,
Years Ended September 30, 1996, 1995 and 1994. 19
Consolidated Balance Sheets, at September 30, 1996 and 1995. 20
Consolidated Statements of Stockholders' Equity,
Years Ended September 30, 1996, 1995 and 1994. 21
Consolidated Statements of Cash Flows,
Years Ended September 30, 1996, 1995 and 1994. 22
Notes to Consolidated Financial Statements. 23-31
(2) FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants. 32
Schedule I - Condensed Financial Information of Registrant -
Haggar Corp. (Parent Company). 33-34
Schedule II - Valuation and Qualifying Accounts. 35
Schedules not included with this additional financial data have been
omitted because they are not applicable or the required information
is shown in the Consolidated Financial Statements or Notes thereto.
(3) EXHIBITS
3(a) Third Amended and Fully Restated Articles of
Incorporation. (Incorporated by reference from
Exhibit 3(a) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1993
[File No. 0-20850].)
3(b) Bylaws of the Company, as amended. (Incorporated by
reference from Exhibit 3(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1994 [File No. 0-20850].)
4(a) Specimen Certificate evidencing Common Stock (and
Preferred Stock Purchase Right). (Incorporated by
reference from Exhibit 4(a) to the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1994 [File No. 0-20850].)
4(b) Form of Stockholders' Rights Agreement. (Incorporated
by reference from Exhibit 4(b) to the Company's
Pre-Effective Amendment No. 1 to Form S-1, filed with
the Security and Exchange Commission on November 16,
1992 [Registration No. 33-52704].)
4(c) Note Purchase Agreement dated December 22, 1994,
among Haggar Apparel Company, Haggar Corp. and
Allstate Life Insurance Company. (Incorporated by
reference from Exhibit 4(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994 [File No. 0-20850].)
37
<PAGE>
4(d) Note No. 1 dated December 22, 1994, in
original principal amount of $10,500,000 executed by
Haggar Apparel Company, as maker, and Haggar Corp.,
as guarantor, payable to Allstate Life Insurance
Company. (Incorporated by reference from Exhibit 4(b)
to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994 [File No. 0-20850].)
4(e) Note No. 2 dated December 22, 1994, in original
principal amount of $6,500,000 executed by Haggar
Apparel Company, as maker, and Haggar Corp., as
guarantor, payable to Allstate Life Insurance
Company. (Incorporated by reference from Exhibit 4(c)
to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994 [File No. 0-20850].)
4(f) Note No. 3 dated December 22, 1994, in original
principal amount of $4,800,000 executed by Haggar
Apparel Company, as maker, and Haggar Corp., as
guarantor, payable to Allstate Life Insurance Company.
(Incorporated by reference from Exhibit 4(d) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994 [File No. 0-20850].)
4(g) Note No. 4 dated December 22, 1994, in original
principal amount of $2,200,000 executed by Haggar
Apparel Company, as maker, and Haggar Corp., as
guarantor, payable to Allstate Life Insurance Company.
(Incorporated by reference from Exhibit 4(e) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994 [File No. 0-20850].)
4(h) Note No. 5 dated December 22, 1994, in original
principal amount of $1,000,000 executed by Haggar
Apparel Company, as maker, and Haggar Corp., as
guarantor, payable to Allstate Life Insurance Company.
(Incorporated by reference from Exhibit 4(f) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994 [File No. 0-20850].)
10(a) 1992 Long Term Incentive Plan. (Incorporated by
reference from Exhibit 10(a) to the Company's
Pre-Effective Amendment No. 1 to Form S-1, filed with
the Security and Exchange Commission on November 16,
1992 [Registration No. 33-52704].)
10(b) Management Incentive Plan. (Incorporated by reference
from Exhibit 10(b) to the Company's Registration
Statement on Form S-1, filed with the Security and
Exchange Commission on October 1, 1992
[Registration No. 33-52704].)
10(c) Master Letter of Credit Agreement between Philadelphia
National Bank and Haggar Apparel Company.
(Incorporated by reference from Exhibit 10(n) to the
Company's Registration Statement on Form S-1, filed
with the Security and Exchange Commission on October
1, 1992 [Registration No. 33-52704].)
10(d) Articles of Association of Haggar UK Limited.
(Incorporated by reference from Exhibit 10(n) to the
Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1993 [File No. 0-20850].)
10(e) Subscription and Shareholders Agreement relating to
Haggar UK Limited. (Incorporated by reference from
Exhibit 10(o) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1993
[File No. 0-20850].)
10(f) Trade mark License Agreement between Haggar Apparel
Company and Haggar UK Limited. (Incorporated by
reference from Exhibit 10(l) to the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1994 [File No. 0-20850].)
38
<PAGE>
10(g) First Amendment to the 1992 Long-term Incentive Plan.
(Incorporated by reference from Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994 [File No. 0-20850 ].)
10(h) Standard Form of Agreement Between Owner and
Contractor dated as of April 25, 1994, between Haggar
Apparel Company and Bob Moore Construction, Inc.
regarding construction of customer service center.
(Incorporated by reference from Exhibit 10(d) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 [File No. 0-20850].)
10(i) Agreement dated as of April 26, 1994, between Haggar
Apparel Company and Kosan Crisplant USA, Inc.
regarding tilt tray sortation system for the customer
service center. (Incorporated by reference from
Exhibit 10(e) to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994
[File No. 0-20850].)
10(j) Agreement by and between Haggar Apparel Company and
Babcock Industries Inc., regarding a material
conveying system. (Incorporated by reference from
Exhibit 10(b) to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995
[File No. 0-20850].)
10(k) First Amended and Restated Credit Agreement between
the Company and Texas Commerce Bank, as agent for a
bank syndicate.
10(l) Commercial Contract of Sale dated effective March 28,
1996, between Haggar Clothing Co. and Fred's Foreign
Car Service, Inc. regarding land and storage building,
together with First Amendment to Commercial Contract
of Sale dated effective April 8, 1996.
10(m) Commercial Contract of Sale dated effective March 28,
1996, between Haggar Clothing Co. and R.H.A.
Partnership regarding land and storage building,
together with Amendment to Contract of Sale dated
April 22, 1996, Second Amendment to Commercial
Contract of Sale dated effective April 29, 1996, and
Third Amendment to Commercial Contract of Sale dated
effective May 10, 1996.
11 Statement Regarding Computation of Net Income (Loss)
Per Common Share.
21 Significant Subsidiary of the Company. (Incorporated
by reference from Exhibit 22 to the Company's
Registration Statement on Form S-1, filed with the
Security and Exchange Commission on October 1, 1992
[Registration No. 33-52704].)
23 Consent of independent public accountants.
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed with the Commission
during the fourth quarter of fiscal 1996.
39
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
40
<PAGE>
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.
HAGGAR CORP.
(Registrant)
By: /s/ RALPH A. BEATTIE
-----------------------------------
Ralph A. Beattie, December 20, 1996
(EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER)
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:
Signature Title Date
- ------------------------ ---------------------------------- -----------------
/s/ J. M. HAGGAR, III Chairman and December 20, 1996
- ------------------------ Chief Executive Officer
J. M. Haggar, III (Principal Executive Officer)
/s/ FRANK D. BRACKEN Director, President and December 20, 1996
- ------------------------ Chief Operating Officer
Frank D. Bracken
/s/ RALPH A. BEATTIE Director, Executive Vice President December 20, 1996
- ------------------------ and Chief Financial Officer
Ralph A. Beattie (Principal Financial and
Accounting Officer)
/s/ NORMAN E. BRINKER Director December 20, 1996
- ------------------------
Norman E. Brinker
41
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
INDEX TO ATTACHED EXHIBITS
EXHIBIT PAGES
10(k) First Amended and Restated Credit Agreement between the Company
and Texas Commerce Bank, as Agent for a bank syndicate.
10(l) Commercial Contract of Sale between the Company and Fred's Foreign
Car Service Inc. and First Amendment to Contract of Sale.
10(m) Commercial Contract of Sale between the Company and R.H.A.
Partnership, Amendment to Contract of Sale, and Second Amendment
to Commercial Contract of Sale and Third Amendment to Commercial
Contract of Sale.
11 Statement Regarding Computation of Net Income (Loss) Per Common
Share.
23 Consent of Independent Public Accountants
42
<PAGE>
$100,000,000
FIRST AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
HAGGAR CLOTHING CO.,
A NEVADA CORPORATION,
HAGGAR CORP.,
A NEVADA CORPORATION,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
INDIVIDUALLY AND AS AGENT,
AND
THE BANKS LISTED HEREIN
DATED AS OF SEPTEMBER 18, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS. . . . . . . . . . . . . . . 1
1.1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 1
1.2. GENDER AND NUMBER. . . . . . . . . . . . . . . . . . . . 18
1.3. REFERENCES TO AGREEMENT. . . . . . . . . . . . . . . . . 18
ARTICLE 2
THE CREDITS . . . . . . . . . . . . . . . 18
2.1. ADVANCES AND LETTERS OF CREDIT . . . . . . . . . . . . . 18
2.2. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 19
2.3. OPTIONAL PRINCIPAL PAYMENTS. . . . . . . . . . . . . . . 19
2.4. REDUCTION OR TERMINATION OF COMMITMENTS. . . . . . . . . 19
2.5. FEES.. . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.6. METHODS OF BORROWING AND APPLICATION AND ISSUANCE OF
LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . 20
2.7. METHOD OF SELECTING RATE OPTIONS AND INTEREST
PERIODS; CALCULATION OF INTEREST.. . . . . . . . . . . . 24
2.8. BORROWING BASE AND BORROWING BASE CERTIFICATE. . . . . . 25
2.9. METHOD OF PAYMENT. . . . . . . . . . . . . . . . . . . . 25
2.10. NOTES; TELEPHONIC NOTICES. . . . . . . . . . . . . . . . 26
2.11. INTEREST PAYMENT DATES; INTEREST BASIS.. . . . . . . . . 26
2.12 MANDATORY PRINCIPAL PAYMENTS.. . . . . . . . . . . . . . 27
2.13. NOTIFICATION OF LOANS, INTEREST RATES, PREPAYMENTS
AND COMMITMENT REDUCTIONS. . . . . . . . . . . . . . . . 27
2.14. MAXIMUM INTEREST; HIGHEST LAWFUL RATE. . . . . . . . . . 27
2.15. INTEREST RECAPTURE.. . . . . . . . . . . . . . . . . . . 28
ARTICLE 3
CHANGE IN CIRCUMSTANCES; INDEMNIFICATION . . . . . . . . 28
3.1. YIELD PROTECTION.. . . . . . . . . . . . . . . . . . . . 28
3.2. AVAILABILITY OF INTEREST RATE. . . . . . . . . . . . . . 30
3.3 DISCRETION OF BANKS AS TO MANNER OF FUNDING. . . . . . . 30
3.4. FAILURE TO PAY OR BORROW ON CERTAIN DATES. . . . . . . . 30
3.5. BANK CERTIFICATES; SURVIVAL OF INDEMNITY.. . . . . . . . 31
i
<PAGE>
ARTICLE 4
CONDITIONS PRECEDENT . . . . . . . . . . . . . 31
4.1. AMENDMENT AND RESTATEMENT. . . . . . . . . . . . . . . . 31
4.2. EACH ADVANCE.. . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 5
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . 33
5.1. CORPORATE EXISTENCE AND AUTHORITY. . . . . . . . . . . . 33
5.2. COMPLIANCE WITH LAWS.. . . . . . . . . . . . . . . . . . 34
5.3. LITIGATION.. . . . . . . . . . . . . . . . . . . . . . . 34
5.4. COMPLIANCE WITH LAWS AND CONTRACTS.. . . . . . . . . . . 34
5.5. FINANCIAL STATEMENTS.. . . . . . . . . . . . . . . . . . 34
5.6. MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . . 34
5.7. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.8. GOVERNMENT REGULATION. . . . . . . . . . . . . . . . . . 35
5.9. PROPERTIES; LIENS. . . . . . . . . . . . . . . . . . . . 35
5.10. LEASES.. . . . . . . . . . . . . . . . . . . . . . . . . 35
5.11. SUBSIDIARIES.. . . . . . . . . . . . . . . . . . . . . . 35
5.12. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.13. DEFAULTS.. . . . . . . . . . . . . . . . . . . . . . . . 35
5.14. ACCURACY OF INFORMATION. . . . . . . . . . . . . . . . . 35
5.15. USE OF PROCEEDS, MARGIN STOCK. . . . . . . . . . . . . . 36
5.16. NO FINANCING OF CORPORATE TAKEOVERS. . . . . . . . . . . 36
5.17. INSIDER. . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 6
AFFIRMATIVE COVENANTS. . . . . . . . . . . . . 37
6.1. FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . 37
6.2. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 38
6.3. NOTICE OF DEFAULT, ETC.. . . . . . . . . . . . . . . . . 38
6.4. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.5. PAYMENT AND PREPAYMENT OF OBLIGATIONS. . . . . . . . . . 38
6.6. MAINTENANCE OF CORPORATE EXISTENCE, ASSETS, BUSINESS
AND INSURANCE. . . . . . . . . . . . . . . . . . . . . . 38
6.7. INSPECTION.. . . . . . . . . . . . . . . . . . . . . . . 39
6.8. COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . 39
6.9. ERISA COMPLIANCE.. . . . . . . . . . . . . . . . . . . . 39
ii
<PAGE>
ARTICLE 7
NEGATIVE COVENANTS. . . . . . . . . . . . . . 39
7.1. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.2. LINES OF BUSINESS. . . . . . . . . . . . . . . . . . . . 40
7.3. INDEBTEDNESS.. . . . . . . . . . . . . . . . . . . . . . 40
7.4. MERGERS AND ACQUISITIONS.. . . . . . . . . . . . . . . . 40
7.5. AFFILIATES.. . . . . . . . . . . . . . . . . . . . . . . 41
7.6. FIXED CHARGE REQUIREMENT.. . . . . . . . . . . . . . . . 41
7.7. FUNDED DEBT LIMITATION.. . . . . . . . . . . . . . . . . 41
7.8 TANGIBLE NET WORTH.. . . . . . . . . . . . . . . . . . . 41
7.9. INVENTORY TURN.. . . . . . . . . . . . . . . . . . . . . 42
7.10. SALE OF ASSETS.. . . . . . . . . . . . . . . . . . . . . 42
7.11. SUBSIDIARIES.. . . . . . . . . . . . . . . . . . . . . . 43
7.12. FOREIGN SUBSIDIARIES.. . . . . . . . . . . . . . . . . . 43
7.13. DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . 43
7.14. INTERCOMPANY INDEBTEDNESS. . . . . . . . . . . . . . . . 43
ARTICLE 8
DEFAULTS . . . . . . . . . . . . . . . . 44
8.1. REPRESENTATION OR WARRANTY . . . . . . . . . . . . . . . 44
8.2. NONPAYMENT.. . . . . . . . . . . . . . . . . . . . . . . 45
8.3. PREPAYMENT.. . . . . . . . . . . . . . . . . . . . . . . 45
8.4. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 45
8.5. OTHER. . . . . . . . . . . . . . . . . . . . . . . . . 45
8.6. MATERIAL INDEBTEDNESS. . . . . . . . . . . . . . . . . 45
8.7. INSOLVENCY. . . . . . . . . . . . . . . . . . . . . . . 45
8.8. RECEIVER. . . . . . . . . . . . . . . . . . . . . . . . 46
8.9. APPROPRIATION. . . . . . . . . . . . . . . . . . . . . 46
8.10. JUDGMENTS. . . . . . . . . . . . . . . . . . . . . . . 46
8.11. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 46
8.12. MATERIAL AGREEMENT. . . . . . . . . . . . . . . . . . . 46
8.13. CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . 46
ARTICLE 9
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES. . . . . . . 46
9.1. REMEDIES UPON DEFAULT. . . . . . . . . . . . . . . . . . 46
9.2. REMEDIES UPON UNMATURED DEFAULT. . . . . . . . . . . . . 47
9.3. AMENDMENTS AND WAIVERS.. . . . . . . . . . . . . . . . . 48
9.4. PRESERVATION OF RIGHTS.. . . . . . . . . . . . . . . . . 48
9.5. PERFORMANCE BY LENDER. . . . . . . . . . . . . . . . . . 49
9.6. RIGHTS OF SETOFF.. . . . . . . . . . . . . . . . . . . . 49
9.7. REMEDIES CUMULATIVE, CONCURRENT AND NON-EXCLUSIVE. . . . 49
iii
<PAGE>
ARTICLE 10
GENERAL PROVISIONS. . . . . . . . . . . . . . 50
10.1. BENEFIT OF AGREEMENT.. . . . . . . . . . . . . . . . . . 50
10.2. ASSIGNMENTS AND PARTICIPATIONS.. . . . . . . . . . . . . 50
10.3. SURVIVAL OF REPRESENTATIONS. . . . . . . . . . . . . . . 52
10.4. GOVERNMENT REGULATION. . . . . . . . . . . . . . . . . . 52
10.5. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.6. CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . . . 53
10.7. HEADINGS.. . . . . . . . . . . . . . . . . . . . . . . . 53
10.8. ENTIRETY; WRITTEN AGREEMENT. . . . . . . . . . . . . . . 53
10.9. ACCOUNTING.. . . . . . . . . . . . . . . . . . . . . . . 53
10.10. SEVERAL OBLIGATIONS . . . . . . . . . . . . . . . . . . 53
10.11. EXPENSES; INDEMNIFICATION. . . . . . . . . . . . . . . . 53
10.12. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . 54
10.13. CHOICE OF FORUM. . . . . . . . . . . . . . . . . . . . . 54
10.14. REVOLVING CREDIT . . . . . . . . . . . . . . . . . . . . 54
10.15. PRIOR AGREEMENT. . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 11
THE AGENT. . . . . . . . . . . . . . . . 55
11.1. APPOINTMENT AND POWERS.. . . . . . . . . . . . . . . . . 55
11.2. POWERS.. . . . . . . . . . . . . . . . . . . . . . . . . 55
11.3. POSSESSION OF INSTRUMENTS BY THE AGENT.. . . . . . . . . 55
11.4. DEBTOR-CREDITOR RELATIONSHIP.. . . . . . . . . . . . . . 55
11.5. GENERAL IMMUNITY.. . . . . . . . . . . . . . . . . . . . 56
11.6. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC.. . . . . . . 56
11.7. RIGHT TO INDEMNITY.. . . . . . . . . . . . . . . . . . . 56
11.8. ACTION ON INSTRUCTIONS OF THE BANKS. . . . . . . . . . . 56
11.9. EMPLOYMENT OF THE AGENT AND COUNSEL. . . . . . . . . . . 56
11.10. RELIANCE ON DOCUMENTS; COUNSEL. . . . . . . . . . . . . 57
11.11. MAY TREAT PAYEE AS OWNER . . . . . . . . . . . . . . . . 57
11.12. THE AGENT'S REIMBURSEMENT. . . . . . . . . . . . . . . . 57
11.13. RIGHTS AS A LENDER. . . . . . . . . . . . . . . . . . . 57
11.14. BANK CREDIT DECISION . . . . . . . . . . . . . . . . . . 57
11.15. SUCCESSOR AGENT. . . . . . . . . . . . . . . . . . . . . 57
11.16. DISTRIBUTION OF INFORMATION. . . . . . . . . . . . . . 58
11.17. NON-ADVANCING BANKS. . . . . . . . . . . . . . . . . . . 58
11.18. BENEFIT OF THE BANKS . . . . . . . . . . . . . . . . . . 59
iv
<PAGE>
ARTICLE 12
RATABLE PAYMENTS . . . . . . . . . . . . . . 59
12.1. RATABLE PAYMENTS.. . . . . . . . . . . . . . . . . . . . 59
ARTICLE 13
NOTICES . . . . . . . . . . . . . . . . 59
13.1. GIVING NOTICE. . . . . . . . . . . . . . . . . . . . . . 59
13.2. CHANGE OF ADDRESS. . . . . . . . . . . . . . . . . . . . 59
ARTICLE 14
COUNTERPARTS . . . . . . . . . . . . . . . 60
SCHEDULES
Schedule 1 - Current Members of the Boards of Directors of Haggar and the
Company
Schedule 2 - Existing Standby Letters of Credit
Schedule 3 - Domestic and Foreign Subsidiaries
Schedule 4 - Current Obligations
Schedule 5 - Pending Litigation
Schedule 6 - Existing Affiliate Transactions
Schedule 7 - Capacity Adjustment Costs
EXHIBITS
Exhibit A - Form of Application for Standby Letter of Credit
Exhibit B - Form of Borrowing Base Certificate
Exhibit C - Form of Note
Exhibit D - Consent of Haggar
Exhibit E - Subsidiary Guaranty
Exhibit F - Consent of Domestic Subsidiaries
Exhibit G - Compliance Certificate
v
<PAGE>
FIRST AMENDED AND RESTATED
CREDIT AGREEMENT
This First Amended and Restated Credit Agreement is entered into as of
September 18, 1996, by and among Haggar Clothing Co., a Nevada corporation,
Haggar Corp., a Nevada corporation, the Banks listed on the signature pages of
this Agreement and Texas Commerce Bank National Association, a national banking
association, individually and as Agent for the Banks.
R E C I T A L S :
A. The Parties and Texas Commerce Bank, National Association entered into
that certain Credit Agreement dated as of September 14, 1992, which Credit
Agreement was amended by (i) First Amendment to Credit Agreement dated as of
March 31, 1993, (ii) Second Amendment to Credit Agreement dated as of April 20,
1994, (iii) Third Amendment to Credit Agreement dated as of November 9, 1994,
(iv) Fourth Amendment to Credit Agreement dated as of March 17, 1995, and (v)
Fifth Amendment to Credit Agreement dated as of December 31, 1995 (such Credit
Agreement, as amended, the "Prior Agreement").
B. The Parties desire to amend the Prior Agreement and restate it in its
entirety as hereinafter provided.
In consideration of the mutual covenants and agreements herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged and confessed, and subject to the terms of all the Loan
Documents, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
"Advance" means a Eurodollar Advance, a Fixed CD Rate Advance or a Floating
Rate Advance.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 1
<PAGE>
"Affiliate" means any Person directly or indirectly controlling, controlled
by or under direct or indirect common control with any other Person. A Person
shall be deemed to control another Person if the controlling Person owns ten
percent (10%) or more of any class of stock of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies of the controlled Person, whether through ownership
of stock, by contract or otherwise.
"Agent" means Texas Commerce Bank National Association, in its capacity as
agent for the Banks (but not in its capacity as a Bank), and any successor Agent
appointed pursuant to Section 11.15.
"Agreement" means this First Amended and Restated Credit Agreement, as it
may be further amended or modified from time to time.
"Alternate Base Rate" means, for any date, a rate per annum (rounded
upwards, if necessary, to the next higher 1/100%) equal to the greater of (a)
the Prime Rate in effect on such day or (b) the Fed Funds Rate in effect for
such day plus one-half percent (1/2%). Any change in the Alternate Base Rate
due to a change in the Prime Rate or the Fed Funds Rate shall be effective on
the effective date of such change in the Prime Rate or the Fed Funds Rate. If
for any reason the Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Fed Funds
Rate for any reason, including the inability or failure of the Agent to obtain
sufficient bids or publications in accordance with the terms hereof, the
Alternate Base Rate shall be the Prime Rate until the circumstances giving rise
to such inability no longer exist.
"Application" means any Application and Agreement for Standby Letter of
Credit delivered to the Agent for or in connection with any Standby Letter of
Credit, and substantially in the form attached hereto as EXHIBIT A.
"Assessment Rate" means, for any CD Interest Period, the net assessment
rate per annum payable to the Federal Deposit Insurance Corporation (or any
successor) for the insurance of domestic deposits of the Agent, in its capacity
as a Bank, during the calendar year in which the first day of such CD Interest
Period falls, as reasonably estimated by the Agent on the first day of such CD
Interest Period.
"Authorized Officer" means the Chief Executive Officer, President, Chief
Financial Officer, any Senior Vice President of Finance, any Vice President of
Finance or the Treasurer, in each case acting singly.
"Banks" means the banks listed on the signature pages of this Agreement
(including Texas Commerce Bank National Association in its capacity as a Bank
but not in its capacity as the Agent), and their respective successors and
assigns.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 2
<PAGE>
"Base Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, the rate determined by the Agent as the
rate at which deposits in U.S. Dollars are offered to the Agent in the interbank
Eurodollar market where the Agent (or its Affiliates) conducts foreign exchange
and currency operations, at or before 10:00 a.m. (Dallas, Texas time) two (2)
Business Days prior to the first day of such Eurodollar Interest Period, in the
approximate amount of such Eurodollar Advance and having a maturity
approximately equal to such Eurodollar Interest Period, for delivery in
immediately available funds on the first day of such Eurodollar Interest Period.
"Base Fixed CD Rate" means, with respect to a Fixed CD Rate Advance for the
relevant CD Interest Period, the rate determined by the Agent as the prevailing
bid rate for the purchase at face value at or before 10:00 a.m. (Dallas, Texas
time) on the first day of such CD Interest Period by three (3) certificate of
deposit dealers in New York, New York of recognized standing selected by the
Agent (or its Affiliates) of certificates of deposit of the Agent in the
approximate amount of such Fixed CD Rate Advance and having a maturity
approximately equal to such CD Interest Period.
"Borrowing Base" means an amount calculated as of the last day of each
fiscal month, equal to the sum of (i) eighty percent (80%) of Eligible
Receivables, and (ii) fifty percent (50%) of Eligible Inventory (each of [i] and
[ii] as determined pursuant to the most recent Borrowing Base Certificate
delivered by the Company to the Agent pursuant to Sections 2.8 or 6.1[d]);
PROVIDED, HOWEVER, that the portion of the Borrowing Base attributable to
Eligible Inventory shall not be greater than fifty percent (50%) of the
Borrowing Base, other than in the months of January, June, July and December,
when such Eligible Inventory may constitute up to sixty percent (60%) of the
Borrowing Base.
"Borrowing Base Availability" means at any time the amount by which the
Borrowing Base exceeds the sum of the principal amount of all outstanding
Advances.
"Borrowing Base Certificate" means a certificate substantially in the form
of EXHIBIT B to this Agreement, duly executed by the Chief Financial Officer of
the Company.
"Borrowing Base Deficiency" means the amount, if any, by which the sum of
the outstanding principal balance of all Notes exceeds the Borrowing Base in
effect on such date.
"Borrowing Date" means a date, which shall be a Business Day, on which an
Advance is made hereunder.
"Business Day" means (a) with respect to borrowing, payment or rate
selection of Eurodollar Advances, a day on which banks are open for business in
Dallas, Texas and London, England and on which dealings in U.S. Dollars are
carried on in the interbank Eurodollar market where Agent (or its Affiliates)
conducts foreign exchange and currency operations, and (b) for all other
purposes, a day on which banks are open for business in Dallas, Texas, and New
York, New York.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 3
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"Capacity Adjustment Costs" means amounts not to exceed $14,000,000 in the
aggregate which are accrued or expensed by the Company after June 30, 1996, and
prior to July 1, 1997, in connection with the adjustment by the Company Group of
its manufacturing capacity, which Capacity Adjustment Costs shall be comprised
of the items reflected on SCHEDULE 7 attached hereto. Capacity Adjustment Costs
shall not include amounts accrued or expensed in connection with the closing of
the Company Group's Bowie, Olney and Robstown facilities unless such amounts are
expensed or accrued during or after the fiscal quarter in which Capacity
Adjustment Costs are accrued or expensed with respect to the adjustment of its
manufacturing capacity at its remaining domestic facilities.
"Capital Expenditures" means capital expenditures according to GAAP LESS
the amount thereof financed by any long-term Indebtedness, the terms of which
are acceptable to the Banks.
"Capitalized Lease Obligations" means any obligation, as lessee or
guarantor, to pay rent under a lease of real or personal property, which
obligation is required to be capitalized on a balance sheet of the lessee or
guarantor prepared in accordance with GAAP. As used herein, a principal payment
on a Capitalized Lease Obligation shall mean the portion of any payment which is
treated as a principal payment on the financial statements of the lessee or
guarantor, prepared in accordance with GAAP.
"CD Interest Period" means, with respect to a Fixed CD Rate Advance, a
period of thirty (30), sixty (60), ninety (90) or one hundred eighty (180) days
(and, if all of the Banks elect in their sole discretion to offer a longer
period, then a longer period of days) commencing on a Business Day selected by
the Company pursuant to Section 2.7; provided that in no event shall any CD
Interest Period extend beyond the Termination Date. If such CD Interest Period
would end on a day that is not a Business Day, such CD Interest Period shall end
on the next succeeding Business Day.
"CD Margin" means (a) at any time when the Funded Debt Ratio is equal to or
less than 1.50 to 1, five-eighths of one percent (5/8%) per annum, (b) at any
time when the Funded Debt Ratio is greater than 1.50 to 1 but less than or equal
to 2.00 to 1, three-quarters of one percent (3/4%) per annum, (c) at any time
when the Funded Debt Ratio is greater than 2.00 to 1 but less than or equal to
2.50 to 1, seven-eighths of one percent (7/8%) per annum, (d) at any time when
the Funded Debt Ratio is greater than 2.50 to 1 but less than or equal to 3.00
to 1, one percent (1%) per annum, (e) at any time when the Funded Debt Ratio is
greater than 3.00 to 1 but less than or equal to 3.50 to 1, one and one-quarter
percent (1 1/4%) per annum, and (f) at any time when the Funded Debt Ratio is
greater than 3.50 to 1, one and one-half percent (1 1/2%) per annum. Each
adjustment to the previously calculated CD Margin shall be effective five (5)
Business Days following the Agent's receipt of the reports to be delivered by
the Company pursuant to Sections 6.1(a), (b) and (c).
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 4
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A "Change in Control" shall be deemed to have occurred in any of the
following circumstances:
(a) if, at any time, any one (1) Person or any one (1) group (within
the meaning of Rule 13d-5 promulgated by the Securities and Exchange
Commission as in effect on the date hereof), other than a Person or group
consisting of (A) Existing Shareholders or their Affiliates, (B) members of
the Family Group, or (C) Persons who/which are not required to file a
Schedule 13D by virtue of Rule 13d-1(b)(1) promulgated by the Securities
and Exchange Commission, shall own, directly or indirectly, beneficially or
of record, in the aggregate shares representing more than twenty percent
(20%) of the voting power represented by the issued and outstanding capital
stock of the Company or Haggar or which upon the occurrence of an event or
passage of time or both could be converted into or could exercise twenty
percent (20%) of such aggregate voting power; or
(b) if, at any time, the individuals who are members of the Board of
Directors of Haggar or the Company, respectively, as of the date of this
Agreement, being those individuals listed in Schedule 1 attached hereto, or
any lesser combination thereof, do not constitute a majority of the
respective Boards of Directors of Haggar or the Company.
"Chief Financial Officer" means the officer of the Company or other entity
designated as such, or in absence of such designation, the President, Chief
Executive Officer or Senior Vice President - Finance of the same.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means, for any Bank, the amount set forth opposite such Bank's
signature hereto, as such amount may be reduced pursuant to Section 2.4.
"Commitments" means the aggregate of such amounts for all of the Banks.
"Company" means Haggar Clothing Co., a Nevada corporation.
"Company Group" means, at any time, Haggar, the Company, and their
respective Subsidiaries.
"Compliance Certificate" means a certificate substantially in the form of
EXHIBIT G to this Agreement and Annexes thereto, duly executed by the Chief
Financial Officer of the Company.
"Consent of Haggar" and "Consent of Domestic Subsidiaries" have,
respectively, the meanings ascribed thereto in the definitions of Parent
Guaranty and Subsidiary Guaranty.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 5
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"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
that, together with the Company, are treated as a single employer under Section
414(b) or 414(c) of the Code.
"Customer Service and Distribution Center" means a facility in Fort Worth,
Texas, to be operated by the Company as a customer service and distribution
facility, for which the costs of construction and equipment shall be
approximately $38,000,000.
"Dated Invoice" means an invoice having an effective date later than the
date of the sale and delivery of the Inventory or services giving rise to such
invoice.
"Debtor Relief Laws" means the Bankruptcy Code of the United States, as
amended from time to time, and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization or similar debtor relief Laws from time to time in
effect affecting the rights of creditors generally.
"Default" means an event described in Article 8.
"Default Rate" means the lesser of (a) the Highest Lawful Rate or (b) the
Alternate Base Rate plus five percent (5%) per annum.
"Distributions" of any Person means (a) with respect to any stock issued by
such Person, the retirement, redemption, purchase or other acquisition for value
of any such stock (other than pursuant to contractual obligations existing as of
the date of this Agreement to repurchase the outstanding shares of the stock of
Haggar from any holder thereof which is an officer, director or employee of any
member of the Company Group), (b) the declaration or payment of any dividend or
other distribution on or with respect to such stock, (c) any loan or advance by
such Person to, or other investment by such Person in, the holder of any such
stock (other than advances to shareholders reflected as accounts receivable, to
the extent that the aggregate amounts thereof do not exceed the greater of (i)
the amounts permitted be made pursuant to the provisions of Section 7.13, or
(ii) $250,000, after deducting therefrom all loans or advances due and owing by
the Company Group, in the aggregate, to its shareholders, in the aggregate), and
(d) any other payment (other than salaries of employees or advances made in the
ordinary course of business to employees for travel and other expenses incurred
in the ordinary course of business, including, but not limited to, premiums for
policies of insurance) by such Person with respect to such stock.
"Dollars" and the "$" symbol refer to currency of the United States of
America.
"Domestic Subsidiaries" means any Subsidiary which is organized under the
laws of a State of, or maintains its principal operations in, the United States
of America.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 6
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"Eligible Inventory" means Inventory as to which the Company furnished to
the Agent the information required under Sections 2.8 or 6.1.(c) and (d), and
that strictly complies with all of the Company's representations, warranties and
covenants contained herein with respect thereto; provided, however, that
Eligible Inventory shall not include any Inventory subject to any Lien.
"Eligible Receivables" means Receivables as to which the Company furnished
to the Agent the information required under Sections 2.8 or 6.1.(d), and that
strictly complies with all of the Company's representations, warranties and
covenants contained herein with respect thereto; provided, however, that
Eligible Receivables shall not include the following:
(a) Receivables that represent amounts due from Affiliates or
employees of the Company;
(b) Receivables that remain unpaid more than ninety (90) days after
the date of the original invoice (or the effective date of Dated Invoices,
provided that no more than five percent [5%] of Eligible Receivables shall
arise from Dated Invoices) giving rise to the Receivable or Receivables
which are known to be uncollectible or the subject of dispute;
(c) Receivables that are subject to any Lien; and
(d) Receivables with respect to which goods are placed on
consignment, guaranteed sale or other terms by reason of which the payment
obligation of the account debtor may be conditional, but only to the extent
that such Receivables equal or exceed $500,000 in the aggregate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Advance" means that portion of the aggregate Loans made by the
Banks bearing interest at a particular Eurodollar Rate for a particular
Eurodollar Interest Period.
"Eurodollar Interest Period" means, with respect to a Eurodollar Advance, a
period of one (1), two (2), three (3) or six (6) months (and, if all of the
Banks elect in their sole discretion to offer a longer period, then a longer
period of months) commencing on a Business Day selected by the Company pursuant
to Section 2.7; provided that in no event shall any Eurodollar Interest Period
extend beyond the Termination Date. A month means a period starting on one day
in a calendar month and ending on the numerically corresponding day in the next
calendar month. If there is no such numerically corresponding day in the
calendar month in which a Eurodollar Interest Period ends, such Eurodollar
Interest Period shall end on the last Business Day of such calendar month. If a
Eurodollar Interest Period would otherwise end on a day that
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 7
<PAGE>
is not a Business Day, such Eurodollar Interest Period shall end on the next
succeeding Business Day; provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Eurodollar Interest Period
shall end on the immediately preceding Business Day.
"Eurodollar Margin" means (a) at any time when the Funded Debt Ratio is
equal to or less than 1.50 to 1, one-half of one percent (1/2%) per annum,
(b) at any time when the Funded Debt Ratio is greater than 1.50 to 1 but less
than or equal to 2.00 to 1, five-eighths of one percent (5/8%) per annum, (c) at
any time when the Funded Debt Ratio is greater than 2.00 to 1 but less than or
equal to 2.50 to 1, three-quarters of one percent (3/4%) per annum, (d) at any
time when the Funded Debt Ratio is greater than 2.50 to 1 but less than or equal
to 3.00 to 1, seven-eighths of one percent (7/8%) per annum, (e) at any time
when the Funded Debt Ratio is greater than 3.00 to 1 but less than or equal to
3.50 to 1, one and one-eighth percent (1-1/8%) per annum, and (f) at any time
when the Funded Debt Ratio is greater than 3.50 to 1, one and three-eighths
percent (1-3/8%) per annum. Each adjustment to the previously calculated
Eurodollar Margin shall be effective five (5) Business Days following Agent's
receipt of the reports to be delivered by the Company pursuant to Sections
6.1(a), (b) and (c).
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, a rate of interest per annum, calculated on
the basis of a three hundred sixty (360) day year, equal to the sum of (a) the
Base Eurodollar Rate applicable to that Eurodollar Interest Period, plus (b) the
applicable Eurodollar Margin; provided that in no event shall the Eurodollar
Rate exceed the Highest Lawful Rate.
"Existing Shareholders" means those Persons that are shareholders of Haggar
or the Company on the date of this Agreement.
"Existing Standby Letters of Credit" means those Letters of Credit more
particularly described on SCHEDULE 2 attached hereto.
"Family Group" means E. R. Haggar, J. M. Haggar, Jr. and Rosemary Haggar
Vaughan, and their respective spouses, children, children's spouses,
grandchildren, grandchildren's spouses, and any trust existing or established
for the benefit of any of the foregoing.
"Fed Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published on the succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Agent from three (3) federal funds
brokers of recognized standing selected by it.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 8
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"Fixed CD Rate" means, with respect to a Fixed CD Rate Advance for the
relevant CD Interest Period, a rate of interest per annum, calculated on the
basis of a three hundred sixty (360) day year, equal to the sum of (a) the
Base Fixed CD Rate applicable to that CD Interest Period, plus (b) the
Assessment Rate applicable to that CD Interest Period, plus (c) the
applicable CD Margin; provided that in no event shall the Fixed CD Rate
exceed the Highest Lawful Rate.
"Fixed CD Rate Advance" means that portion of the aggregate Loans made
by the Banks bearing interest at a particular Fixed CD Rate for a particular
CD Interest Period.
"Fixed Charge Ratio" means the ratio of Operating Cash Flow to Fixed
Charges as measured in accordance with Section 7.6 and as measured at the end
of each fiscal quarter.
"Fixed Charges" means, for the Company Group on a consolidated basis for
any period, in accordance with GAAP, the sum of (a) all interest on and
principal of Indebtedness (not including employee severance payments) that is
paid or required to be paid or accrued during such period, (b) all dividends
paid in cash during such period with respect to the securities of any member
of the Company Group to any recipient other than a member of the Company
Group, and (c) all cash payments made during such period for Capital
Expenditures (but not including (i) expenditures of up to $38,000,000
attributable to the Customer Service and Distribution Center, and (ii)
expenditures for the purchase of a corporate headquarters [to the
extent such expenditures in the aggregate do not exceed the net cash
amount realized by the Company from any sale of its existing headquarters
situated at 6113 Lemmon Avenue, Dallas Texas]).
"Fixed Rate" means the Fixed CD Rate or the Eurodollar Rate.
"Fixed Rate Advance" means a Eurodollar Advance or a Fixed CD Rate Advance.
"Floating Rate Advance" means that portion of the aggregate Loans made by
the Banks bearing interest at the Alternate Base Rate for the applicable period
outstanding.
"Funded Debt" means, for the Company Group on a consolidated basis for any
period, all amounts advanced and outstanding with respect to any Indebtedness
(excluding, however, any Indebtedness of the type described in clause (f) of the
definitions of such term) of any member of the Company Group, including, without
limitation, the Obligations.
"Funded Debt Ratio" means the ratio, as measured at the end of each fiscal
quarter, of Funded Debt as of the end of such quarter to Operating Cash Flow for
the preceding twelve (12) month period.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 9
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"GAAP" means generally accepted accounting principles in the United States
of America consistently applied as in effect at the time of application of the
provisions hereof; provided, however, that to the extent any such generally
accepted accounting principle conflicts with any applicable enforceable rule of
the Securities and Exchange Commission, if any, then such enforceable rule shall
control; and provided further, however, that wherever in this Agreement
principles of consolidation different from those required by generally accepted
accounting principles are specified, the principles of consolidation specified
in this Agreement shall govern.
"Guarantors" means Haggar and each of the Company's now or hereafter
existing Domestic Subsidiaries, including, without limitation, those
Subsidiaries listed on SCHEDULE 3 attached to this Agreement as Domestic
Subsidiaries.
"Guarantee" of any Person means any obligation, contingent or otherwise,
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation (whether arising by virtue of partnership arrangements, by
agreements to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions, by "comfort letter"
or other similar undertaking of support or otherwise), or (b) entered into for
the purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business.
"Haggar" means Haggar Corp., a Nevada corporation.
"Highest Lawful Rate" means the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the Loans under the Laws of the United States and the
Laws of the State of Texas as may be applicable thereto that are presently in
effect or, to the extent allowed by Law under such applicable Laws of the United
States and the Laws of the State of Texas, which may hereafter be in effect and
which allow a higher maximum nonusurious interest rate than applicable Laws now
allow. To the extent, if any, that Chapter One of Title 79, Texas Revised Civil
Statutes, 1925, as amended (the "Act") establishes the highest nonusurious rate,
the Highest Lawful Rate shall be the "indicated rate ceiling," as defined in the
Act in effect from time to time, calculated on the basis of a 365/366 day year;
provided, however, that to the extent permitted by the Act, the Banks at their
election may substitute for the "indicated rate ceiling" the "annual ceiling" or
the "quarterly ceiling," as these terms are defined in the Act, upon the giving
of the notices provided for by the Act and effective upon the giving of such
notices, such substitution to have the effect provided for in Section (h)(1) of
the Act and to be automatically renewable for additional periods as therein
provided.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 10
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"Indebtedness" for any Person means any and all (a) obligations for
borrowed money, whether or not evidenced by a note or other similar
instrument or agreement, (b) obligations representing the deferred purchase
price of property or services other than accounts payable arising in the
ordinary course of business and in accordance with past practice, (c)
obligations, whether or not assumed, secured by Liens on or payable out of
the proceeds or production from specified property now or hereafter owned or
acquired by such Person, (d) obligations that are evidenced by notes,
acceptances or other instruments or agreements, including, but not limited
to, employee severance agreements (but not including non-capitalized lease
obligations), (e) Capitalized Lease Obligations and (f) obligations under any
Guarantee.
"Intercompany Indebtedness" means, at any time, any Indebtedness owing
from one member of the Company Group to another member of the Company Group.
"Interest Period" means a CD Interest Period or a Eurodollar Interest
Period.
"Inventory" means, at any time, goods, merchandise or other personal
property held for sale in the ordinary course of business of the Company
Group on a consolidated basis.
"Laws" means all applicable statutes, laws, rules, ordinances,
regulations, orders, writs, judgments, awards, injunctions or decrees of any
Tribunal.
"Letter of Credit Commitment" means, for any Bank, the lesser of (a)
such Bank's Ratable Share of $30,000,000, or (b) such Bank's Ratable Share of
the Total Commitments if the Total Commitments are less than $30,000,000.
"Letter of Credit Exposure" means the aggregate amount of all issued and
outstanding Letters of Credit.
"Letter of Credit Facility" means the aggregate of all Letter of Credit
Commitments.
"Letters of Credit" means Standby Letters of Credit.
"Lien" means any security interest, mortgage, pledge, lien, charge,
encumbrance, title retention agreement, lessor's interest under a Capitalized
Lease Obligation or other similar interest in, of or on any property of the
Company or any Subsidiary of the Company.
"Litigation" means any proceeding, claim, lawsuit and/or investigation
conducted or threatened in writing (and known to the Person in question) by
or before any Tribunal.
"Loan" means any loan made under this Agreement.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 11
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"Loan Documents" means this Agreement, each of the Notes, the Parent
Guaranty, the Subsidiary Guaranty, the Applications and all other documents
executed or delivered (or to be executed or delivered) pursuant to any of the
foregoing documents.
"Material Adverse Effect" means any set of circumstances or event that
(a) would have any adverse effect whatsoever upon the validity or
enforceability of any of the Loan Documents, (b) is or, upon the passage of
time or the happening of an event will be, material and adverse to the
consolidated financial position or business operations of the Company Group,
or (c) would materially impair the ability of the members of the Company
Group, taken as a whole, to fulfill the obligations of the Loan Documents.
"Material Indebtedness" means any Indebtedness (excluding Intercompany
Indebtedness) in an amount equal to or exceeding $5,000,000.
"Net Worth" means, as of any date, the total shareholder's equity
(including common and preferred stock, additional paid-in capital and
retained earnings after deducting treasury stock) which would appear on a
consolidated balance sheet of the Company Group, or on a balance sheet of the
Company, as the case may be, prepared as of such date in accordance with GAAP.
"Note" means each promissory note in substantially the form of EXHIBIT C
to this Agreement, duly executed and delivered to the Agent by the Company
and payable to the order of a Bank in the amount of its Commitment, including
any amendment, modification, renewal or replacement of such promissory note.
"Obligations" means all unpaid principal and accrued and unpaid interest
under the Notes, all accrued and unpaid fees hereunder, and all other
obligations of the Company and each Guarantor to the Banks or to any Bank or
the Agent arising under the Loan Documents, including, but not limited to,
the Parent Guaranty and the Subsidiary Guaranty.
"Operating Cash Flow" means, for any period, (a) the net income of the
Company Group on a consolidated basis (before accounting for the gains and
losses on the sale of capital assets, discontinued operations and other like
extraordinary or nonrecurring events, including all Capacity Adjustment
Costs), plus (b) depreciation or amortization, plus (c) interest expense,
plus (d) federal and state income taxes, as set forth on the financial
statements of the Company and its Subsidiaries and as determined in
accordance with GAAP. In no event shall Operating Cash Flow include any
income or loss attributable to any changes in the accounting for pension,
profit sharing or employee benefits.
"Parties" means the Company, Haggar, the Banks and the Agent.
"Parent Guaranty" means that certain continuing guaranty, dated of even
date with the Prior Agreement, executed by Haggar, pursuant to which Haggar
unconditionally guaranteed the
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 12
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full payment of the obligations described therein together with that certain
Consent of Haggar (herein so called), dated of even date with this Agreement,
executed by Haggar, in the form of EXHIBIT D attached hereto.
"Payment Date" means each March 31, June 30, September 30 and December 31
during the term of this Agreement.
"Permitted Indebtedness" means the obligations of the Company Group
listed on SCHEDULE 4 hereto, together with any obligations of a same or
similar character incurred in the ordinary course of business which, when
taken together with the outstanding amount of the obligations listed on
SCHEDULE 4 hereof, do not exceed, in the aggregate, the amount of
$40,140,692, plus any or all of the following Indebtedness:
(a) obligations to reimburse advances made under commercial letters
of credit or similar instruments incurred in the ordinary course of
business but only to the extent that the aggregate outstanding amount
thereof does not exceed $30,000,000;
(b) obligations to reimburse advances made under standby letters of
credit (other than Standby Letters of Credit) incurred in the ordinary
course of business but only to the extent that the aggregate outstanding
amount thereof does not exceed $2,000,000;
(c) obligations (i) to advance monies for the repurchase of the
outstanding shares of the stock of Haggar from any holder thereof which is
an officer, director or employee of any member of the Company Group, or
(ii) to pay any sum or sums of money as a settlement of existing or future
compensation expectations or agreements with any such officer, director or
employee, in each case in connection with the resignation, severance or
termination of such relationship, but only to the extent that the aggregate
amount payable over any twelve (12) month period does not exceed
$2,500,000.00 (not including the amount of any severance compensation paid
to hourly wage employees) and the aggregate amount of all such obligations
payable over their respective terms does not exceed $10,000,000;
(d) Indebtedness incurred in the ordinary course of business,
purchase money obligations and Capitalized Lease Obligations to the extent
that the aggregate outstanding amounts thereof do not exceed the sum of
$2,000,000 plus (i) $2,000,000 TIMES (ii) the number of fiscal years of the
Company ending during the period in which this Agreement has been in
effect;
(e) Intercompany Indebtedness, which shall be subordinate to the
Obligations in all respects (other than Intercompany Indebtedness with
Subsidiaries other than Domestic Subsidiaries incurred in the ordinary
course of business);
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 13
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(f) accounts payable and other obligations to officers and directors
of the Company Group;
(g) the amount of any Guarantee to the extent the Indebtedness
guaranteed thereby constitutes Permitted Indebtedness of any member of the
Company Group;
(h) the amount of any Guarantee by the Company or Haggar of real
property leases for retail premises in favor of Haggar Direct, Inc.
provided that (i) the remaining liability under such Guarantee does not
exceed the rental payable during one lease year, or (ii) the aggregate
remaining liability in excess of the rental payable during one lease year
under all such Guarantees does not exceed (w) the sum of $1,000,000 for the
period from the date hereof through September 30, 1996, (x) the sum of
$2,000,000 for the period October 1, 1996, through September 30, 1997, (y)
the sum of $4,000,000 for the period October 1, 1997, through September 30,
1998, and (z) the sum of $6,000,000 for the period October 1, 1998,
through the Termination Date; and
(i) the Obligations.
"Permitted Liens" means (a) Liens for Taxes not yet due and payable,
mechanic's Liens and materialman's, shipper's or warehouseman's Liens for
services or materials and landlord's Liens for rental amounts for which payment
is not yet due or that are being contested in good faith and their enforcement
stayed by appropriate proceedings, (b) Liens securing any purchase money
Indebtedness if such Liens do not encumber any property other than the property
for which such purchase money Indebtedness was incurred, (c) the currently
existing Liens described in SCHEDULE 4 to this Agreement, if any, and renewals
thereof if the principal amounts secured thereby are not increased and the
renewed Lien does not cover any assets which are not covered by the existing
Lien renewed thereby, (d) pledges or deposits made to secure payment of worker's
compensation, or to participate in any fund in connection with worker's
compensation, unemployment insurance, pensions, or other social security
programs, (e) good-faith pledges or deposits made to secure performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or leases,
not in excess of twenty percent (20%) of the aggregate amount due thereunder, or
to secure statutory obligation, surety or appeal bonds, or indemnity,
performance, or other similar bonds in the ordinary course of business, (f)
encumbrances consisting of zoning restrictions, easements or other restrictions
on the use of real property, none of which materially impair the operation by
the Company Group (taken as a whole) of their business, and none of which is
violated by existing or proposed structures or land use that materially impair
the operation by the Company Group (taken as a whole), and (g) the following, if
(i) the validity or amount thereof is being contested in good faith and by
appropriate and lawful proceedings and so long as levy and execution thereon
have been stayed and continue to be stayed, or (ii) they do not in the aggregate
materially detract from the value of any material assets or the operation by the
Company Group of their respective businesses: claims and Liens for Taxes due and
payable; any attachment of personal or real property or
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 14
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other legal process prior to adjudication of a dispute on the merits; adverse
judgments on appeal; and Liens.
"Person" means any corporation, natural person, firm, joint venture,
partnership, trust, unincorporated organization, government or any department
or agency of any government.
"Plan" means an employee pension benefit plan that is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of
the Code and is either (a) maintained by the Company or any member of the
Controlled Group for employees of the Company or any member of the Controlled
Group (a "Single Employer Plan") or (b) maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Company or any
member of the Controlled Group is a party under which more than one employer
makes contributions (a "Multi-Employer Plan").
"Prime Rate" means, as of a particular date, the prime rate most
recently announced by the Agent, automatically fluctuating upward and
downward with and at the time specified in each such announcement without
special notice to the Company or any other Person, which prime rate may not
necessarily represent the lowest or best rate actually charged to a customer.
"Prior Agreement" has the meaning ascribed thereto in Recital A hereof.
"Ratable Share" of any Bank means that percentage which the Commitment
of such Bank bears to the Total Commitments.
"Rate Option" means the Eurodollar Rate, the Fixed CD Rate or the
Alternate Base Rate.
"Receivables" means the unpaid principal portion of the obligation, as
stated on the respective invoice, of any customer of the Company or any of
its Domestic Subsidiaries, to pay money arising out of or related to the sale
of Inventory or services by the Company and/or its Domestic Subsidiaries on a
consolidated basis in the ordinary course of business, net of any credits,
rebates or offsets owed to such customer and also net of any commissions
payable by the Company or such Domestic Subsidiary to third parties, other
than commissions payable with respect to sales of finished goods.
"Regulation D", "Regulation G", "Regulation U" and "Regulation X" means
respectively Regulation D, Regulation G, Regulation U and Regulation X of the
Board of Governors of the Federal Reserve System from time to time in effect
and shall include any successor or other regulation or official
interpretation of said Board of Governors.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA, other than a reportable event for which the ERISA notice
requirement has been waived.
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"Required Banks" means (a) Banks in the aggregate holding at least sixty
percent (60%) of the sum of (i) the aggregate unpaid principal amount of the
outstanding Loans plus (ii) the Letter of Credit Exposure, or (b) if no Loans
or Letters of Credit are outstanding, Banks in the aggregate having at least
sixty percent (60%) of the Commitments.
"Reserve Requirement" means, with respect to a Eurodollar Interest
Period or a CD Interest Period, the maximum aggregate reserve requirement
imposed on the Agent (including all basic, supplemental, marginal and other
reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements during such Interest Period) that
is imposed under Regulation D on non-personal time deposits of $100,000 or
more with a maturity equal to that of the CD Interest Period (in the case of
Fixed CD Rate Advances) or on Eurocurrency liabilities with a maturity equal
to that of the Eurodollar Interest Period (in the case of Eurodollar
Advances).
"Section" or "Article" means a numbered section or article of this
Agreement, unless another document or Law is specifically referenced.
"Shortfall" shall have the meaning ascribed thereto in Section 2.9(b).
"Standby Letter of Credit" means a standby letter of credit issued by
the Agent for the account of the Company, and all renewals, extensions or
replacements thereof, and includes an Existing Standby Letter of Credit.
"Subsidiary" means any corporation or other entity, more than fifty
percent (50%) of the outstanding voting securities of which shall at the time
be owned or controlled, directly or indirectly, by any Person, including, but
not limited to, any foreign business organization that is so owned or
controlled.
"Subsidiary Guaranty" means those certain continuing guaranties,
executed by each of the Company's Domestic Subsidiaries, pursuant to which
the Company's Domestic Subsidiaries unconditionally guaranteed the full
payment of the obligations described therein, together with (a) each and
every other continuing guaranty which is hereafter executed and delivered
pursuant to the provisions of Section 7.11, in each case substantially in the
form of EXHIBIT E attached hereto, and (b) that certain Consent of Domestic
Subsidiaries (herein so called), dated of even date with this Agreement,
executed by each of the Company's Domestic Subsidiaries in the form attached
hereto as EXHIBIT F.
"Tangible Net Worth" means, at any time, an amount equal to Net Worth
LESS the following (without duplication of deductions in respect of items
already deducted in arriving at surplus and retained earnings): (a) the book
value of all assets that would be treated as intangibles in accordance with
GAAP, including, without limitation, goodwill, trademarks, trade names,
copyrights, patents, unamortized debt discount and expense, unamortized
organization
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and reorganization expense and costs in excess of the net asset value of
acquired property or Persons; (b) all amounts representing any write-up in
the book value of any assets of the Company Group resulting from the
revaluation thereof, but only to the extent any such write-up exceeds the
original cost of such asset; and (c) the aggregate amount of accounts
receivable and other assets of the Company Group relating to loans or
advances due and owing from officers and directors of the Company Group,
unless such obligations have been secured by collateral approved by the
Required Banks, as evidenced by their written consent thereto, but only in
the event that such amount exceeds $1,000,000, in the aggregate, after
deducting therefrom all loans or advances due and owing from the Company
Group, in the aggregate, to their respective officers and directors, in the
aggregate.
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or charges, or other
similar charges from time to time or at any time imposed by any Law or
Tribunal.
"Termination Date" means December 31, 1998, unless the Commitments are
terminated prior to such date pursuant to Sections 2.4 or 9.1; provided,
however, if the Agent receives written notice from the Company by April 30,
1997, and each April 30 thereafter, of its intention to extend for one (1)
additional year (and the Company receives notice from the Agent by June 15,
1997, and each June 15 thereafter, of the election of all the Banks to so
extend), then the Termination Date shall be extended for one (1) additional
year, unless the Commitments are terminated prior to such extended date
pursuant to Sections 2.4 or 9.1.
"Total Commitments" means the aggregate Commitments of all the Banks.
"Total Liabilities" means the total of all amounts that would be treated
as liabilities on a consolidated balance sheet of the Company Group prepared
in accordance with GAAP, including, without limitation, accrued taxes and
accrued expenses.
"Tribunal" means any relevant court or government department,
commission, board, bureau, agency or instrumentality of or any state,
commonwealth, nation, territory, possession, county, parish or municipality,
whether now or hereafter constituted or existing.
"Unfunded Liabilities" means (a) in the case of Single Employer Plans,
the amount (if any) by which the present value of all vested non-forfeitable
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent
valuation date for such Plan, and (b) in the case of Multi-Employer Plans,
the withdrawal liability of the Company Group.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default; provided, however,
that the failure to maintain any
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of the financial ratios set forth in Sections 7.6, 7.7 and 7.9 as of a
specific point in time prior to the end of a fiscal quarter shall not
constitute an Unmatured Default unless the Required Banks reasonably
determine that it is likely that at the end of such fiscal quarter a Default
will exist with respect to any of the financial ratios set forth in Section
7.6, 7.7 or 7.9, as applicable.
1.2. GENDER AND NUMBER. Words of any gender used in this Agreement
shall be held and construed to include any other gender; and, words in the
singular number shall be held to include the plural, and vice versa, unless
the context requires otherwise.
1.3. REFERENCES TO AGREEMENT. Use of the words "herein", "hereof",
"hereinabove", and the like are and shall be construed as references to this
Agreement.
ARTICLE 2
THE CREDITS
2.1. ADVANCES AND LETTERS OF CREDIT.
(a) Each Bank severally agrees, on the terms and conditions set forth
in this Agreement, to make Advances to the Company from time to time prior
to the Termination Date, in amounts not to exceed in the aggregate at any
one time outstanding the amount of its Commitment, which Advances shall be
each Bank's Ratable Share of such amounts as the Company may request up to,
but not exceeding, a total principal amount equal to the lesser of (i) the
Total Commitments MINUS any Letter of Credit Exposure, or (ii) the
Borrowing Base; provided, however, that no Bank shall be obligated to make
any Advance pursuant to a particular Rate Option at any time when such Rate
Option exceeds the Highest Lawful Rate. Subject to the terms of this
Agreement, the Company may borrow, repay and reborrow at any time prior to
the Termination Date. Such loans may be Floating Rate Advances, Fixed CD
Rate Advances or Eurodollar Advances, or a combination thereof, determined
in accordance with Section 2.7. Each Advance shall bear interest at one of
the Rate Options selected in accordance with Section 2.7 or otherwise as
provided in Section 2.7, and shall be paid in full by the Company on the
Termination Date.
(b) Each Bank severally agrees, on the terms and conditions set forth
in this Agreement and each Application, that the Agent shall, and the Agent
agrees on behalf of the Banks to the extent of their Ratable Share to,
issue Standby Letters of Credit from time to time, as requested by the
Company and otherwise in accordance with Subsection 2.6(c). The Existing
Standby Letters of Credit are and shall constitute Standby Letters of
Credit issued under this Agreement on behalf of the Banks in their Ratable
Share. Upon the issuance of each Standby Letter of Credit (and
contemporaneously herewith as
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to Existing Standby Letters of Credit), each Bank shall automatically
acquire a participation in the liability of the Agent thereunder equal
to such Bank's Ratable Share thereof, as the same may be reduced,
increased, renewed, extended or replaced from time to time in
accordance with this Agreement.
2.2. USE OF PROCEEDS. The proceeds of the Advances shall be used by the
Company in compliance with Section 5.15 hereof, for working capital and
general corporate purposes, in compliance with Section 7.2 in all respects
and in the ordinary course of its business. Proceeds of the Advances may
also be used to fund the repurchase of shares of the common stock of Haggar
on the open market or through privately negotiated transactions; provided,
however, that proceeds used for such purpose, in the aggregate over the term
of the Obligations, shall not exceed $25,000,000. The provisions of this
Section 2.2 are subject to, and shall not limit, modify or otherwise affect,
the other covenants and agreements contained in this Agreement, including,
without limitation, the covenants contained in Article 7 hereof.
2.3. OPTIONAL PRINCIPAL PAYMENTS. The Company may from time to time pay
all outstanding Advances or, in a minimum aggregate amount of $1,000,000 (or
any integral multiple thereof), any portion of the outstanding Advances (a)
at any time, in the case of a Floating Rate Advance, and (b) upon one (1)
Business Day's notice to the Agent, in the case of a Fixed Rate Advance;
PROVIDED, HOWEVER, that each Fixed Rate Advance may be paid only on the last
day of its applicable Interest Period, whether in connection with a total or
a partial prepayment.
2.4. REDUCTION OR TERMINATION OF COMMITMENTS. The Commitments may or
shall be reduced as follows:
(a) The Company may permanently reduce the Commitments, in whole or
in part, ratably among the Banks in integral multiples of $1,000,000, upon
at least thirty (30) Business Days' prior notice to the Agent, which
written notice shall specify the amount of any such reduction; provided,
however, that the Commitments may not be reduced below the sum of (i) the
outstanding principal amount of the Advances plus (ii) any Letter of Credit
Exposure.
(b) Any reduction of the Commitments shall first reduce the
Commitments other than the Letter of Credit Commitments prior to any
reduction in the Letter of Credit Facility.
2.5. FEES. The Company shall pay to the Agent for the account of the
Banks in their respective Ratable Shares (except as set forth in subsection
[b][i] below), from the date of this Agreement to and including the Termination
Date, the following fees:
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(a) On each Payment Date and on the Termination Date, a commitment
fee equal to a fluctuating percentage of the average daily amount of the
Total Commitments minus the sum of (i) the outstanding principal amount of
all Advances and (ii) the Letter of Credit Exposure during the quarter
ending on and including such Payment Date, or such shorter period ending on
and including the Termination Date, as the case may be. The percentage
shall be equal to the following: (a) at any time when the Funded Debt
Ratio is equal to or less than 1.50 to 1, three-sixteenths of one percent
(3/16%) per annum, (b) at any time when the Funded Debt Ratio is greater
than 1.50 to 1 but less than or equal to 2.00 to 1, one-fifth of one
percent (1/5%) per annum, (c) at any time when the Funded Debt Ratio is
greater than 2.00 to 1 but less than or equal to 3.50 to 1, one-quarter of
one percent (1/4%) per annum, and (d) at any time when the Funded Debt
Ratio is greater than 3.50 to 1, three-eighths of one percent (3/8%) per
annum. Each adjustment to the percentage used to calculate the Commitment
Fee shall be effective five (5) Business Days following Agent's receipt of
the reports to be delivered by the Company pursuant to Sections 6.1(a), (b)
and (c);
(b) On each Payment Date and on the Termination Date, (i) a Letter of
Credit issuance fee payable to the Agent (which issuance fee shall not be
shared with the Banks), in an amount equal to one-eighth of one percent
(1/8%) of the Letter of Credit Exposure during the quarter ending on and
including such Payment Date, or such shorter period ending on and including
the Termination Date, as the case may be, calculated on the number of days
in such quarterly or shorter period, as the case may be, and (ii) a Letter
of Credit fee equal to the Eurodollar Margin then in effect TIMES the
Letter of Credit Exposure during the quarter ending on and including such
Payment Date, or such shorter period ending on and including the
Termination Date, as the case may be, calculated on the number of days in
such quarterly or shorter period, as the case may be;
provided, however, if the Commitments are terminated in their entirety prior to
the Termination Date as provided herein, all accrued and unpaid commitment fees
shall be payable on the effective date of such termination, and, notwithstanding
the termination of the Commitments, the Letter of Credit commitment fees
referred to in clause (b) above shall continue to accrue and be due and payable
as set forth therein until the extinguishment in full of any Letter of Credit
Exposure. All such fees shall be calculated on the basis of a year consisting
of three hundred sixty (360) days and, except as set forth in this Section 2.5,
of four (4) quarterly periods of ninety (90) days each.
2.6. METHODS OF BORROWING AND APPLICATION AND ISSUANCE OF LETTERS OF
CREDIT.
(a) With respect to the making of any Advance requested by the
Company, the Company shall give to the Agent its notice of such request for
Advance in accordance with the provisions of Section 2.7 and, subject to
the terms and conditions set forth herein, each Bank shall make available
its Ratable Share of the Advance or Advances to
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 20
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be made on a Borrowing Date (as determined in accordance with the
provisions of Section 2.7[a] below) not later than the day of such
Borrowing Date, in Dollars immediately available in Dallas, Texas,
to the Agent at its address specified pursuant to Article 13; PROVIDED,
HOWEVER, that the Agent shall advise such Bank not later than
1:00 p.m. (Dallas, Texas time) on the date of its receipt of any notice
of borrowing timely given by the Company pursuant to Subsection 2.7(a).
The Agent will make the funds so received from the Banks available to the
Company within two (2) hours of receipt by it.
(b) The Agent may (unless notified to the contrary by a Bank prior to
a Borrowing Date) assume that each Bank has made available to the Agent on
such Borrowing Date such Bank's Ratable Share of the Advance or Advances to
be made on such Borrowing Date pursuant to Subsection 2.6(a) above, and the
Agent may (but it shall not be required to), in reliance upon such
assumption, make available to the Company a corresponding amount. The
Agent shall notify the Company by telephone or telecopy to the treasurer or
another Authorized Officer of the Company of the failure of any Bank to
make available to the Agent its Ratable Share on such Borrowing Date if
such failure continues for a period of two (2) Business Days and the Agent
has made available to the Company an amount corresponding to such Bank's
Ratable Share, or, if the Agent has not made available such corresponding
amount, promptly after the account officer of the Agent with responsibility
for the Company's account obtains actual knowledge of such failure. If and
to the extent that such Bank shall not have so made such Ratable Share
available to the Agent and the Agent shall have made available such
corresponding amount to the Company, such Bank agrees to pay the same to
the Agent with interest at a rate equal to the Fed Funds Rate with respect
to such corresponding amount forthwith on, and as specified in, the Agent's
demand, and if such Bank shall fail to do so the Company agrees to pay to
the Agent within three (3) Business Days after demand, an amount equal to
such corresponding amount, together with interest thereon at the rate per
annum applicable to the Advance or Advances made on such Borrowing Date for
each day from the date the Agent shall make such amount available to the
Company until the date such amount is paid or repaid to the Agent,
PROVIDED, HOWEVER, that until and unless such payment has been made in full
by the Company, such Bank shall remain liable to the Agent for the full
amount of such payment, including interest as set forth above.
(c) With respect to the issuance of any Standby Letter of Credit
requested by the Company, the Company shall give to the Agent its notice of
such request at least two (2) Business Days in advance of the date of its
issuance by delivery of a duly executed and completed Application in the
form of EXHIBIT A attached hereto. Each Standby Letter of Credit (i) shall
be in form acceptable to the Agent and the Company, (ii) shall be dated the
date of issuance and (iii) shall expire on such date as may be requested by
the Company, but in no event later than the earlier of (1) three hundred
sixty-five (365)
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 21
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days after its issuance date or (2) the Termination Date. Notwithstanding
anything herein or in any other Loan Documents to the contrary, in no
event shall the Company be entitled to the issuance of a Standby Letter
of Credit if the issuance of such Letter of Credit would cause the Letter
of Credit Exposure (including the requested Letter of Credit) to exceed
the LESSER of (A) the Letter of Credit Facility, or (B) the Total
Commitments MINUS the aggregate amount of all outstanding Advances.
(d) With respect to the issuance by the Agent of Letters of Credit,
the Agent shall provide to each of the Banks, as of the last day of each
calendar month and within twenty (20) days thereafter, a written report
setting forth all issued and outstanding Letters of Credit, their
respective amounts, issuance dates, expiration dates, identifying numbers,
and beneficiaries.
(e) All the terms and provisions of any and all Applications executed
and delivered pursuant to this Section 2.6 are incorporated herein by
reference; provided, however, that in the event of a conflict between the
provisions of this Agreement and any Application, the provisions of this
Agreement shall control. Without limitation of the foregoing, the
repayment of Advances occasioned by drawings under Letters of Credit,
interest to accrue thereon and remedies of the Banks in the event of
nonpayment of such Advances when due shall be governed by the terms of this
Agreement notwithstanding contrary terms in any Application. The Company
shall pay to the Agent on demand an amount equal to the face amount of each
draft drawn or purporting to be drawn under a Letter of Credit in
accordance with the terms of the Application. The Agent may debit the
Company's account with the Agent in order to pay each such draft, which the
Agent may do in reliance on the assumption that sufficient funds have been
made available to such account by the Company on the date when such drafts
are payable, PROVIDED that the Agent shall not be required to effect any
such debit if it determines insufficient funds exist in such account for
the payment in full of any such amounts. If the Company's account has
insufficient funds with which to pay such draft and if payment thereof is
not otherwise made or provided for on the maturity date of the draft, the
face amount of the maturing draft shall automatically be deemed to be an
Advance, payable by each of the Banks to the Agent in accordance with their
Ratable Share, in immediately available funds, not later than 2:00 p.m.,
Dallas, Texas time, on the day specified in the demand of the Agent to each
Bank. Such Advance shall be confirmed to the Agent by the Company in
writing not later than five (5) Business Days following the date the draft
matured. The failure of the Company to transmit such written confirmation
shall not affect the Company's obligation to repay the amount of such
Advance, which shall be deemed to be a Floating Rate Advance.
(f) Notwithstanding any other provision of this Agreement to the
contrary, each Bank shall be unconditionally and irrevocably liable,
without regard to the occurrence of a Default or Unmatured Default or any
other fact or circumstance which
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would entitle such Bank to withhold, abate, reduce or offset the making
of an Advance hereunder, to advance to or reimburse the Agent, in
accordance with the demand of the Agent, such Bank's Ratable Share of
the amount of each draft under a Letter of Credit payable or paid by
the Agent to the extent that such amount has not been reimbursed by the
Company pursuant to the provisions of Section 2.6(e) above. The Agent
may make the proceeds of any such draft under a Letter of Credit available
to the beneficiary thereof prior to its receipt of such funds from the
Banks in reliance on the assumption that each Bank will make available to
the Agent its Ratable Share on the date such amount has been demanded for
payment. If the Agent is required at any time (whether before or after
the expiration date of any Letter of Credit) to return to the Company or
to a trustee, receiver, liquidator, custodian or other similar official any
portion of the payments made by or on behalf of the Company to the Agent
in reimbursement of payments made by the Agent under any Letter of Credit
and interest thereon, each Bank shall, upon demand of the Agent, forthwith
pay over to the Agent such Bank's Ratable Share of such amount. All amounts
payable by any Bank under this Section 2.6(f) shall include interest
thereon from the day the applicable draft is made (or the date such Bank
was to have made such reimbursement payment, as appropriate), to but not
including the date such amount is paid by such Bank to the Agent, at a
rate equal to the Agent's Fed Funds Rate with respect to such amount as
specified in the Agent's demand. The obligations of Banks under this
Section 2.6(f) shall continue after the Termination Date and survive any
termination of this Agreement.
(g) The Agent agrees with each Bank that it will exercise and give
the same care and attention to each Letter of Credit as it gives to its
other letters of credit. Other than complying with the terms of the Letter
of Credit and/or this Agreement, including any drafts, certificates and
other documents required thereby, each Bank and the Company agrees that, in
paying any draft, the Agent shall not have any responsibility to obtain any
document or to ascertain or inquire as to the validity or accuracy of any
such document or the authority of the person delivering any such document.
Subject to the terms of the foregoing sentence, none of the Agent and its
representatives, directors, officers, employees, attorneys or agents shall
be liable to any Bank or the Company for (i) any action taken or omitted in
connection herewith at the request or with the approval of any Bank, (ii)
any action taken or omitted in the absence of gross negligence and the
absence of willful misconduct (it being the intention hereby that no
liability shall result from a negligent action or omission), (iii) any
recitals, statements, representations or warranties contained in any
document distributed to any Bank, (iv) the creditworthiness of the Company
or (v) the execution, effectiveness, genuineness, validity or
enforceability of any Loan Documents or any other document contemplated
hereby or thereby. The Agent and its officers, directors, employees,
attorneys and agents shall be entitled to rely and shall be fully protected
in relying on any writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telex or teletype message,
statement, order, or other document or conversation believed by it or them
to be genuine
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 23
<PAGE>
and correct and to have been signed or made by the proper person and, with
respect to legal matters, upon opinions of counsel selected by the Agent.
2.7. METHOD OF SELECTING RATE OPTIONS AND INTEREST PERIODS; CALCULATION OF
INTEREST.
(a) The Company shall give the Agent irrevocable notice not later
than 10:00 a.m. (Dallas, Texas time) on the Borrowing Date of each Floating
Rate Advance, at least one (1) Business Day before the Borrowing Date of
each Fixed CD Rate Advance and at least three (3) Business Days before the
Borrowing Date for each Eurodollar Advance specifying: (i) the Borrowing
Date of such Advance; (ii) the aggregate amount of such Advance; (iii) the
Rate Option selected for the Advance; and (iv) in the case of each Fixed
Rate Advance, the Interest Period applicable thereto, the information
provided to the Agent in such notice to be confirmed to the Agent in
writing not later than five (5) Business Days following the Borrowing Date
The unpaid principal amount of each Fixed Rate Advance shall bear interest
from and including the first day of the Interest Period applicable thereto
to (but not including) the last day of such Interest Period at the Fixed
Rate applicable to such Fixed Rate Advance. Floating Rate Advances shall
bear interest at the Alternate Base Rate, and the interest rate on any
Floating Rate Advances shall change when and as the Alternate Base Rate
changes. Each Advance shall be in the minimum amount of $1,000,000 (and in
integral multiples of $1,000,000 if in excess thereof). The Company may,
at the expiration of any Interest Period, or at any time with respect to a
Floating Rate Advance, select an Interest Period and/or Rate Option to
apply to any Advance, or any portion or combination thereof, by the
delivery to the Agent of notice of such election in the same manner as is
provided in this Section 2.7 (a) with respect to the making of an Advance,
subject to the notice and minimum Advance amount provisions applicable to
the Rate Option selected. Notwithstanding the foregoing, in no event shall
the Company have more than seven (7) Fixed Rate Advances outstanding at any
one time, and the last day of a chosen Interest Period shall not be later
than the Termination Date. Any Advance not paid at maturity, whether by
acceleration or otherwise, shall bear interest until paid in full at the
Default Rate, except that in the case of a Fixed Rate Advance whose
Interest Period has not yet expired, the same shall bear interest at the
higher of the rate otherwise in effect for the existing Interest Period
plus five percent (5%) per annum or the Alternate Base Rate plus five
percent (5%) per annum, not to exceed, however, the Highest Lawful Rate.
The Company may not select a Fixed Rate for an Advance if there exists a
Default or Unmatured Default hereunder.
(b) Prior to the termination of each Interest Period with respect to
any Fixed Rate Advance, the Company shall notify the Agent whether it
desires to renew such Fixed Rate Advance and specifying in accordance with
Section 2.7(a) above the Rate Option and Interest Period to be applicable
thereto. Absent the delivery of such a notice, then, upon the expiration
of the Interest Period applicable to such Fixed Rate Advance,
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 24
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the Company shall be deemed to have selected the Alternate Base Rate to
be applicable to the outstanding principal amount thereof.
2.8. BORROWING BASE AND BORROWING BASE CERTIFICATE. In no event shall the
Banks be required to make any Advance or the Agent be required to issue any
Letter of Credit hereunder if the making of such Advance or drawing under such
Letter of Credit (assumed for these purposes to be an Advance) would create a
Borrowing Base Deficiency. The Borrowing Base shall be initially computed as of
the date of this Agreement. Thereafter the Borrowing Base shall be recomputed
as of the last day of each fiscal month utilizing the required Borrowing Base
Certificate, which shall be furnished to the Agent within twenty (20) days after
the end of such fiscal or calendar month and certified as to correctness by an
Authorized Officer of the Company. If the Banks shall reasonably object to the
form or contents of, or any calculations made in, any Borrowing Base
Certificate, the Banks shall not be required to make any Advance hereunder until
such objection is resolved to the Banks' satisfaction.
2.9. METHOD OF PAYMENT.
(a) All payments of principal, interest and fees hereunder shall be
made in immediately available funds to the Agent at the Agent's address
specified pursuant to Article 13 by noon (Dallas, Texas time) on the date
when due. Each payment shall be distributed by the Agent ratably among the
Banks in the proportion by which the Commitment of each Bank bears to the
Commitments. On or before the time a principal payment is made on any of
the Loans, the Company shall inform the Agent as to the proportionate
application of such payment to the Floating Rate Advances and Fixed Rate
Advances. In the absence of such direction, such payment shall be applied
first to repay Floating Rate Advances then outstanding and thereafter in
such fashion as the Agent shall determine. Each payment delivered to the
Agent for the account of any Bank shall be delivered promptly by the Agent
to such Bank in the same type of funds that the Agent received at its
address specified pursuant to Article 13.
(b) The Agent is authorized to cause the delivery of payments of
principal, interest or fees owing to the Banks and/or the Agent by charging
the Company's account with the Agent, which the Agent may do in reliance on
the assumption that sufficient funds have been made available to such
account by the Company on the date when such payments are due or have been
directed by the Company to be made, PROVIDED THAT the Agent shall have no
obligation to cause such delivery if it determines insufficient funds exist
in such account for the payment of any such amounts. If and to the extent
that the Company fails to provide sufficient funds in its account to cover
the amount of any charges made for the payment of principal, interest or
fees charged to such account and delivered by the Agent pursuant to this
Section 2.9(b), the Company shall immediately pay to the Agent the amount
by which such payment(s) so charged exceed the amount on deposit in such
account (the "SHORTFALL"), together with interest thereon at the Default
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Rate from the date of such charge to the date such amount is repaid to the
Agent. Nothing contained herein shall be construed to extend the date of
payment of any amount due by the Company to the Agent, the Banks, or any of
them, and in no event shall the delivery of any amount by the Agent to
itself or any Bank pursuant to this Section 2.9(b) be effective as a
payment by or on behalf of the Company absent the Company's delivery to the
Agent of such amount to the Agent on the date when due in accordance with
the terms of this Agreement. If and to the extent that the Company
continues to fail to provide the amount of such Shortfall and accrued
interest thereon, as required pursuant to the immediately preceding
sentence, for a period of three (3) Business Days following the Agent's
demand therefor, each Bank agrees to advance to the Agent, under the Note
held by it, its pro rata portion of the Shortfall, together with interest
at a rate equal to the Fed Funds Rate with respect to such amount,
forthwith on, and as specified in, the Agent's demand.
2.10. NOTES; TELEPHONIC NOTICES. The Advances shall be evidenced by
the Notes. Each Bank is hereby authorized to record the principal amount of
each Advance and each repayment on the schedule attached to its Note, whereupon
such schedule shall constitute a part of the Note for all purposes. Any such
recording shall constitute PRIMA FACIE evidence of the accuracy of the
information so recorded; PROVIDED, HOWEVER, that the absence or inaccuracy of
such schedule or any notation thereon shall not limit or otherwise affect the
Obligations. The Company hereby authorizes each Bank and the Agent to extend
Loans and effect Rate Option selections based on telephonic notices made by any
person or persons the Agent or such Bank in good faith believes to be acting on
behalf of the Company. The Company shall promptly confirm to the Agent any
telephonic notice by written confirmation signed by an Authorized Officer of the
Company as provided in Section 2.7. If the written confirmation differs in any
material respect from the action taken by the Agent and the Banks, the records
of the Agent and the Banks shall govern absent manifest error.
2.11. INTEREST PAYMENT DATES; INTEREST BASIS. Interest accrued and
unpaid on the outstanding principal of all Advances shall be due and payable on
the last day of each calendar quarter, on the Termination Date, and additionally
with respect to each Fixed Rate Advance, on the last day of the Interest Period
applicable to each Fixed Rate Advance. Interest shall be calculated for actual
days elapsed on the basis of a three hundred sixty (360) day year or, if such a
calculation would result in an amount which exceeds the Highest Lawful Rate,
then on the basis of the actual number of days contained in such year. Interest
shall be payable for the day a Loan is made but not for the day of any payment
on the amount paid if payment is received prior to noon (Dallas, Texas time) at
the place of payment. If any payment of principal of or interest on a Loan or
any other amount due hereunder shall become due on a day that is not a Business
Day, such payment shall be made on the next succeeding Business Day and, in the
case of a principal payment, such extension of time shall be included in
computing interest in connection with such payment.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 26
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2.12 MANDATORY PRINCIPAL PAYMENTS. In the event (a) of the existence of
a Borrowing Base Deficiency (as set forth in the Borrowing Base Certificate
due pursuant to Section 6.1[d]), or (b) that the outstanding principal amount
of all Advances made by any Bank plus its Ratable Share of any Letter of
Credit Exposure exceeds the Commitment of such Bank (as the same may be
reduced from time to time in accordance with the provisions of Section 2.4),
the Company shall immediately make principal reductions on the Notes or
furnish cash to the Agent in the manner hereafter described to the extent
necessary to reduce the Borrowing Base Deficiency to zero or to reduce such
Obligations to an amount equal to or less than the amount of such Commitment
LESS the amount of its Ratable Share of any Letter of Credit Exposure, as the
case may be. Each payment under this Section 2.12 shall be applied in
reduction of any outstanding Floating Rate Advances, and then against the
outstanding Advances designated by the Company in a notice accompanying such
payment. In the event the Company fails to make such designation, such
payment shall be applied first against Fixed Rate Advances in the order of
the expiration of the Interest Periods applicable thereto. In the event that
a payment is required of the Company pursuant to this Section 2.12 solely by
virtue of Letter of Credit Exposure, such that there are no outstanding
Advances, the Company shall, within one (1) Business Day after becoming aware
of the occurrence of such Borrowing Base Deficiency or excess in the Advances
plus Letter of Credit Exposure as to the Total Commitments, remit to the
Agent a cash amount equal to the payment which is required of it, to be held
by the Agent for the benefit of the Banks in their Ratable Share as
collateral for the Obligations (with rights of offset). The Company agrees
to execute and deliver any and all pledge, assignment or other security
documents as the Agent shall deem necessary or desirable to further evidence
or perfect the pledge, assignment or grant of a security interest in such
cash deposit pursuant to this Section 2.12.
2.13. NOTIFICATION OF LOANS, INTEREST RATES, PREPAYMENTS AND
COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Agent will
notify each Bank of the contents of each Commitment reduction notice, notice
contemplated by Section 2.7, and repayment notice received hereunder. The
Agent will notify each Bank of the interest rate applicable to each Fixed
Rate Advance promptly upon determination of such interest rate and will give
each Bank prompt notice of each change in the Alternate Base Rate.
2.14. MAXIMUM INTEREST; HIGHEST LAWFUL RATE. The parties hereto
intend to conform strictly to the usury Laws in force that apply to this
transaction. Accordingly, all agreements among the parties hereto
(including, without limitation, the Notes), whether now existing or hereafter
arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of acceleration of the maturity of the Loans
or otherwise, shall the interest (and all other sums that are deemed to be
interest) contracted for, charged or received by the Banks with respect to
the Loans and the Loan Documents, whether separately or in the aggregate,
exceed the Highest Lawful Rate. If, from any circumstance whatsoever,
interest under the Loans and/or Loan Documents would otherwise be payable in
excess of the Highest Lawful Rate, and if from any circumstance any of the
Banks shall ever receive anything of value deemed interest by applicable Law
in excess of the Highest Lawful Rate, such Bank's receipt
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of such excess interest shall be deemed a mistake and the same shall, so long
as no Default shall be continuing, at the option of the Company, either be
repaid to the Company or credited to the unpaid principal of the Notes;
PROVIDED, HOWEVER, that if a Default shall have occurred and be continuing,
and any of the Banks shall receive an amount which, but for this Section
2.14, would constitute excess interest during such period, the Banks shall
have the option of either crediting such excess amount to principal or
refunding such excess amount to the Company. If the Loans are prepaid or the
maturity of the Loans is accelerated by reason of an election of the Required
Banks, unearned interest, if any, shall be canceled and, if theretofore paid,
shall either be refunded to the Company or credited on the Loans as the
Required Banks elect. All interest paid or agreed to be paid to the Banks
shall, to the extent allowed by applicable Law, be amortized, prorated,
allocated and spread throughout the full period until payment in full of the
principal (including the period of any renewal or extension) so that the
interest for such full period shall not exceed the Highest Lawful Rate.
Notwithstanding that the parties hereto in good faith deem each and every fee
provided by this Agreement to be bona fide fees for services rendered and to
be rendered separate and apart from the lending of money or the provision of
credit, if any such fee is ever determined by a Tribunal of competent
jurisdiction or by the Banks to constitute interest, then the treatment of
such fee for usury purposes shall be controlled by the provisions of this
Section.
2.15. INTEREST RECAPTURE. If at any time and from time to time the
rate of interest calculated pursuant to the Rate Option applicable to an
Advance would exceed the Highest Lawful Rate but for provisions limiting the
same to the Highest Lawful Rate, then, notwithstanding the foregoing, the
rate of interest accruing on such Advance shall continue to be the Highest
Lawful Rate until the total amount of interest accrued on such Advance equals
the amount of interest that would have accrued on such Advance but for
provisions limiting the same to the Highest Lawful Rate.
ARTICLE 3
CHANGE IN CIRCUMSTANCES; INDEMNIFICATION
3.1. YIELD PROTECTION.
(a) If any existing or future Law (whether or not having the force of
law) or compliance of any Bank with such,
(i) subjects any Bank to any Tax, duty, charge or withholding
on or from payments due from the Company (excluding U.S.
taxation of the overall net income of any Bank) or changes
the basis of taxation of payments to any Bank in respect
of its Loans or other amounts due hereunder;
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(ii) imposes or increases or deems applicable any reserve
(other than reserves included in the Reserve
Requirement with respect to Fixed Rate Advances), special
deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any
Bank; or
(iii) imposes any other condition the result of which is to
increase the cost to any Bank of making, funding or
maintaining Dollar loans or reduces any amount
receivable by any Bank in connection with Dollar loans,
or requires any Bank or any applicable lending office
to make any payment calculated by reference to the amount
of loans held or interest received by it, by an amount
deemed material by such Bank;
then, within fifteen (15) days of demand and the submission of reasonable
evidence in support thereof by such Bank, the Company shall pay such
Bank that portion of such increased expense incurred or the amount of
reduction in an amount received which such Bank reasonably determines
is attributable to making, funding and maintaining its Fixed Rate
Advances. The determination of any amount to be paid by the Company shall
take into consideration the policies of such Bank, or any corporation
controlling such Bank, and shall be based upon any reasonable averaging,
attribution and allocation methods.
(b) If any Bank shall reasonably determine that the application or
adoption after the date hereof of any law, rule, regulation, directive,
interpretation, treaty or guideline regarding capital adequacy, or any
change therein or in the interpretation or administration thereof after the
date hereof, whether or not having the force of law increases the amount of
capital required or expected to be maintained by such Bank, or any
corporation controlling such Bank, and such increase is based upon the
existence of such Bank's obligations hereunder by an amount reasonably
determined by such Bank, then from time to time, within fifteen (15) days
of demand and the submission of reasonable evidence in support thereof by
such Bank, such Bank may adjust the amount of the Commitment Fee thereafter
payable to it by an amount as will fairly compensate such Bank for such
increased capital requirement. The determination of any amount to be paid
by the Company shall take into consideration the policies of such Bank, or
any corporation controlling such Bank, and shall be based upon any
reasonable averaging, attribution and allocation methods.
(c) In the event that any Bank assesses against the Company any of
the costs contemplated in Sections 3.1 (a) and (b) preceding, the Company
may, at its option, prepay the amount of the Obligation owing with respect
to any Bank assessing such costs, without premium or penalty except as
provided in Section 3.4 hereof, terminate the Commitment of such Bank, and
cause one or more banking institutions reasonably
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 29
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acceptable to the Agent and the Required Banks (not taking into account
the interest of the assessing Bank) to unconditionally offer in writing
to collectively purchase and assume, on a specified date not more than
thirty (30) days from the date on which such costs were due, all of such
Bank's rights hereunder and principal and interest in the Loans owing to
such Bank on the date of such proposed purchase, without recourse to such
Bank. If the assessing Bank fails to accept the proposed purchase offer,
the Company shall not be obligated to pay the costs so assessed by such
Bank for the period following the date of such purchase offer. If the
assessing Bank accepts the proposed purchase, and the proposed purchasing
bank(s) consummates the purchase of such rights and interest and assumes
such obligations on the specified date in accordance with the terms of such
offer, then such purchasing bank(s) shall be substituted for such Bank as
to all or any portion of such Bank's Commitment, in which event this
Agreement shall be modified and amended to reflect such substitution and,
if applicable, reduction in Commitment. Such substitution, however, shall
not relieve the Company of its obligation to reimburse any Bank for the
costs enumerated in Sections 3.1(a) and (b) incurred prior to the date of
the substitution of another banking institution.
3.2. AVAILABILITY OF INTEREST RATE. If any Bank determines that
maintenance of its portion of the Eurodollar Advances would violate any
applicable Law, whether or not having the force of law, or if the Required Banks
reasonably determine that (a) deposits of a type and maturity appropriate to
"match fund" Fixed Rate Advances are not generally available or (b) a Fixed Rate
does not accurately reflect the cost of making or maintaining a Fixed Rate
Advance, then the Agent shall suspend the availability of the affected Rate
Option and require any Fixed Rate Advances outstanding under an affected Rate
Option to be converted to an unaffected Rate Option. Subject to the provisions
of Article 2, the Company may select any unaffected Rate Option to apply to such
affected Advances. If the Company fails to select a new Rate Option, the
affected Advances shall be Floating Rate Advances.
3.3 DISCRETION OF BANKS AS TO MANNER OF FUNDING. Notwithstanding any
provision of this Agreement to the contrary, each Bank shall be entitled to fund
and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had actually funded and
maintained each Fixed Rate Advance during the Interest Period for such Advance
through the purchase of deposits having a maturity corresponding to the last day
of such Interest Period and bearing an interest rate equal to the Fixed Rate for
such Interest Period.
3.4. FAILURE TO PAY OR BORROW ON CERTAIN DATES. If any payment of a Fixed
Rate Advance occurs on a date that is not the last day of the applicable
Interest Period, or a Fixed Rate Advance is not made on the date specified by
the Company for any reason other than default by the Banks, the Company will
indemnify each Bank for any loss or cost incurred by it resulting therefrom,
including, without limitation, any loss or cost (exclusive of any loss of
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 30
<PAGE>
profit) in liquidating or employing deposits acquired to fund or maintain such
Fixed Rate Advance.
3.5. BANK CERTIFICATES; SURVIVAL OF INDEMNITY. To the extent reasonably
possible, each Bank shall designate an alternate lending office with respect to
its Fixed Rate Advances to reduce any liability of the Company to such Bank
under Section 3.1 or to avoid the unavailability of a Rate Option under Section
3.2, so long as such designation is not disadvantageous to such Bank. A
certificate of a Bank as to the amount due under Sections 3.1 or 3.4 shall be
final, conclusive and binding on the Company in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a Fixed
Rate Advance shall be calculated as though each Bank funded its portion of the
Fixed Rate Advance through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the Fixed Rate
applicable to such Advance. Unless otherwise provided herein, the amount
specified in any such certificate shall be payable on demand after receipt by
the Company of such certificate. The obligations of the Company under Sections
3.1 and 3.4 shall survive payment of the Loans and termination of this
Agreement.
ARTICLE 4
CONDITIONS PRECEDENT
4.1. AMENDMENT AND RESTATEMENT. The Banks shall not be required to amend
and restate the Prior Agreement unless the Company has furnished to the Agent:
(a) Copies of the Articles of Incorporation of the Company and the
Guarantors, together with all amendments, certified by the Secretary of
State of the State of their incorporation, and a certificate of good
standing of the Company, and the Guarantors, certified by the appropriate
office of the State of their incorporation;
(b) Copies, certified by the Secretary or Assistant Secretary of the
Company, of its Bylaws and of its Board of Directors resolutions
authorizing the execution of the Loan Documents;
(c) Copies, certified by the Secretary or Assistant Secretary of the
Guarantors, of their Bylaws and of their Board of Directors resolutions
authorizing the execution of the Consent of Haggar or the Consent of
Domestic Subsidiaries, as applicable;
(d) An incumbency certificate, executed by the Secretary or Assistant
Secretary of the Company and the Guarantors which shall identify by name
and title and bear the signature of the officers of the Company and the
Guarantors authorized to sign
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 31
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the respective Loan Documents and to make borrowings hereunder, upon which
certificate the Banks shall be entitled to rely until informed in writing
of any change;
(e) A written opinion of the Company's and the Guarantors' counsel,
addressed to the Banks in form acceptable to the Agent and its counsel;
(f) A certificate, signed by the Treasurer of the Company or the
Chief Financial Officer of the Company, stating that as of the effective
date of this Agreement no Default or Unmatured Default has occurred and is
continuing;
(g) A Note payable to the order of each Bank in the amount of its
Commitment;
(h) The Consent of Haggar, executed by Haggar; and
(i) The Consent of Domestic Subsidiaries, executed by each of the
Company's Domestic Subsidiaries.
4.2. EACH ADVANCE. The Banks shall not be required to make any Advance,
except as otherwise contemplated by Sections 2.6(f) and (g), unless on the
relevant Borrowing Date:
(a) There exists no Default or Unmatured Default and no Default or
Unmatured Default will result from the requested Borrowing;
(b) The representations and warranties contained in Article 5 are
true and correct in all material respects as of such Borrowing Date except
for changes in the Schedules to this Agreement reflecting transactions
permitted by this Agreement;
(c) The sum of (i) the principal balance of the outstanding Loans
made by the Banks, (ii) the amount of the requested Advance, (iii) the
amount of any Advance previously requested and in process, and (iv) any
Letter of Credit Exposure (excluding any amounts thereof attributable to an
Advance then requested and in process), is equal to or less than the Total
Commitments;
(d) The sum of (i) the principal balance of the outstanding Loans
made by the Banks, (ii) the amount of the requested Advance, and (iii) the
amount of any Advance previously requested and in process, is equal to or
less than the Borrowing Base Availability;
(e) The Agent has received from the Company a notice that complies in
all respects with the requirements of Section 2.7;
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 32
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(f) As of the date of the making of such Advance, no change that
would cause or result in a Material Adverse Effect has occurred since the
date of the financial statements delivered pursuant to Section 5.5;
(g) The most recent financial statements of the Company Group
delivered to the Banks pursuant to Section 6.1 are true, correct and
complete in all material respects, fairly represent the financial condition
of the Company and the Guarantors and have been prepared on a basis
consistent with prior periods. As of the date of such Advance, there are
no obligations, liabilities or Material Indebtedness (including contingent
and indirect liabilities and obligations or unusual forward or long-term
commitments) of the Company or the Guarantors which, separately or in the
aggregate, are material and which are not reflected or otherwise disclosed
in such financial statements; and
(h) All legal matters incident to the making of such Advance shall be
reasonably satisfactory to the Banks and their respective counsel.
Each request for an Advance hereunder shall be deemed to be a representation and
warranty by the Company to the Banks, as of the applicable Borrowing Date, as to
each of the matters specified in this Section 4.2.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and the other Loan
Documents and to make the Loans, the Company represents and warrants to the
Banks as follows:
5.1. CORPORATE EXISTENCE AND AUTHORITY. The Company and each of the
Guarantors (a) is a corporation duly incorporated, validly existing, and in good
standing under the Laws of its jurisdiction of incorporation, (b) is duly
qualified to transact business as a foreign corporation in each jurisdiction
where the nature or extent of its business and properties require the same,
except in such jurisdictions where the failure so to qualify would not
reasonably be expected to cause a Material Adverse Effect and (c) possesses all
requisite authority and power and material licenses, permits and franchises to
execute, deliver and comply with the terms of the Loan Documents, which have
been duly authorized and approved by all necessary corporate action, for which
no material approval or consent of any Person or Tribunal is required which has
not or will not have been obtained prior to the date of this Agreement, and each
of the Loan Documents constitutes the legal, valid and binding obligation of the
Company and the Guarantors (to the extent each of them is a party to the same)
enforceable against the Company and the Guarantors in accordance with its terms.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 33
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5.2. COMPLIANCE WITH LAWS. Neither the Company nor any of the Guarantors
is in violation of (a) any Laws, other than such violations that, collectively,
could not reasonably be expected to cause a Material Adverse Effect, (b) the
terms of any material agreement, contract, document or instrument to which the
Company or any of the Guarantors is a party or by which it or any of its assets
is bound, other than such violations that, collectively, could not reasonably be
expected to cause a Material Adverse Effect, or (c) its respective Articles of
Incorporation or Bylaws in any material respect.
5.3. LITIGATION. There is no Litigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of the
Guarantors other than that listed on SCHEDULE 5 attached hereto, and none of
such Litigation, collectively or individually, has or could reasonably be
expected to result in a Material Adverse Effect.
5.4. COMPLIANCE WITH LAWS AND CONTRACTS. Neither the execution and
delivery by the Company of the Loan Documents, the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will materially violate any material Law binding on the Company or any of the
Guarantors or the Company's or any of the Guarantors' Articles of Incorporation
or Bylaws, or the provisions of any indenture, instrument or agreement to which
the Company or any of the Guarantors is a party or is subject, or by which it or
its property is bound, or materially conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien (other than a
Permitted Lien) pursuant to the terms of any such indenture, instrument or
agreement. No order, consent, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, any Tribunal is
required to authorize, or is required in connection with the execution, delivery
and performance of, or the legality, validity, binding effect or enforceability
of, any of the Loan Documents.
5.5. FINANCIAL STATEMENTS. The June 30, 1996, unaudited consolidated
financial statements of the Company Group heretofore delivered to the Banks were
prepared in accordance with historical practice, and the September 30, 1995,
consolidated financial statements of the Company Group audited by Arthur
Andersen & Co. heretofore delivered to the Banks were prepared in accordance
with GAAP in effect on the respective dates, such statements were prepared and
fairly present the consolidated financial condition and operations of the
Company Group at such dates and the consolidated results of their operations for
the respective periods then ended.
5.6. MATERIAL ADVERSE EFFECT. No Material Adverse Effect has occurred
since the date of the financial statements referred to in Section 5.5.
5.7. TAXES. To the best of the Company's knowledge, all tax returns of the
Company Group required to be filed (unless such filing dates have been validly
extended) by any Tribunal have been or will be filed prior to the date such
returns were or are due, and all Taxes imposed upon the Company Group by any
Tribunal in respect of periods ending on or before the initial
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 34
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Borrowing Date which are due and owing unless subject to a good faith contest
by appropriate legal proceedings for which adequate reserves have been
established in accordance with GAAP, will be paid by the Company Group on or
before the initial Borrowing Date.
5.8. GOVERNMENT REGULATION. Neither the Company nor any of the Guarantors
nor any Affiliate of any of them is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940, the Interstate Commerce Act (as any of the preceding acts
have been amended) , or any other Law (other than Regulation X of the Board of
Governors of the Federal Reserve System) that regulates the incurring by the
Company of Indebtedness, including, without limitation, Laws relating to common
or contract carriers or the sale of electricity, gas, steam, water or other
public utility services.
5.9. PROPERTIES; LIENS. Each of the Company and each Guarantor has good
and indefeasible title to all of its real and personal properties and fixtures
reflected on its balance sheet, subject to no defects in title thereto which
would reasonably be expected, collectively, to cause a Material Adverse Effect,
and there are no Liens on any material asset of the Company or any of the
Guarantors other than Permitted Liens.
5.10. LEASES. All material leases under which the Company or any of
the Guarantors is lessee or tenant are in full force and effect, and there does
not exist any default thereunder on the part of the Company or any of the
Guarantors or, to the best of the Company's knowledge, on the part of any other
party thereto which in either case could reasonably be expected to cause a
Material Adverse Effect.
5.11. SUBSIDIARIES. SCHEDULE 3 to this Agreement contains an accurate
list of all of the presently existing Subsidiaries of the Company, setting forth
their respective jurisdictions of incorporation and the percentage of their
respective capital stock owned by the Company Group; all of the issued and
outstanding shares of capital stock of the Domestic Subsidiaries of the Company
have been duly authorized and issued and are fully paid and non-assessable.
5.12. ERISA. Each Plan complies in all material respects with all
applicable requirements of Law, no Reportable Event which could result in a
Material Adverse Effect has occurred with respect to any Plan, neither the
Company nor any of the Guarantors has withdrawn from any Plan or initiated steps
to do so, and no steps have been taken to terminate any Plan. On the date of
this Agreement, no Unfunded Liabilities exist.
5.13. DEFAULTS. No Default or Unmatured Default has occurred and is
continuing.
5.14. ACCURACY OF INFORMATION. No information, exhibit or report
furnished by the Company or any of the Guarantors to the Agent in connection
with the negotiation of the Loan Documents contained any material misstatement
of fact or omitted to state a material fact or any
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fact necessary to make the statements contained therein not misleading, in
light of the circumstances under which furnished. There is no material fact
that the Company has not disclosed to the Agent which would have a Material
Adverse Effect.
5.15. USE OF PROCEEDS, MARGIN STOCK. The proceeds of the Advances will
be used by the Company solely for the purposes specified in this Agreement.
Except as expressly provided in Section 2.2, none of such proceeds will be used
for the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U, Regulation X, or Regulation G, or for the purpose of reducing or
retiring any Debt that was originally incurred to purchase or carry a "margin
stock" or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of Regulation U, Regulation X, or Regulation
G. The Company is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stocks. Neither the Company nor any
Person acting on behalf of the Company has taken or will take any action which
might cause the Note or any of the other Loan Documents, including this
Agreement, to violate Regulation U, Regulation X, or Regulation G or any other
regulations of the Board of Governors of the Federal Reserve System or to
violate Section 8 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect. Except as permitted by Section 2.2, the Company owns
no "margin stock" except for that described in the financial statements referred
to in Section 5.5 hereof and, the aggregate value of all "margin stock" owned by
the Company does not exceed twenty-five percent (25%) of the value of all of the
Company's assets.
5.16. NO FINANCING OF CORPORATE TAKEOVERS. No proceeds of the Advances
will be used to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, including, without
limitation, Sections 13(d) and 14(d) thereof, except (a) for the purchases of
shares of the Company Group or any of them, and (b) to the extent permitted
under Section 7.4 hereof.
5.17. INSIDER. Except as to any circumstances which the Company has
previously disclosed to the Agent in writing, the Company is not, and no Person
having "control" (as that term is defined in 12 U.S.C. Section 375(b)(5) or in
regulations promulgated pursuant thereto) of the Company is, an "executive
officer," "director," or "principal shareholder" (as those terms are defined in
12 U.S.C. Section 375(b) or in regulations promulgated pursuant thereto) of the
Banks, of a bank holding company of which any Bank is a subsidiary, or of any
bank holding company of which any Bank is a subsidiary, or of any bank at which
any Bank maintains a "correspondent account" (as such term is defined in such
statute or regulations), or of any bank which maintains a correspondent account
with any Bank.
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ARTICLE 6
AFFIRMATIVE COVENANTS
To induce the Banks to enter into this Agreement and the other Loan
Documents and to make the Loans, Haggar and the Company covenant and agree that,
on behalf of themselves and the Company Group, during the term of this Agreement
and as long as all or any part of any Advances is outstanding, they will do or
cause to be done the following (unless the prior written consent of the Required
Banks is otherwise obtained):
6.1. FINANCIAL REPORTING. Maintain a system of accounting established and
administered in accordance with GAAP, and the Company, on behalf of the Company
Group, will furnish and deliver to the Agent, which will deliver to the Banks:
(a) Within ninety (90) days after the close of each fiscal year
commencing with the fiscal year ending September 30, 1996, an audited
consolidated and consolidating balance sheet of the Company Group, a
consolidated and consolidating statement of income and retained earnings of
the Company Group and a consolidated statement of cash flows of the Company
Group, each set forth in comparative form with corresponding figures from
the immediately preceding fiscal year, in each case such statements to be
furnished in reasonable detail and prepared in accordance with GAAP, and to
be accompanied by an unqualified opinion of independent certified public
accountants of nationally recognized standing acceptable to the Banks.
(b) Within forty-five (45) days after the close of each of the first
three (3) quarters of each fiscal year, a consolidated and consolidating
statement of income of the Company Group for the period from the beginning
of such fiscal year to the end of the quarter thereof, and a consolidated
and consolidating balance sheet of the Company Group as of the end of such
quarter, together with schedules detailing depreciation, amortization,
dividends, scheduled payments of principal on Indebtedness, all outstanding
letters of credit, and all capital expenditures, setting forth in
reasonable detail and prepared in accordance with historical practice,
which shall be certified by the Chief Financial Officer of the Company as
complete and correct in all material respects to the best knowledge and
belief of such officer after diligent inquiry.
(c) Together with the financial statements required hereunder, a
Compliance Certificate. The Compliance Certificate for the fiscal quarter
in which Capital Adjustment Costs are accrued or expensed and the
Compliance Certificate to be delivered for the succeeding four (4) fiscal
quarters shall include as an annex thereto the information contained on
SCHEDULE 7 hereof.
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(d) Within twenty (20) days after the end of each month, a Borrowing
Base Certificate.
(e) Within one hundred eighty (180) days after the close of each
fiscal year, a statement of the Unfunded Liabilities of each Plan, if any,
certified as correct by an actuary enrolled under ERISA.
(f) As soon as possible and in any event within ten (10) days after
the Company knows that any Reportable Event has occurred with respect to
any Plan, a statement, signed by the Chief Financial Officer or Treasurer
of the Company, describing said Reportable Event and the action which the
Company proposes to take with respect thereto.
(g) Such other material and pertinent information (including
non-financial information) as the Agent or the Banks, through the Agent,
may, from time to time, reasonably request.
6.2. USE OF PROCEEDS. Use all proceeds of the Advances for the purposes
set forth in Section 2.2.
6.3. NOTICE OF DEFAULT, ETC. Give prompt notice in writing to the Agent
of the occurrence of any Default or Unmatured Default and of any other
development, financial or otherwise, that has a substantial likelihood of a
Material Adverse Effect.
6.4. TAXES. Promptly pay when due any and all Taxes due and owing by it,
except Taxes that (a) are being contested in good faith by appropriate legal
proceedings and for which a reserve has been established in an amount determined
in accordance with GAAP and (b) do not, in the aggregate, materially detract
from the value of the properties of the Company and the Guarantors (taken as a
whole), materially impair the operation of their businesses (taken as a whole)
or give rise to any Lien other than a Permitted Lien.
6.5. PAYMENT AND PREPAYMENT OF OBLIGATIONS. Promptly pay or renew and
extend all of its Material Indebtedness for the payment of money as the same
become due, except for any such Material Indebtedness being contested in good
faith by appropriate legal proceedings, for which a reserve for the payment
thereof has been established in an amount determined in accordance with GAAP.
6.6. MAINTENANCE OF CORPORATE EXISTENCE, ASSETS, BUSINESS AND INSURANCE.
Except as otherwise permitted by Section 7.4, maintain (a) its corporate
existence and authority to transact business and good standing in its
jurisdiction of incorporation and in all other jurisdictions where the failure
to so maintain could reasonably be expected to cause a Material Adverse Effect,
(b) all material licenses, permits and franchises necessary for its business
except such as could not
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in the aggregate reasonably be expected to cause a Material Adverse Effect,
(c) to the extent consistent with prudent business practices, all of its
assets which are useful and necessary in its business in good working order
and condition and make all necessary repairs and replacements thereto or
thereof and (d) insurance with such insurers, in such types and amounts, and
covering such casualties, contingencies and risks, as is customary in its
industry including, without limitation, worker's compensation insurance
(unless the Company maintains self-insurance with respect to such risk of
loss which is satisfactory to the Banks in all respects), liability
insurance, adequate business interruption insurance, and insurance on its
properties, assets and business, now owned or hereafter acquired.
6.7. INSPECTION. Permit the Agent, by its representatives and agents, to
inspect the properties, corporate books and financial records of the Company
Group, to examine and make copies of such of its books of accounts and other
financial records, and to discuss its affairs, finances and accounts with, and
to be advised as to the same by, its officers as shall be reasonably requested
at such reasonable times and intervals as the Agent may designate upon
reasonable notice. Each Bank agrees to treat all such information received by
it (except such information which is generally available or has been made
available to the public from sources other than the Banks or their respective
officers, employees or representatives) as confidential; provided, however,
nothing in this Section shall prohibit any Bank or the Agent from, or subject
any Bank or the Agent to liability for, disclosing any such information to any
Tribunal, or any representative thereof, to whose jurisdiction any Bank or the
Agent may be subject and to the extent required thereby.
6.8. COMPLIANCE WITH LAW. Shall, and shall cause each member of the
Company Group to comply with all laws applicable to it or any of its property,
business operations or transactions, a breach of which could have a Material
Adverse Effect.
6.9. ERISA COMPLIANCE. Shall (i) at all times, make, and cause to be made
prompt payment of all contributions required under all Plans, if any, and
required to meet the minimum funding standard set forth in ERISA with respect to
the Plans of each of such entities, and (ii) furnish to the Agent, upon request,
such additional information concerning any Plans as may be reasonably requested.
ARTICLE 7
NEGATIVE COVENANTS
To induce the Banks to enter into this Agreement and the other Loan
Documents and to make the Loans, Haggar and the Company covenant and agree that,
on behalf of themselves and the Company Group, during the term of this
Agreement, they will not, nor permit or suffer any
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member of the Company Group to, do any of the following (unless the prior
written consent of the Required Banks is otherwise obtained):
7.1. LIENS. Directly or indirectly, create, incur or suffer or permit to
be created or incurred or to exist any Lien upon any of the assets (now owned or
hereafter acquired) of the Company Group, including, without limitation, the
Inventory and Receivables, except for Permitted Liens.
7.2. LINES OF BUSINESS. Directly or indirectly, engage in any lines of
business other than those in which they are presently engaged or reasonable
expansions or extensions thereof.
7.3. INDEBTEDNESS. Create, incur or suffer to exist any Indebtedness other
than Permitted Indebtedness.
7.4. MERGERS AND ACQUISITIONS.
(a) Dissolve or liquidate, or permit any Subsidiary of the Company to
dissolve or liquidate, provided that any Subsidiary of the Company may
dissolve or liquidate so long as the assets of such Subsidiary are
distributed to a member of the Company Group;
(b) Become or permit any Subsidiary of the Company to become, a party
to any merger or consolidation with or into any other Person, provided that
any Subsidiary may discontinue its operations or may merge or consolidate
with or into any member of the Company Group, provided that in the event of
a merger with the Company, the Company is the legally surviving entity;
(c) Acquire, or permit any Subsidiary of the Company to acquire, by
purchase, lease or otherwise, all or substantially all of the assets or
capital stock of any Person, provided that such acquisitions which, when
added to any other acquisitions since the effective date of this Agreement
and any permitted investments made pursuant to Section 7.4(d), do not
exceed $15,000,000 in the aggregate (including all consideration given in
connection with such acquisition), may be made so long as the assets or
Person acquired is involved with the same line of business, or an integral
part thereof, as is currently pursued by the Company Group; or
(d) Invest or acquire an ownership interest in, or permit any
Subsidiary of the Company to invest or acquire an ownership interest in,
any joint venture, partnership, corporation or other entity which is not an
Affiliate of any member of the Company Group, or otherwise invest in any
new business venture, provided that such investments which, when added to
any investments since the effective date of this Agreement and any
permitted acquisitions made pursuant to Section 7.4(c), do not exceed
$15,000,000 in the aggregate, may be made so long as no member of the
Company Group has any legal or
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contractual liability or obligation in excess of such investment, and
the business venture in which the investment is made involves the same
line of business, or an integral part thereof, as is currently pursued
by the Company Group.
7.5. AFFILIATES. Enter into any material transaction (including, without
limitation, the purchase or sale of any property or service) with, or make any
material payment or transfer to, any Affiliate of the Company Group (other than
the Company or any Guarantor) or member of the Family Group except (a) in the
ordinary course of business and pursuant to the reasonable requirements of the
business of the Company Group and upon fair and reasonable terms no less
favorable than those that would result from a comparable arms-length
transaction, (b) those transactions set forth on SCHEDULE 6 hereof, (c)
repurchases of shares of the common stock of Haggar upon fair and reasonable
terms no less favorable than those that would result from a comparable arms-
length transaction, (d) the incurrence of Indebtedness which constitutes
Permitted Indebtedness; and (e) dividends paid by the Company Group in the
ordinary course of business.
7.6. FIXED CHARGE REQUIREMENT. Permit the ratio of Operating Cash Flow to
Fixed Charges for the prior twelve (12) months, as measured at the end of each
fiscal quarter, to be or become less than 1.10 to 1.0.
7.7. FUNDED DEBT LIMITATION. Permit the Funded Debt Ratio, as measured at
the end of each fiscal quarter, to be or become greater than 4.0 to 1.0.
7.8 TANGIBLE NET WORTH.
(a) Permit Tangible Net Worth of the Company Group to
be or become less than:
(i) for the period through September 30, 1996,
$155,000,000; and
(ii) beginning October 1, 1996 and thereafter (if
measured at a specific point in time), an amount
equal to the sum of (1) $155,000,000, plus (2)
fifty percent (50%) of the cumulative net income
of the Company Group, on a consolidated basis, for
the fiscal year ended September 30, 1996, and each
subsequently completed fiscal year, plus (3) in
the event Haggar or the Company shall make a
registered public offering of its capital stock,
sixty-six and two-thirds percent (66-2/3%) of that
portion of the net proceeds from such offering
attributable to the primary issuance of new shares
(but not the secondary issuance of existing
shares).
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Notwithstanding the foregoing, the Tangible Net Worth
requirement of the Company Group may be reduced by the amount of any
sums used for the repurchase of shares of common stock of Haggar,
whether pursuant to Advances as contemplated in Section 2.2 or
otherwise (so long as such stock repurchase is made in compliance with
all covenants and agreements contained in this Agreement); PROVIDED,
HOWEVER, that the maximum cumulative reduction in such requirement
attributable to stock repurchases, whether pursuant to Advances as
contemplated in Section 2.2 or otherwise, shall not exceed $10,000,000
over the term of the Obligations. In addition, during the fiscal
quarter in which the Company Group accrues or expenses Capacity
Adjustment Costs, the Tangible Net Worth requirement of the Company
Group shall be reduced by an amount equal to the lesser of (1) the net
loss of the Company Group, on a consolidated basis, for such fiscal
quarter; or (2) sixty-two percent (62%) of the Capacity Adjustment
Cost accrued or expensed in that fiscal quarter.
(b) Permit Tangible Net Worth of the Company to be or
become less than $55,000,000.
(c) Notwithstanding the foregoing, in the event that
Tangible Net Worth is less than the amount required hereby, the
Company shall have a period of ten (10) days from the earlier of the
date on which Tangible Net Worth is disclosed to the Agent or is to be
disclosed to the Agent under Section 6.1 in which to cause Tangible
Net Worth to be in compliance with the terms hereof. Cumulative net
income shall be determined by reference to the statements of income
described in Section 6.1(a) and shall not be decreased by any losses
occurring during any fiscal year.
7.9. INVENTORY TURN. Permit the quotient, as measured for the Company
Group on a consolidated basis at the end of each fiscal quarter, with reference
to the financial statements described in Section 6.1, of (a) the cost of goods
sold during the prior twelve (12) months divided by (b) the Dollar amount of the
cost of Inventory at the end of such fiscal quarter, to be (if measured at a
specific point in time) or become less than 2.0.
7.10. SALE OF ASSETS. Sell, lease, transfer or otherwise dispose of,
in a single transaction or in a series of transactions, more than ten percent
(10%) of the assets of the Company Group other than (a) to a member of the
Company Group, and (b) sales of Inventory in the ordinary course of business;
PROVIDED, HOWEVER, that the provisions of this Agreement shall not prohibit the
Company or any other member of the Company Group from selling any of its capital
stock in a registered public offering, so long as such offering is in compliance
with all Laws and does not result in a Default under Section 8.13 hereof.
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7.11. SUBSIDIARIES. Create, nor permit any member of the Company Group
to create, any Domestic Subsidiary unless, contemporaneously therewith, such
Domestic Subsidiary executes and delivers to the Agent, for the benefit of the
Banks, a Subsidiary Guaranty.
7.12. FOREIGN SUBSIDIARIES. Permit more than ten percent (10%) of Net
Worth to be attributable at any time to Subsidiaries of the Company which are
not Domestic Subsidiaries unless (a) such Subsidiary has executed a Guaranty
which is legal, valid and enforceable against such Subsidiary in all respects
under the laws of any jurisdiction applicable to such Subsidiary, and (b) the
Agent has received from counsel to the Company a legal opinion as to such matter
and other matters as the Agent shall request, such counsel and opinion to be
satisfactory to the Agent and the Required Banks in all respects.
7.13. DISTRIBUTIONS. Make or agree to make any Distribution (other
than a Distribution of a Subsidiary of the Company to the Company) in any fiscal
year of the Company (a) unless the Fixed Charge Ratio is equal to or greater
than 1.10 to 1.00 (calculated by giving effect to any such Distribution), or (b)
if a Default or Unmatured Default exists at the time of such Distribution or,
after giving effect to any such Distribution, a Default or Unmatured Default
would occur.
7.14. INTERCOMPANY INDEBTEDNESS. Incur or permit to exist any
Intercompany Indebtedness which is not subordinate in right of payment to the
prior payment in full of the Obligations; any and all of such Intercompany
Indebtedness, whether now or hereafter owed, being hereby so subordinated in
right of payment to the prior payment in full of the Obligations. In connection
therewith, each member of the Company Group hereby agrees that:
(a) No member of the Company Group shall, after a Default (or an
Unmatured Default, in the case of payments or distributions made outside
the ordinary course of its business):
(i) demand, sue for, take, or accept or receive, directly or
indirectly, any payment of principal or interest with
respect to such Intercompany Indebtedness, whether in cash
or other property;
(ii) claim any offset or other reduction of the Obligations
because of any such Intercompany Indebtedness; or
(iii) take any other action to make it the same.
(b) Any payments or distributions upon or with respect to the
Intercompany Indebtedness subordinated hereby which are received by any
member of the Company Group following a Default (or an Unmatured Default,
in the case of payments or distributions made outside the ordinary course
of business) shall be collected, enforced
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and received by such member of the Company Group as trustee for the Banks
and paid over to the Agent on account of the Obligations.
(c) In the event of any distribution of all or any of the assets of
any member of the Company Group to its creditors upon the dissolution,
winding up, liquidation, arrangement, reorganization, adjustment,
protection or relief of any member of the Company Group or its debts,
whether in any bankruptcy, insolvency, arrangement, reorganization,
receivership, relief or similar proceedings, or upon an assignment for the
benefit of creditors or any other marshalling of the assets and liabilities
of any member of the Company Group, any payment or distribution of any kind
(whether in cash, property, or securities) which otherwise would be payable
or deliverable upon or with respect to the Intercompany Indebtedness
subordinated hereby shall be paid or delivered directly to the Agent for
the benefit of the Banks for application to (in the case of cash) or as
collateral for (in the case of non-cash property or securities) the payment
of the Obligations until the Obligations shall have been paid in full.
(d) If any proceeding referred to in subsection (c) above is
commenced by or against any member of the Company Group, the Agent is
hereby irrevocably authorized and empowered (in its own name or in the name
of such member of the Company Group), but shall have no obligation, to
demand, sue for, collect and receive every payment or distribution referred
to in subsection (c) above, and give acquittance therefor, and to file
claims and proofs of claim and take such other action (including, without
limitation, voting the Intercompany Indebtedness subordinated hereby or
enforcing any security interest or lien securing its payment) as it may
deem necessary or advisable for the exercise or enforcement of any of the
rights of the Agent and Banks hereunder.
(e) The Agent and/or the Banks are hereby authorized to demand
specific performance of the provisions of this Section 7.14 at any time
when any member of the Company Group shall have failed to comply with any
of the provisions hereof.
ARTICLE 8
DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
8.1. REPRESENTATION OR WARRANTY. Any representation or warranty made by or
on behalf of the Company or any of the Guarantors to the Banks under or in
connection with any Loan Document shall be materially false as it relates to the
operations of the Company Group taken as a whole as of the date on which made or
deemed to be made.
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8.2. NONPAYMENT. Nonpayment of any Obligation (other than a nonpayment of
the nature described in Section 8.3) when the same becomes due and payable and,
with respect to any nonpayment when due of the Obligation constituting accrued
interest, the continuance thereof for a period of five (5) Business Days.
8.3. PREPAYMENT. The failure of the Company or any of the Guarantors to
make the mandatory prepayment or cash deposit required by Section 2.12 and the
continuance thereof for a period of ten (10) days from the date on which the
Borrowing Base Certificate which would disclose the obligation to make such
prepayment or cash deposit is delivered or to be delivered pursuant to Section
6.1(d).
8.4. COVENANTS. The breach by the Company or any of the Guarantors of any
of the terms or provisions of Sections 6.2, 6.3, 6.5, 6.6, 6.7, 6.8, 6.9 or
Article 7.
8.5. OTHER. The breach by the Company or any of the Guarantors (other
than a breach which constitutes a Default under Sections 8.1, 8.2, 8.3 or
8.4) of (a) Section 6.1(d) that continues unremedied for a period of ten (10)
days, or (b) any other term or provision of this Agreement that continues
unremedied within thirty (30) days after written notice from the Agent or any
Bank specifying such breach.
8.6. MATERIAL INDEBTEDNESS. The default by the Company or any of the
Guarantors in the performance of any term, provision or condition contained in
any agreement under which any such Material Indebtedness was created or is
governed, the effect of which is to cause such Material Indebtedness to become
due prior to its stated maturity, or any such Material Indebtedness shall be
required to be prepaid prior to the stated maturity thereof.
8.7. INSOLVENCY. Any member of the Company Group shall (a) have an order
for relief entered with respect to it under any Debtor Relief Laws, (b) not pay,
or admit in writing its inability to pay, its debts generally as they become
due, (c) make an assignment for the benefit of creditors, (d) apply for, seek,
consent to or acquiesce in the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any substantial part of its
property, (e) institute any proceeding seeking an order for relief under any
Debtor Relief Laws or seeking to adjudicate it as bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any Debtor Relief Laws or
fail to file an answer or other pleading denying the material allegations of any
such proceeding filed against it, (f) take any corporate action to authorize or
effect any of the foregoing actions set forth in this Section or (g) fail to
contest in good faith any appointment or proceeding described in Section 8.8;
PROVIDED, HOWEVER, that the foregoing as to any member of the Company Group
other than Haggar or the Company shall not constitute a Default if such an event
would not constitute a Material Adverse Effect.
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8.8. RECEIVER. A receiver, trustee, examiner, liquidator or similar
official shall be appointed for any member of the Company Group or any
substantial part of their respective property, or a proceeding described in
Section 8.7(e) shall be instituted against the Company or any of the Guarantors
and such appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of sixty (60) consecutive days; PROVIDED,
HOWEVER, that the foregoing as to any member of the Company Group other than
Haggar or the Company shall not constitute a Default if such an event would not
constitute a Material Adverse Effect.
8.9. APPROPRIATION. Any Tribunal shall condemn, seize or otherwise
appropriate, or take custody or control of all or any substantial portion of the
property of the Company Group taken as a whole.
8.10. JUDGMENTS. The Company or any of the Guarantors shall fail
within thirty (30) days to pay, bond or otherwise discharge any judgment or
order for the payment of money in excess of $1,000,000 which is not stayed on
appeal or otherwise being appropriately contested in good faith.
8.11. ERISA. Any member of the Company Group shall fail to meet the
minimum funding requirements required by the provisions of Section 412 of the
Code and Section 302 of ERISA with respect to any Plan, if applicable, or any
Reportable Event causing a Material Adverse Effect shall occur in connection
with any Plan.
8.12. MATERIAL AGREEMENT. The occurrence of a default (including the
passage of any applicable period of grace or cure) under any other material
agreement, document or instrument to which the Company or any of the Guarantors
is a party or by which any of their respective assets are bound, the effect of
which would constitute a Material Adverse Effect.
8.13. CHANGE IN CONTROL. A Change in Control shall occur.
Any notice that may be required hereunder need be delivered to the Company
only, and no other Person shall be entitled to receive any notices whatsoever
under this Agreement, regardless of whether the action, inaction, default or
other matter to which such notice relates is by or concerning a Person other
than the Company.
ARTICLE 9
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
9.1. REMEDIES UPON DEFAULT. If any Default described in Section 8.7 or
8.8 occurs, the Commitments of the Banks to make Advances hereunder shall
automatically terminate and
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the Obligations shall immediately become due and payable without any election
or action on the part of the Agent or any Bank. If any other Default occurs
and is continuing, the Required Banks shall have and may exercise any one or
more of the following rights and remedies, and any other remedies provided in
any of the Loan Documents:
(a) terminate the Commitments of the Banks to make Advances
hereunder;
(b) declare the Obligations to be due and payable, whereupon the
Obligations shall become immediately due and payable, without presentment,
demand, protest, notice of default, notice of intention to accelerate or of
acceleration, or other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in any of the Loan Documents
to the contrary notwithstanding;
(c) reduce any claim to judgment; and/or
(d) without notice of default or demand, exercise, pursue or enforce
any of the Banks' rights and remedies under the Loan Documents or pursuant
to applicable law.
9.2. REMEDIES UPON UNMATURED DEFAULT. If any Unmatured Default occurs and
is continuing, the Required Banks may exercise, on behalf of the Banks, any one
or more of the following rights and remedies at their option:
(a) to the fullest extent permitted by law, restrict any payment or
withdrawals from any or all deposits and other sums at any time credited by
or due from such Banks, to Haggar or the Company (other than deposits and
other sums being held by such Bank(s) on behalf of Haggar or the Company as
fiduciary for or in trust for other Persons), without notice or demand and
without liability, for so long as and until such time as such Unmatured
Default and any other Unmatured Default is cured; PROVIDED, HOWEVER, that,
the foregoing shall in no way be construed to limit such Bank's right of
setoff provided to it under Section 9.6 hereof; and/or
(b) require the Company, on the next succeeding Business Day, to
deposit with the Agent cash in such amounts as the Agent may request, up to
a maximum amount equal to the aggregate existing Letter of Credit Exposure
of all the Banks. Any amounts so deposited shall be held by the Agent for
the ratable benefit of all the Banks as security for the outstanding
Letter of Credit Exposure and the other Obligations, and the Company will,
in connection therewith, execute and deliver such security agreements in
form and substance satisfactory to the Agent which it may reasonably
require. As drafts or demands for payment are presented under any Letter
of Credit, the Agent shall apply such cash to satisfy such drafts or
demands. When either (i) all Letters of Credit have expired and drawings
thereunder satisfied by the Company, or (ii) all Defaults and Unmatured
Defaults have been waived in writing by the Required Banks or cured to the
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satisfaction of the Required Banks, the Agent shall release to the Company
any remaining cash deposited under this SECTION 9.2. In addition, as the
aggregate existing Letter of Credit Exposure is reduced, the Company may
receive, upon its request, return of a portion of such cash deposit equal
to the amount of the reduction. Whenever the Company is required to make
deposits under SECTIONS 2.12 AND 9.2 and fails to do so on the day such
deposit is due, the Agent or any Bank may, without notice to the Company,
make such deposit (whether by application of proceeds of any collateral for
the Obligations, by transfers from other accounts maintained with any Bank,
by Advances or otherwise) using any funds then available to any Bank of the
Company or Haggar; and/or
(c) seek such equitable relief to which the Banks may be entitled.
9.3. AMENDMENTS AND WAIVERS. Subject to the provisions of this Section
9.3, the Required Banks (or the Agent with the consent in writing of the
Required Banks), the Company and each of the Guarantors may enter into
agreements supplemental hereto for the purpose of adding any provisions to this
Agreement or changing in any manner the rights of the Banks or the Company
hereunder or waiving any Default or Unmatured Default hereunder; provided,
however, that no such supplemental agreement shall, without the consent of all
of the Banks:
(a) Change the maturity of any Note or the principal amount thereof,
or change the rate or the time of payment of interest thereon or of any
fees due hereunder, or waive any non-payment of principal, interest or fees
then existing;
(b) Reduce the percentage specified in the definition of Required
Banks;
(c) Permit the Company to assign its rights under this Agreement;
(d) Release the Parent Guaranty; or
(e) Amend this Section.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent.
9.4. PRESERVATION OF RIGHTS. No delay or omission of the Banks or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and any
single or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right, and no waiver, amendment or
other variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Banks required
pursuant to Section 9.3, and then only to the extent specifically set forth in
such writing.
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9.5. PERFORMANCE BY LENDER. Should the Company or any other Person
fail to perform any covenant, duty or agreement contained herein or in any of
the Loan Documents, the Agent or any Bank may perform or attempt to perform
such covenant, duty or agreement on behalf of the Company or such other
Person. In such event, the Company shall, at the request of the Agent or any
Bank, promptly pay any amount expended by the Agent or any Bank in such
performance or attempted performance to the Agent or any Bank at its
principal office as specified herein, together with interest thereon at the
Default Rate from the date of such expenditure until paid. Notwithstanding
the foregoing, the Agent and the Banks do not assume any liability or
responsibility for the performance of any duties of the Company or any other
Person hereunder or under any of the Loan Documents or other control over the
management and affairs of the Company or any other Person.
9.6. RIGHTS OF SETOFF. Haggar and the Company hereby expressly grant to
the Banks the right of setoff against all deposits and other sums at any time
credited by or due from the Banks, or any of them, to Haggar or the Company
(other than deposits and other sums being held by the Banks on behalf of Haggar
or the Company as fiduciary for or in trust for other Persons) in accordance
with the provisions of this Section 9.6. The rights of the Banks under this
Section 9.6 are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Banks, or any of them, may have
under law or equity or by agreement. Upon the occurrence and during the
continuance of any Default, the Banks are hereby authorized at any time and from
time to time, to the fullest extent permitted by law, at their option, without
notice or demand and without liability, 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 time owing by the Banks to or for the credit
or the account of Haggar or the Company against any and all of their respective
Obligations now or hereafter existing under this Agreement, the Notes and the
other Loan Documents, in such order and manner as the Banks may determine in
their sole discretion, irrespective of whether the Banks shall have made any
demand under this Agreement or the Notes and although such Obligations may be
unmatured.
9.7. REMEDIES CUMULATIVE, CONCURRENT AND NON-EXCLUSIVE. The Banks shall
have all rights, options, remedies and recourses granted in the Loan Documents
and available at law or equity and same (a) shall be cumulative and concurrent,
(b) may be pursued separately, successively or concurrently against the Company
or any other Person obligated under the Loan Documents or against any one or
more of them, at the sole discretion of the Banks, (c) may be exercised as often
as the occasion therefor shall arise, it being agreed by the Company that the
exercise or failure to exercise any of same shall in no event be construed as a
waiver or release thereof or of any other right, remedy or recourse, and (d) are
intended to be, and shall be, non-exclusive.
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ARTICLE 10
GENERAL PROVISIONS
10.1. BENEFIT OF AGREEMENT. The terms and provisions of this Agreement
and the Notes shall be binding upon and inure to the benefit of the Company and
the Banks and their permitted successors and assigns. The Company shall not
have the right to assign any of its rights or transfer any of its obligations
under this Agreement. The Banks may assign only such of their rights under this
Agreement as is provided in Section 10.2.
10.2. ASSIGNMENTS AND PARTICIPATIONS.
(a) A Bank may sell, to any Person with a Standard & Poor's rating of
"A" or better, a participation consisting of all of its interests, rights
and obligations under this Agreement (including, without limitation, all of
its Commitment and the Note held by it), or may sell, to any Person at
least fifty percent (50%) owned by the selling Bank, or by a common parent
of both, or to another Bank, one or more participations in all or a portion
of its interests, rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment and the
corresponding portion of the Note held by it); PROVIDED, HOWEVER, that
other than in the case of a participation sold to a Person at least fifty
percent (50%) owned by the selling Bank, or by a common parent of both, or
to another Bank, the Agent and the Company must give their respective prior
written consent, which consent will not be unreasonably withheld. Prior to
consenting to such participation, the Company shall be afforded a period
not to exceed sixty (60) days in which it may identify a participant
acceptable to it and reasonably acceptable to the selling Bank. In the
event any Bank shall sell any participation, (i) the Company, the Agent and
the other Banks shall continue to deal solely and directly with such
selling Bank in connection with such selling Bank's rights and obligations
under the Loan Documents (including the Note held by such selling Bank);
(ii) such Bank shall retain the sole right and responsibility to enforce
the obligations of the Company and the Guarantors relating to the Loans,
including the right to approve any amendment, modification or waiver of any
provision of this Agreement other than amendments, modifications or waivers
with respect to (1) any fees payable hereunder to the Banks, and (2) the
amount of principal or the rate of interest payable on, or the dates fixed
for the scheduled repayment of principal of, the Loans and other sums to be
paid to the Banks hereunder, and (iii) the Company and Haggar agree, to the
fullest extent they may effectively do so under applicable law, that any
participant of a Bank may exercise all rights of set-off, bankers' lien,
counterclaim or similar rights with respect to such participation as fully
as if such participant were a direct holder of Loans if such Bank has
previously given notice of such participation to the Company.
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(b) Each Bank may assign, to any Person with a Standard & Poor's
rating of "A" or better, all of its interests, rights and obligations under
this Agreement (including all of its Commitment and the related Note held
by it); PROVIDED, HOWEVER, that (i) other than in the case of an assignment
to a Person at least fifty percent (50%) owned by the assignor Bank, or by
a common parent of both, or to another Bank, the Agent and the Company must
give their respective prior written consent, which consent will not be
unreasonably withheld; (ii) the assigning Bank shall contemporaneously
assign to such assignee the assigning Bank's Letter of Credit Commitment;
and (iii) the parties to each such assignment shall execute and deliver to
the Agent, for its acceptance and recording in its records, an assignment
agreement, together with the Note subject to such assignment and a
processing fee of $2,000 (for which the Company shall have no liability).
Prior to consenting to such assignment, the Company shall be afforded a
period not to exceed sixty (60) days in which it may identify an assignee
acceptable to it and reasonably acceptable to the assigning Bank. Upon
such execution, delivery and acceptance, from and after the effective date
specified in each assignment agreement, (1) the assignee thereunder shall
be a party hereto and shall have the rights and obligations of a Bank
hereunder and (2) the Bank thereunder shall be released from its
obligations under this Agreement and such Bank shall cease to be a party
hereto.
(c) By executing and delivering an assignment agreement providing for
the assignment of all or a portion of the interests, rights and obligations
of a Bank under this Agreement, the Bank assignor thereunder and the
assignee thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than the representation and warranty
that it is the legal and beneficial owner of the interest being assigned
thereby, such assignor Bank makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in or in connection with any Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document; (ii) such assignor Bank makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Company or the performance or observance by the Company of
any of its obligations under any Loan Document; (iii) such assignee
confirms that it has received a copy of this Agreement, together with
copies of the financial statements of the Company previously delivered in
accordance herewith and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter
into such an assignment agreement; (iv) such assignee will, independently
and without reliance upon the Agent, such assignor Bank or any other Bank
and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents; (v) such assignee appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such
powers under the Loan Documents as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto, and
(vi) such assignee agrees that it will perform in
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accordance with their terms all obligations that by the terms of the Loan
Documents are required to be performed by it as a Bank.
(d) The Agent shall maintain at its office a copy of each assignment
agreement delivered to it and a record of the names and addresses of the
Banks and the Commitments of, and principal amount of the Loans owing to,
each Bank from time to time. The entries in such record shall be
conclusive, in the absence of manifest error, and the Company, the Agent
and the Banks may treat each Person the name of which is recorded therein
as a Bank hereunder for all purposes of the Loan Documents. Such records
shall be available for inspection by the Company or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an assignment agreement executed by an
assigning Bank and the assignee thereunder together with the Note subject
to such assignment, the written consent to such assignment and the fee
payable in respect thereto, the Agent shall, (i) accept such assignment
agreement; (ii) record the information contained therein in its records,
and (iii) give prompt notice thereof to the Company. Contemporaneously
with the receipt by the Agent of an assignment agreement, the Company, at
its own expense, shall execute and deliver to the Agent in exchange for
each surrendered Note a new Note payable to the order of such assignee in
an amount equal to the Commitment and/or Loans assumed by it pursuant to
such assignment agreement. Such new Note shall be in an aggregate
principal amount equal to the principal amount of each surrendered Note,
shall be dated the effective date of such assignment agreement and shall
otherwise be in substantially the form of the surrendered Note.
Thereafter, each surrendered Note shall be marked canceled and returned to
the Company.
(f) After the sixty (60) day period set forth in Sections 10.2(a) and
(b) above, as applicable, or with the prior written approval of the
Company, any Bank may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Company furnished to such Bank by or on behalf
of the Company.
10.3. SURVIVAL OF REPRESENTATIONS. All representations and warranties
of the Company and the Guarantors contained in this Agreement and the other Loan
Documents shall survive delivery of the Notes and the making of the Loans.
10.4. GOVERNMENT REGULATION. Anything contained in this Agreement to
the contrary notwithstanding, no Bank shall be obligated to extend credit to the
Company in violation of any limitation or prohibition provided by any applicable
Law.
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10.5. TAXES. Any Taxes (excluding income or other Taxes payable with
respect to the assets or income of a bank generally) payable or ruled payable by
any Tribunal in respect of the Loan Documents shall be paid by the Company,
together with interest and penalties, if any.
10.6. CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
10.7. HEADINGS. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
10.8. ENTIRETY; WRITTEN AGREEMENT. (A) THE CONFIDENTIALITY LETTER
AGREEMENTS ENTERED INTO PRIOR TO THE DATE HEREOF, IN EACH CASE BETWEEN THE AGENT
AND A BANK, (B) THE LETTER DATED JUNE 24, 1996, BETWEEN THE COMPANY AND THE
AGENT, AND (C) THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
10.9. ACCOUNTING. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting determinations herein
shall be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with, GAAP as in effect from time to time,
applied on a consistent basis. Compliance with Sections 7.6, 7.7, 7.8, and 7.9
shall be determined on a consolidated basis for the Company Group, in accordance
with GAAP.
10.10. SEVERAL OBLIGATIONS. The respective obligations of the Banks
hereunder are several and not joint and no Bank shall be the partner or agent of
any other (except to the extent to which the Agent is authorized to act as
such). The failure of any Bank to perform any of its obligations hereunder
shall not relieve any other Bank from any of its obligations hereunder.
10.11. EXPENSES; INDEMNIFICATION. The Company shall reimburse the Banks
for any and all reasonable costs and out-of-pocket expenses (including
attorneys' fees) paid or incurred by the Banks in connection with the
preparation, execution and delivery of this Agreement and the amendment,
modification, enforcement of and collection under the Loan Documents. The
Company agrees to indemnify the Agent and each Bank, and its or their directors,
officers and employees against all losses, claims, damages, liabilities and
expenses (including, without limitation, all expenses of litigation or
preparation therefor whether or not the Agent or any
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Bank is a party to such litigation) that may be imposed on, incurred by or
asserted against any of them in any way relating to, or arising out of, the
Loan Documents or any of the transactions contemplated, therein, but only to
the extent that such loss, claim, damage, liability or expense is occasioned
by or arises out of the action, failure to act or default of any member of
the Company Group. Each Bank against which an adverse judgment is entered
agrees to reimburse the Company (on a pro rata basis in accordance with their
respective Commitments to the extent that more than one Bank should be liable
to the Company therefor pursuant to this Section 10.11), for its expenses of
litigation or preparation therefor in any action against such Bank to enforce
the performance of its obligations hereunder, but only in the event that the
judgment in such action is adverse to such Bank. The obligations of the
Company under this Section shall survive the termination of this Agreement
and the payment of the Obligations.
10.12. SEVERABILITY. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or invalidity without invalidating
the remaining portions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
10.13. CHOICE OF FORUM. HAGGAR AND THE COMPANY, ON BEHALF OF THEMSELVES
AND THEIR SUBSIDIARIES, ACKNOWLEDGE AND AGREE THAT ALL OBLIGATIONS HEREUNDER AND
UNDER THE OTHER LOAN DOCUMENTS ARE FULLY PERFORMABLE IN DALLAS COUNTY, TEXAS.
ANY SUIT, ACTION OR PROCEEDING AGAINST ANY MEMBER OF THE COMPANY GROUP, THE
BANKS OR ANY OTHER PERSON WITH RESPECT TO THIS AGREEMENT, THE NOTE, OR ANY OTHER
LOAN DOCUMENT, OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF, SHALL BE
BROUGHT EITHER IN THE COURTS OF THE STATE OF TEXAS, COUNTY OF DALLAS, OR IN THE
UNITED STATES COURTS LOCATED IN THE STATE OF TEXAS, NORTHERN DISTRICT, AND
HAGGAR AND THE COMPANY, ON BEHALF OF THEMSELVES AND THEIR SUBSIDIARIES, AND THE
BANKS, HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE
PURPOSE OF ANY SUCH SUIT, ACTION OR PROCEEDING.
10.14. REVOLVING CREDIT. The Company and the Banks hereby agree that,
except for Section 15.10(b) thereof, the provisions of Article 5069-15.01 et
seq. of the Revised Civil Statutes of Texas, as amended (regulating certain
revolving credit loans and revolving triparty accounts) shall not govern or in
any manner apply to this Agreement or the Loan.
10.15. PRIOR AGREEMENT. On the date the conditions set forth in Section
4.1 are satisfied, the Prior Agreement shall be of no further force and effect,
except as evidence of the obligations renewed hereunder and evidenced by this
Agreement and the Notes and except as to rights acquired by the Banks prior to
such date.
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ARTICLE 11
THE AGENT
11.1. APPOINTMENT AND POWERS. The Agent shall continue as the Agent
hereunder, and each of the Banks irrevocably authorizes the Agent to act as the
agent of such Bank. The Agent agrees to act as such upon the express conditions
contained in this Article. The duties of the Agent shall be administrative in
nature and the Agent shall not have a fiduciary relationship in respect of any
Bank by reason of this Agreement.
11.2. POWERS. The Agent shall have and may exercise such powers
hereunder and under the other Loan Documents as are specifically delegated to
the Agent by the terms hereof or by any other writing signed by the Required
Banks, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Banks, or any obligation to the Banks
to take any action hereunder or exercise any right or remedy with respect to any
Unmatured Default or Default, except as specifically provided by this Agreement
or requested by the Required Banks.
11.3. POSSESSION OF INSTRUMENTS BY THE AGENT. The Agent shall exercise
all rights and remedies under the Notes and the Loan Documents and take all
actions with respect thereto in accordance with the request or direction of the
Required Banks, or otherwise as and to the extent provided herein or in the
other Loan Documents; provided, however, that the Agent may take such actions in
its name without the joinder of the Banks, and all third parties shall be
entitled to rely on the actions taken by the Agent with respect to the Notes and
the execution by the Agent of any and all agreements, financing statements,
affidavits, notices or any other type of document or instrument pertaining
thereto, including, without limitation, in connection with the exercise of any
rights or remedies of the Banks under the Loan Documents (and specifically
including any legal proceedings), and the same shall be binding upon all the
Banks as to any third party relying on such actions of the Agent.
Notwithstanding anything to the contrary expressed or implied herein or in the
Notes or any other Loan Document, each Bank shall be deemed a holder of each
Note and a separate payee, with a separate right to payment thereunder to the
extent of its pro rata part of payments to be made thereunder in accordance with
the terms of this Agreement.
11.4. DEBTOR-CREDITOR RELATIONSHIP. Each Bank has and shall maintain a
direct creditor-debtor relationship with the Company and/or any of the
Guarantors and will have direct recourse, singly or in the aggregate, against
the Company and/or any of the Guarantors. Notwithstanding the foregoing, any
right, remedy, action, omission or waiver respecting this Agreement, the Notes
and the other Loan Documents shall only be exercised, made, taken, or permitted
by the Agent, acting upon the direction of the Required Banks, as the agent for
all the Banks; provided, that in the event of any bankruptcy proceedings or
other legal proceedings
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relating to this Agreement against the Company or any of the Guarantors, each
Bank shall be entitled, at its option, to bring or join in such proceedings
in its own name.
11.5. GENERAL IMMUNITY. Neither the Agent nor any of its respective
directors, officers, agents or employees shall be liable to the Banks or any
Bank for any action taken or omitted to be taken by it or them hereunder or in
connection herewith, except for its or their own gross negligence or willful
misconduct, it being the intention of the Banks that such parties shall not be
liable for the consequences of their own negligence (other than gross
negligence).
11.6. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. The Agent shall not
be responsible to the Banks for any recitals, reports, statements, warranties or
representations herein or any Loans or be bound to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement.
11.7. RIGHT TO INDEMNITY. Each of the Banks shall, ratably in
accordance with the percentage of its Commitment, indemnify the Agent (to the
extent not reimbursed by the Company) for and against any cost, expense
(including attorney's fees and disbursements), claim, demand, action, loss or
liability (except such as result from the Agent's gross negligence or willful
misconduct) that the Agent may suffer or incur in connection with this Agreement
or any action taken or omitted by the Agent hereunder, in its capacity as the
Agent, including, without limitation, matters arising out of the Agent's own
negligence (other than its gross negligence). The Agent shall be fully
justified in failing or refusing to take any action hereunder unless it shall
first be indemnified to its satisfaction by the Banks pro rata against any and
all liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
11.8. ACTION ON INSTRUCTIONS OF THE BANKS. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with written instructions signed by the Required Banks, except as to
those matters enumerated in Section 9.3 as to which the consent of all of the
Banks is required, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Banks and on all holders of
Notes.
11.9. EMPLOYMENT OF THE AGENT AND COUNSEL. The Agent may execute any
of its respective duties as the Agent hereunder by or through employees, agents
and attorneys-in-fact and shall not be answerable to the Banks, except as to
money or securities received by it or them or its or their authorized agents,
for the default or misconduct of any such employees, agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
respective duties hereunder.
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11.10. RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper Person or Persons, and,
in respect to legal matters, upon the opinion of counsel selected by the
Agent.
11.11. MAY TREAT PAYEE AS OWNER. The Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
received by the Agent. Any request, authority or consent of any Person, who
at the time of making such request or giving such authority or consent is the
holder of any Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in
exchange therefor.
11.12. THE AGENT'S REIMBURSEMENT. Each Bank agrees to reimburse the
Agent in proportion to such Bank's ratable share of the Commitments for any
expenses not reimbursed by the Company (a) for which the Agent is entitled to
reimbursement by the Company under the Loan Documents and (b) for any other
expenses incurred by the Agent on behalf of the Banks, including those in
connection with the amendment, modification, enforcement of, and collection
under the Loan Documents, but specifically excluding those in connection with
their preparation, execution or delivery.
11.13. RIGHTS AS A LENDER. With respect to its Commitment, Loans made
by it and the Note issued to it, the Agent shall have the same rights and
powers hereunder as any Bank and may exercise or refrain from exercising the
same as though it were not the Agent and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to and generally
engage in any kind of banking or trust business with Haggar, the Company or
any of the Guarantors as if it were not the Agent.
11.14. BANK CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based
on the financial statements referred to in Section 5.5 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent
or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement.
11.15. SUCCESSOR AGENT. The Agent may resign at any time by giving
written notice thereof, no later than thirty (30) days prior to the date such
resignation will become effective, to the Banks, the Company and the
Guarantors, and may be removed at any time with or without cause by the
Required Banks. Upon any such resignation or removal, the Required Banks
shall have the right, with the consent of the Company, which consent shall
not be unreasonably withheld, to appoint, on behalf of the Company and the
Banks, a successor Agent. If no successor Agent shall have been so appointed
by the Required Banks and shall have accepted such appointment within thirty
(30) days after the retiring Agent's giving notice of resignation, then the
Company may appoint, with the consent of the Required Banks, which shall not
be unreasonably withheld, on behalf of the Banks, a successor agent. If no
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successor agent shall have been so appointed by the Company and shall have
accepted such appointment within sixty (60) days after the retiring Agent's
giving notice of resignation, then the retiring Agent may appoint, on behalf
of the Company and the Banks, a successor Agent. Such successor Agent shall
be a commercial bank having capital and retained earnings of at least
$100,000,000. Upon the acceptance of any appointment as the Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
the Agent, the provisions of this Article shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as an Agent hereunder.
11.16. DISTRIBUTION OF INFORMATION. Subject to the provisions of
Section 6.7, the Company authorizes the Agent to discuss with and furnish to
the Banks all financial statements, audit reports and other information
pertaining to the Company and the Guarantors whether such information was
provided by the Company or prepared or obtained by such Agent and whether or
not such information was requested by the Agent or the Banks. Neither the
Agent nor any of its employees, officers, directors or agents makes any
representation or warranty regarding any audit reports or other analyses of
the Company's and the Guarantors' condition that the Agent distributes,
whether such information was provided by the Company or the Guarantors or was
prepared or obtained by the Agent, nor shall the Agent or any of its
employees, officers, directors or agents be liable to any Person or entity
receiving a copy of such reports or analyses for any inaccuracy or omission
contained in or relating thereto.
11.17. NON-ADVANCING BANKS. In the absence of an occurrence of a
Default and in the event that any Bank shall fail or refuse to advance its
pro rata portion of any Advance, as required hereunder, the Agent shall
notify the other Banks of such failure and such remaining Banks shall advance
such non-advancing Bank's portion but only to the extent that such additional
amount would not cause the outstanding principal balance of each such Bank's
Note to exceed its Commitment. Upon making any such Advance, and
notwithstanding anything to the contrary expressed or implied herein or in
the Notes or any of the Loan Documents, all subsequent payments made on the
Loans or from the exercise of right of setoff or other remedies under the
Loan Documents, shall be paid to only the Banks other than the non-advancing
Bank (and the non-advancing Bank shall not be entitled to receive the same),
to be applied pro rata in accordance with the amounts advanced by each such
advancing Bank, until the amounts advanced by such Banks on behalf of the
non-advancing Bank have been repaid in full. In addition, any Banks that
advance funds on behalf of a non-advancing Bank pursuant to this Section
11.17 shall have a claim against such non-advancing Bank for the amounts so
advanced and shall be entitled to all rights and remedies at law or in equity
to recover any unpaid
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amounts. In the event of the foregoing, the Agent will use reasonable
efforts to suggest to the Company an alternative bank to replace such
non-advancing Bank, without any assurances in such connection that any
alternative bank may be amenable to becoming a Bank.
11.18. BENEFIT OF THE BANKS. Other than Section 11.15 and 11.17, all
terms, conditions and agreements set forth in this Article 11 are for the
sole and exclusive benefit of the Banks, and neither the Company, the
Guarantors nor any other Person shall be entitled to rely on or seek the
benefit of such provisions.
ARTICLE 12
RATABLE PAYMENTS
12.1. RATABLE PAYMENTS. In case at any time any Bank, whether by
setoff or otherwise, has payment made to it upon its Note in a greater
proportion than received by any other Bank upon its Note, such Bank so receiving
such greater proportionate payment agrees to purchase a portion of the Advances
held by the other Banks so that after such purchase each Bank will hold its
ratable proportion of the Advances. In case any such payment is disturbed by
legal process or otherwise, appropriate further adjustments shall be made. Any
Bank executing this Agreement may, to the fullest extent permitted by Law,
exercise all of its rights of payment as if such Bank were the direct creditor
of the Company (but without affecting in any way the provisions of Article 9
hereof).
ARTICLE 13
NOTICES
13.1. GIVING NOTICE. Any notice required or permitted to be given
under this Agreement may be given, and shall be deemed to be received, when
deposited in the United States mail, postage prepaid, by facsimile transmission
or telex when delivered to the appropriate office for transmission, charges
prepaid, or by private delivery service when delivery is receipted for,
addressed to the Company, the Banks or the Agent at the addresses indicated
below their signatures to the Agreement; provided, however, that notices given
pursuant to Section 8.4 shall be given by certified mail, return receipt
requested.
13.2. CHANGE OF ADDRESS. The Company, the Banks and the Agent may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 59
<PAGE>
ARTICLE 14
COUNTERPARTS
This Agreement may be executed in any number counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Company, the Agent and the Banks and
each party has notified the Agent by telex or telephone, confirmed in writing,
that it has taken such action.
EXECUTED as of the date first above written.
HAGGAR CLOTHING CO., a Nevada corporation
f/k/a Haggar Apparel Company
By: /s/ J. M. HAGGAR, III
--------------------------------------
J. M. Haggar, III
Chief Executive Officer
6113 Lemmon Avenue
Dallas, Texas 75209
Attn: Robert Qualls
Telephone: (214) 956-4233
Telecopy: (214) 956-4334
HAGGAR CORP., a Nevada corporation
By: /s/ J. M. HAGGAR, III
--------------------------------------
J. M. Haggar, III
Chief Executive Officer
6113 Lemmon Avenue
Dallas, Texas 75209
Attn: Robert Qualls
Telephone: (214) 956-4233
Telecopy: (214) 956-4334
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 60
<PAGE>
$22,222,222.22 NATIONSBANK OF TEXAS, N.A.
By: /s/ TODD SHIPLEY
--------------------------------------
Todd Shipley
Senior Vice President
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Telephone: (214)508-0907
Telecopy: (214)508-0980
$14,814,814.81 COMERICA BANK - TEXAS
By: /s/ MELINDA A. CHAUSSE
--------------------------------------
Melinda A. Chausse
Vice President
Comerica Bank - Texas
8828 Stemmons Freeway, Suite 441
Dallas, Texas 75247
Telephone: (214) 841-1587
Telecopy: (214) 263-9837
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 61
<PAGE>
$14,814,814.81 THE BANK OF TOKYO-MITSUBISHI, LTD.
Dallas Office
By: /s/ JOHN M. MEARNS
--------------------------------------
John M. Mearns
Vice President/Manager
The Bank of Tokyo-Mitsubishi, Ltd.
Suite 3150 LB 118
Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Telephone: (214) 954-1200
Telecopy: (214) 954-1007
$11,111,111.12 NBD BANK, N.A.
By: /s/ WILLIAM J. MCCAFFREY
--------------------------------------
William J. McCaffrey
Vice President
NBD Bank, N.A.
611 Woodward
Detroit, Michigan 48226
Telephone: (313)225-3444
Telecopy: (313)225-2649
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 62
<PAGE>
$7,407,407.41 BANK OF SCOTLAND
By: /s/ Catherine M. Oniffrey
---------------------------------------
Catherine M. Oniffrey
Vice President
Bank of Scotland
565 Fifth Avenue
New York, New York 10017
Telephone: (212) 490-8030
Copies to:
Janna Blanter
Bank of Scotland
Citicorp Center
1200 Smith Street, Suite 2660
Houston, Texas 77002
Telephone: (713)651-1870
Telecopy: (713)651-9714
$7,407,407.41 NATIONAL CITY BANK, KENTUCKY
By: /s/ DONALD R. PULLEN, JR.
---------------------------------------
Donald R. Pullen, Jr.
Vice President
National City Bank, Kentucky
101 S. Fifth Street
Louisville, Kentucky 40202
Telephone: (502)581-6352
Telecopy: (502)581-5122
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 63
<PAGE>
COMMITMENT
$22,222,222.22 TEXAS COMMERCE BANK National Association,
successor by merger to Texas Commerce Bank,
National Association, Individually and as the
Agent
By: /s/ JOHN P. DEAN
---------------------------------------
John P. Dean
Senior Vice President
2200 Ross Avenue, P-1 Level, Suite 10
Dallas, Texas 75201
Post Office Box 660197
Dallas, Texas 75266-0197
Attn: John P. Dean
Telephone: (214) 965-2466
Telecopy: (214) 965-2044
WIRING INSTRUCTIONS:
Texas Commerce Bank National
Association, ABA #113000609
for Credit to Account #7001-20730-7800
Attn: Loan Syndication Services
Gale Manning
Reference: (As Applicable)
FUNDS MANAGEMENT ADDRESS:
Gale Manning, Manager
Phone: (713) 750-2784
Fax: (713) 750-3810
Loan Syndication Services
Texas Commerce Bank National
Association
P. O. Box 2558
1111 Fannin Street
9th Floor, Mail Station 46
Houston, Texas 77252
FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 64
<PAGE>
SCHEDULE 1
CURRENT MEMBERS OF THE BOARDS OF DIRECTORS
OF HAGGAR AND THE COMPANY
HAGGAR CORP. HAGGAR CLOTHING CO.
------------ -------------------
J.M. HAGGAR, III J. M. HAGGAR,III
FRANK BRACKEN FRANK BRACKEN
RALPH BEATTIE RALPH BEATTIE
NORMAN BRINKER
RICHARD HEATH
RAE EVANS
CARLOS CANTU
<PAGE>
SCHEDULE 2
STANDBY
LETTERS OF CREDIT OUTSTANDING
JUNE 30, 1996
BENEFICIARY LC# MATURITY AMO0UNT
- ------------------------------------------------------------------------------
NATIONAL UNION FIRE INSURANCE D424918 09/30/96 $7,934,093
COMPANY OF PITTSBURG, PA
TRAVELERS INSURANCE COMPANY D418099 12/31/96 $1,509,765
----------
$9,443,858
----------
----------
<PAGE>
SCHEDULE 3
SUBSIDIARIES
COMPANY NAME & ADDRESS SITUS OF INCORPORATION
- ---------------------- ----------------------
DOMESTIC
- --------
Bowie Manufacturing Company Nevada
6113 Lemmon Avenue, Dallas, TX 75209
Corsicana Company Nevada
6113 Lemmon Avenue, Dallas, TX 75209
Dallas Pant Manufacturing Company Nevada
6113 Lemmon Avenue, Dallas, TX 75209
Greenville Pant Manufacturing Company Nevada
6113 Lemmon Avenue, Dallas, TX 75209
McKinney Pant Manufacturing Company Nevada
6113 Lemmon Avenue, Dallas, TX 75209
Olney Manufacturing Company Nevada
6113 Lemmon Avenue, Dallas, TX 75209
Waxahachie Garment Company Nevada
6113 Lemmon Avenue, Dallas, TX 75209
La Romana Manufacturing Corporation Nevada
6113 Lemmon Avenue, Dallas, TX 75209
Haggar Services, Inc. Texas
6113 Lemmon Avenue, Dallas, TX 75209
AirHaggar Texas
6113 Lemmon Avenue, Dallas, TX 75209
Duncan Manufacturing Company Oklahoma
6113 Lemmon Avenue, Dallas, TX 75209
Haggar Corp. (Parent) Nevada
6113 Lemmon Avenue, Dallas, TX 75209
Haggar Clothing Co. Nevada
6113 Lemmon Avenue, Dallas, TX 75209
Weslaco Sewing, Inc. Nevada
6113 Lemmon Avenue, Dallas, TX 75209
Weslaco Cutting, Inc. Nevada
6113 Lemmon Avenue, Dallas, TX 75209
Haggar Direct, Inc. Nevada
6113 Lemmon Avenue, Dallas, TX 75209
<PAGE>
SCHEDULE 3
SUBSIDIARIES
COMPANY NAME & ADDRESS SITUS OF INCORPORATION
- ---------------------- ----------------------
FOREIGN
- -------
Haggar Mex. S.A. de C.V. Mexico
6113 Lemmon Avenue, Dallas, TX 75209
Haggar Apparel Ltd. United Kingdom
6113 Lemmon Avenue, Dallas, TX 75209
<PAGE>
<TABLE>
SCHEDULE 4
CURRENT OBLIGATIONS
APPROXIMATE
AMOUNT AT SECURED
OWED BY 6/30/96 NOTEHOLDER BY GUARANTOR
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AirHaggar $167,596 Bank of Boston Leasing Airplane Haggar Corp.
Bowie Mfg. Co. $2,900,000 TCB - I.R.B. Buildings/Equip. Haggar Clothing Co.
Bowie Mfg. Co. $175,826 City of Weslaco Equipment N/A
Haggar Clothing Co. $25,000,000 Allstate Life Insur. Co. N/A Haggar Corp.
Haggar Clothing Co. $9,469,070 National Life of VT C.V. of Life Insur. N/A
Haggar Clothing Co. $1,411,623 Texas Stadium Platinum Suite N/A
Haggar Direct, Inc. $1,016,577 Retail Lease Guar. (curr.> 12 mos.) Haggar Clothing Co.
-----------
$40,140,692
-----------
-----------
</TABLE>
<PAGE>
<TABLE>
September 16, 1996
SCHEDULE 5
PENDING LITIGATION
CLAIMANT DESCRIPTION HAGGAR ATTORNEY CURRENT
- -------- ----------- --------------- STATUS
-------
PENDING CLAIMS
- --------------
<S> <C> <C> <C>
Elizabeth Rodriguez Intentional infliction of Steve Kardell, Jr. Pending
emotional distress (termination Baker & McKenzie
allegedly due to pregnancy) 2001 Ross Avenue
and invasion of privacy. Suite 4500
Dallas, Texas 75201
Estella Rodriguez Wrongful termination in Steve Kardell, Jr. Pending
violation of Workers Baker & McKenzie Trial - 11/4/96
Compensation Act, Article 2001 Ross Avenue
8307c. Suite 4500
Dallas, Texas 75201
Ana Cecilia Barragan Wrongful termination in Steve Kardell, Jr. Pending
violation of the Workers Baker & McKenzie
Compensation Act, Article 2001 Ross Avenue
8307c, and intentional Suite 4500
infliction of emotional distress. Dallas, Texas 75201
Maria P. Jasso Wrongful termination in Steve Kardell, Jr. Pending
violation of Workers Baker & McKenzie
Compensation Act, Chapter 2001 Ross Avenue
451 of the Texas Labor Code Suite 4500
(f/k/a Article 8307c), Texas Dallas, Texas 75201
Commission of Human Rights
Act, age discrimination, and
intentional infliction of
emotional distress.
Consuelo G. Valdez Wrongful termination and Steve Kardell, Jr. Pending
intentional infliction of Baker & McKenzie
emotional distress. 2001 Ross Avenue
Suite 4500
Dallas, Texas 75201
Altagracia Hernandez Wrongful termination in Steve Kardell, Jr. Pending
violation of the Workers Baker & McKenzie
Compensation Act, Article 2001 Ross Avenue
8307c, intentional infliction of Suite 4500
emotional distress. Dallas, Texas 75201
Maria P. Andrae Wrongful termination in Steve Kardell, Jr. Pending
violation of the Workers Baker & McKenzie
Compensation Act, Article 2001 Ross Avenue
8307c. Suite 4500
Dallas, Texas 75201
Martha Cedillo Wrongful termination in Steve Kardell, Jr. Pending
violation of Workers Baker & McKenzie
Compensation Act, Article 2001 Ross Avenue
8307c, and intentional Suite 4500
infliction of emotional distress. Dallas, Texas 75201
Hilda Espinoza Breach of Contract, intentional Steve Kardell, Jr. Pending
infliction of emotional distress, Baker & McKenzie
and invasion of privacy. 2001 Ross Avenue
Suite 4500
Dallas, Texas 75201
Patricia Espinoza Wrongful termination in Steve Kardell, Jr. Pending
violation of Workers Baker & McKenzie
Compensation Act, Article 2001 Ross Avenue
8307c, and intentional Suite 4500
infliction of emotional distress. Dallas, Texas 75201
Maria O. Leal Wrongful termination in Steve Kardell, Jr. Pending
violation of Workers Baker & McKenzie
Compensation Act, Article 2001 Ross Avenue
8307c, intentional infliction of Suite 4500
emotional distress, and age Dallas, Texas 75201
discrimination in violation of
Texas Commission on Rights
Act.
Connie Garcia Wrongful termination in Steve Kardell, Jr. Pending
violation of article 8307c, Baker & McKenzie Trial - 11/18/96
intentional infliction of 2001 Ross Avenue
emotional distress and Suite 4500
negligent hiring and retention. Dallas, Texas 75201
Amy Padilla Wrongful termination in Steve Kardell, Jr. Pending
violation of Article 8307c of Baker & McKenzie
the Workers Compensation Act 2001 Ross Avenue
and intentional infliction of Suite 4500
emotional distress. Dallas, Texas 75201
Dominga Vasquez Wrongful termination in Steve Kardell, Jr. Dismissed on
violation of the Workers Baker & McKenzie summary
Compensation Act, Article 2001 Ross Avenue judgment on
8307c, and intentional Suite 4500 9/9/96.
infliction of emotional distress. Dallas, Texas 75201
Consuelo Gonzalez Wrongful termination in Steve Kardell, Jr. Pending
Norma E. Cano violation of Workers Baker & McKenzie
Maria J. Hernandez Compensation Act, Article 2001 Ross Avenue
Amado Torres 8307c, negligent hiring and Suite 4500
retention, and violation of Dallas, Texas 75201
Texas Commission on Human
Rights Act (Norma E. Cano,
only).
Maria R. Leal Intentional infliction of Steve Kardell, Jr. Pending
emotional distress. Baker & McKenzie
2001 Ross Avenue
Suite 4500
Dallas, Texas 75201
Francis Creek, et al Class Action for severance pay Steve Kardell, Jr. Pending
v. (breach of contract and Baker & McKenzie (Class Action)
Haggar Apparel Co. d/b/a promissory estoppel) 2001 Ross Avenue 97th Judicial
Olney & Bowie Mfg Suite 4500 District Court,
Dallas, Texas 75201 Montague
County, Texas
Trial - 12/3/96
Joe Trejo, et al 351 former employees Steve Kardell, Jr. Pending
v. claiming fraud and Baker & McKenzie
Haggar Apparel Co. misrepresentation regarding 2001 Ross Avenue
methods of pay and plant Suite 4500
closure, intentional infliction of Dallas, Texas 75201
emotional distress, violation of
the Fair Labor Standards Act Roland Leon
and Texas Workers Thornton, Summers,
Compensation Act, and Biechlim Dunham
discrimination under the 711 North Carancahua,
Americans with Disability Act Suite 600
Corpus Christi, Texas
78745-1401
</TABLE>
<PAGE>
SCHEDULE 5
(CONTINUED)
<TABLE>
<S> <C> <C> <C>
Carlos Riser Sexual harassment and Barbara M. G. Lynn Pending
discrimination based on sex, Carrington, Coleman, Trial 2/3/97
retaliation for complaining of Sloman & Blumenthal
harassment and discrimination, 200 Crescent Court
intentional infliction of Suite 1500
emotional distress, negligent Dallas, Texas 75201
retention, assault and battery,
invasion of privacy, and
constructive termination.
Patrick Arterberry Personal injuries allegedly Stephen Schoettmer Pending
Calvin Joe Wiley arising as a result of roof Thompson & Knight P.C.
Gail Roberson collapse on 5/5/95. 3300 First City Center,
1700 Pacific Avenue
Dallas, Texas 75201
PLAINTIFFS: Allegations of negligence, Stephen Schoettmer Pending
Ernest Jaramillo gross negligence, wrongful Thompson & Knight P.C.
Gilbert deaths and personal injuries 3300 First City Center,
Jaramillo, Diana arising as a result of roof 1700 Pacific Avenue
Quezada, Jerry collapse on 5/5/95 Dallas, Texas 75201
Jaramillo,
Begnigna E. Gonzales,
Individually and as
Representatives of
the Estate of Bessie
Espinoza, Deceased;
INTERVENORS:
Annie V. Coleman,
Individually and as next
Friend of Valencia
Henry, Christopher,
Henry, Ira H. Jeffrey,
Minors, and as
Representative of the
Estate of Lynnice W.
Henry
Ira J. Miller Personal Injury arising out of Joseph P. Wohrle Dismissed with
product defect or product 300 Corporate Pointe prejudice
liability, negligence, breach of Suite 310
warranty ($10,000 actual Culver City, California
damages, $14,000 punitive 90230-7635
damages)
</TABLE>
-4-
<PAGE>
SCHEDULE 5
(CONTINUED)
<TABLE>
<S> <C> <C> <C>
Max Griffin, as father of Wrongful death as a result of Michael S. Burroughs Pending
Jerry Lee Griffin, a collision between tractor Phelps, Jenkins, Gibson
minor, deceased trailer and deceased's vehicle. & Fowler
1201 Greensboro Avenue
Tuscaloosa, Alabama
35401
Gayla Spencer Personal injury arising out of Stephen Schoettmer Pending
negligence--Claimant claims Thompson & Knight P.C.
to have been struck by 3300 First City Center,
conveyor truck. 1700 Pacific Avenue
Dallas, Texas 75201
Daltex Services, Inc. Breach of contract, quantum James A. Ellis, Jr. Settled
meruit, and sworn account Carrington, Coleman,
--Plaintiff claims non-payment Sloman & Blumenthal
of $211,476.65 for clean-up 200 Crescent Court
services allegedly performed Suite 1500
after roof collapse. Dallas, Texas 75201
Maria De La Luz a/ka Wrongful termination in Steve Kardell, Jr. Pending
Luz E. Calles violation of Article 8307c of Baker & McKenzie
Filed: 8/16/96 the Workers Compensation Act 4500 Trammel Crow Ctr
and intentional infliction of 2001 Ross Avenue
emotional distress. Dallas, TX 75201
Cristela Ayala Wrongful termination in Steve Kardell, Jr. Pending
Filed: 8/24/96 violation of Article 8307c of Baker & McKenzie
the Workers Compensation 4500 Trammel Crow Ctr
Act. 2001 Ross Avenue
Dallas, TX 75201
</TABLE>
E E O C
<TABLE>
<S> <C> <C> <C>
Bernice Childress Sex discrimination No attorney Pending
Edgardo Hernandez Failure to hire under ADA No attorney Pending
Annette Ramirez Harassment under ADA No attorney Pending
Robert Serra Discrimination based on No attorney Pending
national origin
Stacy L. Williams Discrimination based on race No attorney Pending
</TABLE>
-5-
<PAGE>
SCHEDULE 5
(CONTINUED)
<TABLE>
<S> <C> <C> <C>
Rosie M. Carroll Discrimination based on race No attorney Pending
Filed: 7/8/96
received after 7/17/96
Tomasa Nunez Discrimination under No attorney Pending
Filed: 7/1/96 Americans with Disabilities
received after 7/17/96 Act
</TABLE>
-6-
<PAGE>
SCHEDULE 6
EXISTING AFFILIATE TRANSACTIONS
1. Continue existing Shiloh Road lease between Company, as lessee, and new,
non-family owner following the sale of property by E.R. Hagger, J.M.
Haggar, Jr., and Rosemary Haggar Vaughan.
2. Split Dollar Life Insurance Policies. The Company owns part of
policy and family member beneficiaries own part.
3. Haggar Clothing Co. makes available use of the Company Plane at a fixed
cost, Health Insurance, use of Product, and use of the New York
Apartment to Ed Haggar and J.M. Haggar, Jr. and an office for Ed Haggar.
4. Haggar Clothing Co. has granted the use of the "Edmond McGrath" label to
James Joseph Haggar.
<PAGE>
SCHEDULE 7
CAPACITY ADJUSTMENT COSTS
FISCAL QUARTER ENDING ________________, 199___
TOTAL PAID THIS CUMULATIVELY
ACCRUAL QUARTER PAID
------- ------- ----
CLOSE (2) PLANTS
Severance Pay
Vacation
Extended Benefits
Workers Comp Claims
Unemployment Costs
Outplacement
Relocation and Setup
Legal Costs/Defense/Settlement
Lease Buyouts
Other Related
OBTAIN ADDITIONAL MEXICO CAPACITY
Start-Up Costs
Training Costs
Other Related
LEGAL COSTS
Defense and Settlements
Robstown
Bowie/Olney
Closed (2) Plants
TOTAL
------- ------- -------
<PAGE>
<TABLE>
<S> <C>
EXHIBIT A
[Logo] APPLICATION AND AGREEMENT
FOR IRREVOCABLE STANDBY LETTER OF CREDIT
/ / WITHOUT RENEWALS / / WITH RENEWALS Renewable until _______________________.
To: TEXAS COMMERCE BANK NATIONAL ASSOCIATION FOR BANK USE ONLY LATEST DATE
P.O. Box 2558 ----------------------------------------------
Houston, Texas 77252-8300 Date: | L/C No.:
Date of this Application ________________________ ----------------------------------------------
Applicant No.:
----------------------------------------------
Beneficiary No.:
----------------------------------------------
Advising Bank No.:
----------------------------------------------
Gentlemen:
The undersigned Applicant(s) hereby request(s) you to establish an irrevocable Standby Letter of Credit
as set forth below in such language as you may deem appropriate, with such variations from such terms as
you may in your discretion determine are necessary and are not materially inconsistent with this
Application and Agreement, and forward the same by:
/ / Cable/telex (full details) / / Airmail / / Brief Cable/telex / / Other __________________
/ / Through your correspondent for delivery to the beneficiary or advised through ________________________
/ / Directly to beneficiary
All banking charges other than the issuing Bank's are for / / Beneficiary / / Applicant(s)
- ----------------------------------------------------------------------------------------------------------
Liability of | on Behalf of (as to appear on Letter of Credit)
|
|
|
|
|
|
|
__________ In favor of (Beneficiary) _______________ | __________________________________________________
|
|
| In figures:
|
|
|
| In words:
|
|
|
- ----------------------------------------------------------------------------------------------------------
Partial drawings: / / Allowed / / Not Allowed | Expiring at the close of business on
If drawings are allowed in installments within |
given periods and no drawing is made for an |
installment within the applicable period, the |
credit |
| _________________________________________________
/ / Shall / / Shall not be available for | At your counters, unless otherwise indicated, for
subsequent installments | Sight Payment
- ----------------------------------------------------------------------------------------------------------
To be available by drafts at sight drawn on you duly signed and endorsed, or specify any other drawee:
_________________________________________
And accompanied by documents as specified below:
Beneficiary's manually signed statement on its letterhead reading exactly as follows:
- ----------------------------------------------------------------------------------------------------------
(Complete only when the beneficiary's bank or correspondent is to issue its undertaking based on the
issued Standby Letter of Credit)
/ / Request beneficiary's bank to issue and deliver their (specify type of undertaking, bid or performance
bond, or other)
____________________________________________________________
In favor of:
____________________________________________________________
For an amount not exceeding that specified above, effective immediately and expiring at their office
on _______________________________________________
(30 days prior to expiry date above)
relative to _______________________________________.
THE OPENING OF THIS CREDIT IS SUBJECT TO THE TERMS AND CONDITIONS AS SET FORTH ON THE FOLLOWING
PAGES, TO WHICH TERMS AND CONDITIONS WE AGREE Please date and sign this Application and Agreement on
page 4 hereof.
- ----------------------------------------------------------------------------------------------------------
Page 1 of 4
</TABLE>
<PAGE>
TERMS AND CONDITIONS FOR STANDBY LETTER OF CREDIT
In consideration of the issuance of the letter of credit and all
renewals, extensions, replacements and amendments thereof (herein called the
"Credit") by Bank in accordance with the Application and Agreement (this
"Agreement"), the undersigned (hereinafter called "Applicants," whether one
or more) jointly and severally agree to the following terms and conditions:
1. Applicants promise to pay to Bank on demand at its office shown on
front, in United States currency as follows:
A. As to drafts, draws, demands, or other evidence of amounts drawn
under or purporting to be drawn under the Credit which are payable in United
States currency, the amount paid thereon, or, if so demanded by Bank, to pay
Bank at its office in advance the amount required to pay such drafts, draws,
demands or other evidence of amounts drawn under or purporting to be drawn
under the Credit;
B. As to drafts, draws, demands, or other evidence of amounts drawn under
or purporting to be drawn under the Credit which are payable in currency
other than United States currency, either (i) the amount paid in the currency
of the Credit at the bank of Bank's choice in the country of such currency,
or (ii) the equivalent of the amount paid, in United States currency, at
Bank's then current selling rate for such currency;
C. All taxes, levies, imposts, duties, charges, fees, deductions or
withholdings of any nature whatsoever and by whomsoever and wherever imposed
in connection with this Agreement, the Credit or any transactions hereunder
or thereunder; and
D. Interest on all amounts owing to Bank hereunder at the maximum
nonusurious rate of interest permitted by applicable laws of the United
States of America or the State of Texas, from time to time in effect,
whichever shall permit the highest lawful rate (hereinafter called "the
Highest Lawful Rate"). At all times, if any, that Chapter One of Title 79,
Texas Revised Civil Statutes, 1925, as amended, establishes the Highest Lawful
Rate, the Highest Lawful Rate shall be the "indicated" rate ceiling (as
defined therein) from time to time in effect. It is the intention of
Applicants and Bank to conform strictly to applicable usury laws. It is
therefore agreed that: (i) if, for any reason, the interest received for the
actual period of the existence of any loan by Bank hereunder exceeds the
Highest Lawful Rate, Bank shall refund to applicants the amount of the excess
or shall credit the amount of the excess against amounts owing hereunder and
shall not be subject to any of the penalties provided by law for contracting
for, charging, or receiving interest in excess of the Highest Lawful Rate,
(ii) the aggregate of all interest and other charges constituting interest
under applicable law and contracted for, chargeable or receivable under this
Agreement or otherwise in connection with this Agreement or the Credit, shall
not for the actual period of the existence of any loan hereunder exceed the
maximum amount of interest, nor produce a rate in excess of the Highest
Lawful Rate, (iii) if, for any reason, usurious interest is contracted for,
charged or received, then the sole remedy of Applicants shall be to receive a
refund thereof or a credit on the accrued and unpaid interest and unpaid
principal under this Agreement equal to the usurious interest, it being
agreed that usurious interest shall mean the amount by which the total
interest contracted for, charged or received exceeds the amount of interest
allowed by applicable law; and this Agreement shall be automatically deemed
reformed so as to permit only the collection of the Highest Lawful Rate of
interest, and (iv) determination of the rate of interest on any loan
evidenced hereby shall be made by amortizing, prorating, allocating, and
spreading, in equal parts during the period of the full stated term of such
loan, all interest at any time contracted for, charged or received from
Applicants in connection with such loan.
E. Applicants assume all risks (political, economic or otherwise) of
disruptions or interruptions in currency exchange with respect to any demand
payable in other than United States currency, and if there is no then
prevailing exchange rate, Bank may obtain the non-United States currency from
any commercially reasonable source, in which case Applicants shall pay Bank's
cost therefor, inclusive of all expenses, in United States currency.
F. Demand, for all purposes of this Agreement, shall be considered made at
the time Bank mails, telephones or otherwise sends notification to Applicants.
G. Applicants agree to pay to Bank, any Member and/or Correspondent (as
hereinafter defined), or its correspondents, annually in advance not later
than forty-five (45) days prior to the then current expiration date of the
Credit, all fees and commissions owing to or which become owing in respect of
the Credit. Such fees and commissions shall be payable at the then current
rate charged by Bank and/or such other entity(ies). Payment of such fees or
commissions in advance shall not affect the Bank's absolute right not to
renew the Credit; however, should bank decide in its sole and absolute
discretion not to renew the Credit, Bank shall refund such advance payment to
Applicants.
2. Applicants agree that if because of any law or regulation, or
because of any change in any existing law or regulation, or in the
interpretation thereof by any official authority, whether or not having the
force of law, which comes into effect after the date of this Agreement, (a)
Bank or Applicants should, with respect to this Agreement, the Credit or any
transactions hereunder or thereunder, be subject any tax, charge, fee,
insurance premium, deduction or withholding of any kind whatsoever, or (b)
reserve requirements, or changes in existing reserve requirements, should be
imposed on Bank with respect to this Agreement or the Credit or any
transactions hereunder or thereunder, and if any of the above-mentioned
measures, or any other similar measure, should result in (i) any increase in
the cost to Bank of issuing and maintaining the Credit pursuant to this
Agreement or of any transaction under or in connection with the Credit or
this Agreement, or (ii) any reduction in the payment or deposit of any amount
(principal, interest, fee, commission or otherwise) receivable by Bank in
respect of the Credit or this Agreement or of any transaction under the
credit or this Agreement, then Applicants shall pay to Bank upon demand such
increased cost or reduction, including such additional amounts as may be
necessary so that every net payment or deposit, after deduction or
withholding for or on account of such payment or deposit (including any taxes
levied on additional amounts paid pursuant to this paragraph), will not be
less than the corresponding amount provided for under the Credit or this
Agreement before giving effect to such increased costs or reduction; provided
that in no event shall any additional amounts which constitute interest exceed
what is considered, together with other interest payments, the Highest Lawful
Rate.
3. Availments under the Credit may be effected through Bank or any
advising or confirming bank (the "Payor") at the then current buying rate of
the Payor for banker's sight drafts at the place from which the Payor is to
receive reimbursement under the terms of the Credit, it being understood and
further agreed: (a) that the amount(s) disbursed to the beneficiary(ies)
relative thereto may be in the currency local to the site of the Payor, and
may be reduced by any taxes and/or other charges whether of the Payor or
otherwise, and (b) that an advice of an availment under the Credit from the
Payor shall be sufficient evidence to Bank of an availment under the Credit,
and such evidence thereof shall be binding upon Applicants for the purposes
of this Agreement.
4. If at any time(s) any funds and/or securities are paid to or
deposited with or under the control of Bank, not as payment under paragraph 1
hereof, but to be held relative hereto, same shall be held as collateral
security for the Obligations (as hereinafter defined) and without Applicants
having any right to dispose of the same while any Obligations (as hereinafter
defined) exist under this Agreement, but with the discretionary right in Bank
to release or surrender all or any part of said funds and/or securities to or
upon the order of Applicants. If any such funds are available to Bank at its
office in the currency of the Credit at time after any payment may become
due hereunder, Bank may (acting in each instance in its discretion and
without being required to make any prior demand for payment hereunder) apply
all or any part thereof at any time(s) on account of the Obligations (as
hereinafter defined), irrespective of the then current rate of exchange.
Should the aggregate market value of any such funds and/or securities at any
time(s) suffer any decline, or should any such property be unavailable at any
time for any reason to Bank at its office or fail to conform to legal
requirements, Applicants will, upon demand, make such payment(s) on account
of the aforesaid Obligations, or as additional collateral therefor, will
deposit and pledge with Bank additional property that is satisfactory to
Bank. If any such funds as aforesaid be other than United States dollars and
occasion arises for a refund by Bank of all or any portion thereof, it shall
be optional with Bank as to whether refund will be made (a) in United States
Dollars at the buying rate for the foreign currency on the date of refund, or
(b) in the amount and kind of the foreign currency on the date of refund, or
(c) by instructing a branch or correspondent of Bank to hold the refundable
amount of foreign currency for Applicants' account and risk.
5. Applicants hereby pledge, assign and hypothecate to Bank as security
for any and all of the obligations and liabilities of Applicants with respect
to the Credit, the Application portion of this Agreement (the "Application")
and this Agreement, whether hereinbefore or hereinafter referred to, now or
hereafter existing (herein called the "Obligations"), any and all property
of Applicants now or at any time(s) hereafter in Bank's possession or
control or in the possession or control of any third party acting in Bank's
behalf, whether for the express purpose of being used by Bank as collateral
security or for safekeeping or for any other or different purpose, including
such property as may be in transit by mail or carrier to or from Bank, a lien
and security interest being hereby given Bank upon and in any and all such
property for the aggregate amount of the Obligations; and Applicants
authorize Bank, at Bank's option, at any time(s), whether or not the property
then held by Bank as security hereunder is deemed by Bank to be adequate, to
appropriate and apply to or upon any and all of the Obligations, whether or
not then due, any and all monies now or hereafter with Bank on deposit or
otherwise to the credit of or belonging to Applicants and in Bank's
discretion, to hold any such monies as security for any such Obligations
until the exact amount thereof, if any, shall have been definitely ascertained
by Bank. Bank's rights, liens and security interest hereunder shall continue
unimpaired, and Applicants shall be and remain obligated in accordance with
the terms and provisions hereof, notwithstanding the release or substitution
of any property which may be held as collateral hereunder at any time(s) or
of any rights or interest therein, or any delay, extension of time, renewal,
compromise or other indulgence granted by Bank in reference to any of the
Obligations, or any promissory note, draft, bill of exchange or other
instrument given Bank in connection with any of the Obligations, Applicants,
and each of them individually, hereby waiving notice of any such delay,
extension, release, substitution, renewal, compromise or other indulgence,
and hereby consenting to be bound thereby as fully and effectually as if
Applicants had expressly agreed thereto in advance.
6. Applicants agree at any time and from time to time, on demand, (i)
to deliver, convey, transfer or assign to Bank, as security for any and all
of the Obligations, and also for any and all other obligations and/or
liabilities, absolute or contingent, due or to become due, which are now, or
may at any time hereafter, be owing by Applicants to Bank, additional security
of a value and character satisfactory to Bank, or (ii) to make such cash
payment(s) in partial or full satisfaction of the Obligations of such other
obligations or liabilities as Bank in its sole discretion may require.
7. Bank is hereby authorized, at its option and without any obligation
to do so, to transfer to and/or register in the name(s) of Bank's nominee(s)
all or any part of the property which may be held by it as security at any
times(s) hereunder, and to do so before or after the maturity of any of the
Obligations and with or without notice to Applicants.
8. The word "property" as used herein includes goods and merchandise (as
well as any and all documents relative thereto), securities, funds, monies
(whether United States currency or otherwise), choses in action and any and
all other forms of property, whether real, personal or mixed, tangible or
intangible, and any right or interest of Applicants, or any one or more of
them, therein or thereto. Bank is authorized, at its option, to file
financing statement(s) and continuation statement(s) without the signature of
Applicants with respect to any of the property, and Applicants jointly and
severally agree to pay the cost of any such filing and to sign upon request
any instruments, documents or other papers which Bank may require to perfect
its security interest in the property. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement.
Page 2 of 4
<PAGE>
9. No proceeds of the Credit will be used for any purpose which would
constitute the Credit a "purpose credit" when the meaning of Regulation U of
the Board of Governors of the Federal Reserve System.
10. Applicants jointly and severally represent and warrant that (a) each
of them which is not a natural person is duly organized in good standing and
validly existing with full power and authority to execute this Agreement; (b)
the execution of this Agreement has been duly authorized by all necessary
action on the part of all Applicants and does not violate or contravene any
law, regulation, order or decree or the articles of incorporation, bylaws,
partnership agreement or any other organizational document of any Applicant;
(c) all requisite licenses, permits and franchises for the operation of
Applicant's business are in full force and effect; (d) any financial
statements delivered to Bank in connection herewith fairly present the
financial condition and results of operations of the subject or subjects
thereof as of the dates and for the periods indicated therein, and no
material adverse change has occurred in the financial condition of the
subject or subjects thereof since the dates thereof; (e) except as disclosed
in writing to Bank in connection herewith, no litigation or administrative
proceeding is pending or threatened against any Applicant; and (f) each
Applicant has filed all tax returns required to have been filed and paid all
taxes shown thereon to be due. Applicants further represent and warrant to
Bank that Applicants are not now in violation of any applicable limitations
on the aggregate amount of loans that may be made to a borrower by any lender
and that issuance of the Credit by Bank will not be, or cause the aggregate
credit outstanding to any or all Applicants to exceed such limitations, and
Applicants covenant and agree that Applicants will at all times during the
term of this Agreement fully comply with and fully advise Bank and Member, if
any, of all circumstances relevant to, all applicable lending limits.
11. Upon the non-performance of any of the promises to pay herein set
forth, or upon the non-payment of any of the Obligations or other obligations
or liabilities of Applicants herein, or upon the failure of Applicants to
furnish satisfactory additional collateral or to make payments on account as
hereinabove agreed, or to perform or comply with any of the other terms or
provisions of this Agreement, or in the event of default under any security
agreement or guaranty or other document securing or guaranteeing Applicants'
payment and performance of the Obligations, or should any information
supplied on behalf of Applicants prove to be incorrect, false or misleading,
or in the event of the death, insolvency, business failure, dissolution or
termination of existence of any Applicant, or in case any petition in
bankruptcy is filed by or against any Applicant, or any proceeding is
commenced for the relief or readjustment of any indebtedness of any
Applicant, either through reorganization, composition, extension or
otherwise, or if any Applicant should make an assignment for the benefit of
creditors or take advantage of any insolvency law, or if a receiver for any
property of any Applicant should be appointed at any time, and in each case
any of the foregoing is initiated under laws or regulations of any
jurisdiction relating to the relief of debtors, then upon such occurrence,
any or all of the Obligations shall, at Bank's option, become due and
payable immediately, without demand or notice, notice of acceleration and of
intention to accelerate being hereby expressly waived by each Applicant.
12. Upon Applicants' failure to pay any Obligation when due, as
aforesaid, or upon the occurrence of any of the events described in paragraph
11 above, Bank shall have, in addition to all other rights and remedies
allowed by law, the right immediately, without demand for performance and
without notice of intention to sell or of the time or place of sale or of
redemption or other notice or demand whatsoever to any Applicant, all of
which are hereby expressly waived, and without advertisement, to sell at any
broker's board, or at public or private sale, or to grant options to
purchase, or otherwise to realize upon the whole or from time to time any
part of the collateral upon which Bank shall have a security interest or lien
as aforesaid, or any interest which Applicants may have therein, and after
deducting from the proceeds of sale or other disposition of the said
collateral all expenses (including but not limited to reasonable attorneys'
fees for legal services of every kind and other expenses as set forth below)
shall apply the residue of such proceeds toward the payment of any of the
Obligations, in such order as Bank shall elect, and whether then due or not
due, Applicants remaining liable for any deficiency remaining unpaid after
such application. If notice of any sale or other disposition is required by
law to be given, each Applicant hereby agrees that a notice sent at least two
(2) days before the time of any intended public sale or of the time after
which any private sale or other disposition of the said collateral is to be
made, shall be reasonable notice of such sale or other disposition.
Applicants also agree to assemble the said collateral at such place or places
as Bank designates by written notice. At any such sale or other disposition,
Bank may itself purchase the whole or any part of the said collateral sold,
free from any right of redemption on the part of Applicants and free of any
right to require sale in inverse order of alienation, which rights are hereby
waived and released. Applicants agree that the said collateral secures, and
further agree to pay on demand, whether or not any default by Applicants has
occurred, all expenses (including but not limited to, reasonable attorneys'
fees for legal services of every kind, the cost of any insurance and the
payment of all taxes or other charges) of, or incidental to, the custody,
care, appraisal, sale or collection of, or realization upon, any of the said
collateral or in any way relating to the enforcement or protection of Bank's
rights hereunder. Where applicable, Bank shall have, to the maximum extent
permitted by applicable law, in addition to and cumulative of the rights
hereinabove provided, all of the rights and remedies provided to a secured
party by the Uniform Commercial Code in effect in the State of Texas on the
date of this Agreement.
13. No delay on the part of Bank in exercising any power of sale, lien,
option or other right hereunder, and no notice or demand which may be given
or made upon Applicants by Bank with respect to any power of sale, lien or
other right hereunder, shall constitute a waiver thereof or limit or impair
the right of Bank to take any action or to exercise any power of sale, lien,
option or any other right hereunder, without demand or notice or prejudice to
the rights of Bank as against Applicants in any respect. Any and all rights
and liens of Bank hereunder shall continue unimpaired, and Applicants shall
be and remain obligated in accordance with the terms and provisions hereof,
notwithstanding the release or substitution of any property as referred to
herein, or of any rights or interests therein, or any delay, extension of
time, renewal, compromise or other indulgence granted by Bank in reference to
any of the Obligations, Applicants each hereby waiving notice of any such
delay, extension, release, substitution, renewal, compromise or other
indulgence, and each hereby consenting to be bound thereby as fully and
effectually as if Applicants had expressly and specifically agreed thereto.
14. The users and beneficiaries of the Credit shall be deemed
Applicants' agents, and Applicants assume all risks of the acts or omissions
of the users or beneficiaries of the Credit. Neither Bank nor its
correspondents or affiliates shall assume any liability to anyone for failure
to pay or accept if such failure is due to any restriction in force at the
time and place of presentment, and Applicants agree to indemnify Bank from
any consequences that may arise therefrom. Neither Bank nor Bank's
correspondents or affiliates shall be liable or responsible in any respect
for any (a) error, omission, interruption or delay in transmission, dispatch
or delivery of any one or more messages or advices in connection with the
Application or the Credit, whether transmitted by cable, radio, telegraph,
twx, wireless, mail, electronic mail, telex, telefax, telecopy, SWIFT, or
otherwise and despite any cipher or code which may be employed, or (b) errors
in translation or for errors in interpretation of technical terms, or (c)
action, inaction or omission which may be taken or suffered by it or them in
good faith or through inadvertence in identifying or failing to identify any
beneficiary(ies) or otherwise in connection with the Credit, or (d) validity,
sufficiency or genuineness of document(s) even if such document(s) should in
fact prove to be in any or all respects invalid or insufficient, fraudulent
or forged, or (e) act, error, neglect or default, omission, insolvency or
failure in business of any of Bank's correspondents. The happening of any one
or more of the contingencies described above shall not affect, impair or
prevent the vesting of any of Bank's rights or powers hereunder. In
furtherance and extension and not in limitation of the specific provisions
hereinbefore set forth, it is hereby further agreed that any action,
inaction, or omission taken or suffered by Bank or by any of its
correspondents under or in connection with the Credit or the relative drafts,
demands, documents or property, if in good faith and in conformity with such
foreign or domestic laws, customs or regulations as Bank or any of its
correspondents may deem to be applicable thereto, shall be binding upon
Applicants and shall not place Bank or any of its correspondents under any
resulting liability to Applicants. If the Credit or this Agreement shall be
terminated or revoked by operation of law as to any Applicant, or if any
Applicant shall restrain the payment of the Credit by court order or any
other means, or if this Agreement or the Credit are amended, modified,
revoked or cancelled as provided for herein and any dispute, claim, demand or
cause of action arises with respect thereto, Applicants will jointly and
severally indemnify and save Bank harmless from any and all loss, cost,
damage, expense, suit, claim, cause of action, judgment and attorneys' fees
which may be suffered or incurred by Bank, whether caused in whole or in part
by the negligence of Bank or any correspondent or affiliate of Bank.
15. The Credit and this Agreement may be amended, modified, cancelled or
revoked only upon the receipt by Bank from all Applicants of a written
request therefor, and then only upon such terms and conditions as Bank may
prescribe and then only by a writing signed by all Applicants, the
beneficiaries and Bank. Notwithstanding the foregoing, however, Bank may,
upon receipt of a written request therefor, signed by all Applicants, extend
the expiration date and/or increase the amount of the Credit without the
written or oral acceptance or consent of any or all beneficiaries of the
Credit. Bank is authorized without reference to or approval by any Applicant
to set forth the terms appearing on the Application portion hereof in the
Credit and to modify or alter such terms in such language as Bank may deem
appropriate, with such variations from such terms as Bank may at its
discretion determine (which determination shall be conclusive and binding
upon Applicants) are necessary and are not materially inconsistent with such
terms.
16. Notwithstanding anything herein (except paragraph 17) to the
contrary, it is understood and agreed that, if the Credit is issued in favor
of a sovereign or commercial entity which is to issue a commitment or
guarantee on Applicants' behalf in connection herewith, each Applicant shall
remain liable on the Credit until Bank is fully released in writing by such
entity. Applicants jointly and severally agree to pay (a) all costs and
expenses incurred by Bank in collection of amounts advanced under the Credit
and any and all other amounts remaining unpaid hereunder through probate,
reorganization, bankruptcy or any other proceeding and (b) reasonable
attorneys' fees when and if collection of any such amount is placed in the
hands of an attorney for collection after default.
17. Notwithstanding anything contained herein or in any other separate
security agreement or other document executed heretofore, herewith or
hereafter in connection with or related to this credit obligation, if this is
a consumer credit obligation (as defined or described in 12 C.F.R. 227,
Regulation AA, promulgated by the Federal Reserve Board), the security for
this credit obligation shall not extend to any non-possessory security
interest in household goods (as defined in said Regulation AA) other than a
purchase money security interest, and no waiver of any notice contained
herein or therein shall be construed under any circumstances to extend to any
waiver of notice prohibited by Regulation AA.
18. This Agreement and the Credit are subject to and incorporate fully
herein (except as expressly modified herein or in the Credit) the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, (hereinafter referred to as "the
Uniform Customs"). THIS AGREEMENT AND THE RIGHTS OF APPLICANTS AND BANK
HEREUNDER SHALL BE SUBJECT TO AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE
STATE OF TEXAS, WITHOUT REGARD TO THE RULES REGARDING CONFLICTS OF LAWS,
EXCEPT WHEN THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS CONFLICT WITH THE
UNIFORM CUSTOMS, IN WHICH EVENT THE PROVISIONS OF THE UNIFORM CUSTOMS SHALL
GOVERN.
Page 3 of 4
<PAGE>
19. If the Credit is governed by the laws of a foreign jurisdiction, the
Credit may require Bank to pay funds as Bank's primary obligation. In the
event Bank is, or in good faith deems itself to be, obligated to advance
funds to the beneficiary(ies) hereof. Applicants hereby expressly jointly and
severally agree to reimburse Bank on demand for all such advances made,
notwithstanding any expiration or cancellation of the Credit by Bank or under
Texas law or the Uniform Customs and even though Applicants may have an
unresolved controversy with a third party or the beneficiary(ies) related to
the transaction for which the Credit is being sought, including the proper
interpretation of the law of such foreign jurisdiction. In the event
Applicants have a dispute with the beneficiary(ies) or a third party,
Applicants are required to reimburse Bank on demand, and Applicants' remedy
is to seek reimbursement from the beneficiary(ies) or the third party. Bank
is expressly authorized to presume that all demands for payment made by the
beneficiary(ies) hereof are made in accordance with such foreign law.
20. Unless otherwise expressly stated herein or in the Credit, neither
the Credit nor this Agreement may be assigned by the beneficiary(ies) or any
Applicant without the prior written consent of Bank. Bank may assign or
transfer the Credit or this Agreement, or any instrument(s) evidencing all or
any of the Obligations, and may deliver all or any of the property then held
as security therefor, to the transferee(s) of Bank, who shall thereupon
become vested with all of the powers and rights in respect thereof given to
Bank herein or in the instrument(s) transferred, and Bank shall thereafter be
forever relieved and fully discharged from any liabilities or responsibility
with respect thereto, but Bank shall retain all rights and powers hereby
given with respect to any and all instrument(s), rights or property not so
transferred.
21. This Agreement, the Application and the Credit constitute the entire
agreement among the parties hereto, except for such agreements executed in
connection herewith which specifically refer to this Agreement, the
Application or the Credit or which grant to Bank a lien or security interest
to secure any debts or obligations of any Applicant, regardless of any
reference or lack thereof to this Agreement, Application or the Credit. Terms
used herein in the plural number shall be construed as singular as the
context requires and vice versa.
22. Although the Credit may refer to a particular agreement or other
obligation to the beneficiary(ies) executed by Applicants, the terms of such
agreement are not in any manner incorporated herein. Bank shall therefore
make payment upon demand under the Credit unless it appears that such demand,
on its face, does not comply with the terms of the Credit. Such payment shall
be made without regard to performance of any obligation by any contracting
party under such agreement.
23. Applicants agree that at all times now and hereafter they will
indemnify and save Bank harmless from and against all suits, judgments,
liabilities, losses or damages to it arising in any manner, including
negligence on the part of Bank in connection with the Credit or this
Agreement, unless due to gross negligence or willful misconduct on the part
of Bank, and from and against all costs, charges and expenses, including in
connection with all legal proceedings, whether groundless or otherwise,
attorneys' fees, it being the purpose of this Agreement to protect Bank fully
in the premises.
24. Applicants agree that no acceptance or payment of overdrafts or
irregular drafts or of drafts with irregular documents attached shall, if
assented to or approved by any Applicant orally or in writing, or if Bank in
good faith accepts an indemnity limited to the actual damage, if any, caused
by such irregularity or discrepancy, impair any rights which Bank may have
under this Agreement. In case of any variation between the documents called
for by the Credit or this Agreement and the documents accepted by Bank or
Bank's correspondents, Applicants shall each be deemed conclusively to have
waived any right to object to such variation with respect to any action by
Bank or Bank's correspondents relating to such documents and to have ratified
and approved such action as having been taken on Applicants' direction,
unless Applicants immediately upon receipt of such documents (and prior to
receipt thereof by any beneficiary or user of the Credit) file objection with
Bank in writing, or unless Bank has been provided with an indemnity, as
aforesaid. Applicants acknowledge and agree that, the information in the
Application portion of this Agreement may be transmitted to Bank and relied
on by Bank in issuing the Credit by any means acceptable to Bank, including
without limitation, SWIFT, electronic mail, telex, telephone, twx, telecopy
or telefax. Applicants, Member and Correspondent (both as hereinafter
defined) agree to hold Bank harmless from and against all claims, expenses,
costs, liabilities, attorneys' fees, suits, judgments, and causes of action
arising out of any discrepancy between the information in this Agreement,
including without limitation, the Application, and that transmitted to, or
received by, Bank.
25. Issuance by Bank of the Credit applied for herein shall constitute
acceptance by Bank of this Agreement.
26. If this Agreement contains the signature of a bank which is a
subsidiary of Texas Commerce Bancshares, Inc. (hereinafter referred to as the
"Member") or of a correspondent bank of Bank (hereinafter referred to as the
"Correspondent"), then this paragraph shall be applicable. In consideration
of Bank's issuing the Credit at the request of Correspondent or Member, as
applicable, Correspondent or Member as applicable, agrees that it is an
Applicant hereunder with respect to Bank, and it agrees to reimburse Bank on
demand and authorizes Bank, without demand or any notice whatsoever, to
charge, setoff against and otherwise exercise any rights Bank may have with
respect to, any monies now or hereafter on deposit with or otherwise to the
credit of or belonging to Correspondent or Member, as applicable, at or with
Bank for any and all Obligations hereunder, whether or not any demand has
been made on Applicants hereunder. As an Applicant hereunder, each
Correspondent or Member Bank, as applicable, makes the same representations,
warranties, covenants and agreements to Bank as the Applicants in paragraph
10 hereof and otherwise provided in this Agreement; provided, however unless
otherwise agreed to in writing, or stated herein neither Member nor
Correspondent agrees to furnish any security for this Agreement or the Credit
other than the aforementioned monies. Upon Member's or Correspondent's, as
applicable, payment to Bank of all Obligations hereunder, Bank thereupon
automatically, and without further action on the part of any party, assigns
and transfers its rights hereunder to Correspondent or Member, as
applicable, who shall be fully subrogated thereto, and Applicants agree to
indemnify and hold Bank harmless from and against any claims, costs,
expenses, suits or causes of action by Applicants or any beneficiary or user
of the Credit. APPLICANTS HEREBY AGREE THAT CORRESPONDENT OR MEMBER, AS
APPLICABLE, SHALL ALSO (IN ADDITION TO BANK) HAVE THE SAME RIGHTS, REMEDIES,
SECURITY INTERESTS AND OTHER LIENS AS ARE STATED HEREIN, TO THE SAME EFFECT
AS IF ADDITIONAL PARAGRAPHS WERE FULLY WRITTEN HEREIN CONTAINING THE SAME
TERMS BUT SUBSTITUTING "CORRESPONDENT" OR "MEMBER" FOR "BANK" THROUGHOUT. ALL
REFERENCES TO SECURED PARTY, BENEFICIARY OR OTHER SIMILAR TERM CONTAINED IN
ANY DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT OR OTHER DOCUMENT
OR INSTRUMENT EXECUTED CONTEMPORANEOUSLY HEREWITH OR PREVIOUSLY EXECUTED BY
ANY OF THE APPLICANTS FOR THE BENEFIT OF MEMBER OR CORRESPONDENT SHALL BE
DEEMED TO INCLUDE BANK AS WELL AS MEMBER OR CORRESPONDENT. ALL SUCH SECURITY
AGREEMENTS, FINANCING STATEMENTS, DEEDS OF TRUST AND OTHER DOCUMENTS AND
INSTRUMENTS ARE AMENDED TO THE EXTENT NECESSARY IN ORDER THAT THE OBLIGATIONS
OF APPLICANTS HEREUNDER ARE SECURED THEREBY AND BY THE COLLATERAL DESCRIBED
THEREIN ON A PARI PASSU BASIS WITH, AND IN ADDITION TO, ANY OTHER OBLIGATIONS
SECURED THEREBY.
27. / / If this box is checked this paragraph is applicable. Applicants
have requested Bank to issue a Credit which the Bank may, but is not
required, to renew on an annual basis until the "latest date" indicated on
the Application or such later date as any Applicant may hereafter request in
writing. Applicants agree that Bank has made no commitment to any beneficiary
or any Applicant, and that Bank has no obligation, to renew the Credit at or
prior to the original or any subsequent expiration date. Except as expressly
provided in the Credit, Bank shall have no liability to any beneficiary for
the renewal of, or failure to renew, the Credit for any reason. Except as
hereinafter agreed, the Bank shall not have any liability to Applicants due
to the renewal of, or failure to renew, the Credit for any reason. Except to
the extent any notice may be required in the Credit, Bank is not required to
notify any beneficiary or Applicant of the renewal, or failure to renew, the
Credit. Subject to the other conditions and indemnities in this Agreement,
including negligence by Bank, Bank and Applicants agree that Bank will not
renew the Credit if it receives, and an authorized officer of Bank
acknowledges such receipt in writing, written notification from any Applicant
at least 14 days and not more than 30 days prior to the earliest date on
which, pursuant to the terms of the Credit, Bank must either renew or decline
to renew the Credit or notify beneficiary(ies) of its decision to renew or
not to renew the Credit. Such written notification must specify to the
satisfaction of Bank the Credit, the then current expiration date, and such
Applicant's request that the Credit not be renewed.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
APPLICANTS: -----------------------------------
Printed Name
- -----------------------------------
Printed Name By:
-------------------------------
By: Authorized Signature
-------------------------------
Authorized Signature CORRESPONDENT/MEMBER BANK:
- ----------------------------------- -----------------------------------
Printed Name Printed Name
By: By:
------------------------------- -------------------------------
Authorized Signature Authorized Signature
BANK ACCEPTANCE: The Bank's Acceptance evidenced by the undersigned
authorized representative's signature is provided as its acknowledgement that
this agreement represents the final agreement by the parties which may not be
contradicted by evidence of prior contemporaneous, or subsequent oral
agreements between the parties.
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
--------------------------------
Page 4 of 4
<PAGE>
EXHIBIT B
BORROWING BASE CERTIFICATE
(FOR THE MONTH ENDING ___________________ OR AS OF ____________________)
HAGGAR CLOTHING CO.
TO: TEXAS COMMERCE BANK National Association
2200 Ross Avenue
P. O. Box 660197
Dallas, Texas 75266
Attention: John P. Dean
DATE: __________________, 199__
RE: First Amended and Restated Credit Agreement dated as of September 18,
1996 (the "Agreement"), by and among Haggar Clothing Co., Haggar Corp.,
Texas Commerce Bank National Association and the Banks Listed in the
Agreement, as amended
- -------------------------------------------------------------------------------
1. RECEIVABLES
A. Total Receivables $ ____________
B. LESS:
(i) Receivables unpaid ($_________)
after 90 days
after date of
invoice (or the
effective date of
Dated Invoices)
<PAGE>
(ii) all uncollectible ($____________)
Receivables
(iii) reserve for "discounts" ($____________)
(iv) reserve for "build-ups" ($____________)
(v) reserve for "deductions" ($____________)
(vi) reserve for GMI discounts ($____________)
(vii) other reserves ($____________)
C. Total Eligible Receivables $____________
D. 80% of Eligible Receivables $____________
2. INVENTORY
A. Total Inventory per attached $____________
summary schedule
B. less: ineligible Inventory ($____________)
C. Total Eligible Inventory $____________
D. 50% of Eligible Inventory $____________
3. BORROWING BASE
A. (i) 80% of Eligible Receivables $____________
(ii) 50% of Eligible Inventory $____________
B. Borrowing Base Formula Sum $____________
<PAGE>
C. less: amount by which (A)(ii) is greater
than 50%* of the Borrowing
Base Formula Sum ($__________)
D. Borrowing Base $____________
4. BORROWING BASE AVAILABILITY
A. Borrowing Base $____________
B. less: Principal amount ($__________)
outstanding under
the Agreement
C. Borrowing Base Availability $____________
5. AVAILABLE COMMITMENT
A. Total Commitments $100,000,000**
B. less: (i) Principal amount ($__________)
outstanding under
the Agreement
(ii) aggregate amount ($__________)
of all issued and
outstanding
Letters of Credit
C. Available Commitment $____________
_________________
* 60% in the months of January, June, July and December.
** Subject to reduction as provided in the Agreement.
<PAGE>
6. AVAILABILITY
A. Borrowing Base Availability $____________
B. Available Commitment $____________
C. Lesser of A or B $____________
I hereby certify that, to the best of my knowledge after appropriate
inquiry, the foregoing is true and correct as of the last day of the month
indicated.
----------------------------------
----------------------------------
Printed Name and Title
<PAGE>
EXHIBIT C
NOTE
$__________________ _______________, 199__
FOR VALUE RECEIVED, Haggar Clothing Co., a Nevada corporation (the
"Company"), promises to pay to the order of _________________ (the "Bank"),
in accordance with the terms and provisions of that certain First Amended and
Restated Credit Agreement dated as of September 18, 1996, executed by and
among the Company, Haggar Corp., Texas Commerce Bank National Association,
individually and as the Agent, and the other Banks named therein (as amended,
supplemented or otherwise modified form time to time, the "Agreement"), the
principal sum of ________________________ ($______________) or the aggregate
unpaid principal amount of all Advances made by the Bank to the Company,
whichever is less, in immediately available funds at the main office of the
Agent, together with interest on the outstanding principal amount hereof at
the rates and on the dates set forth in the Agreement. The Company shall pay
each Advance in full on the dates set forth in the Agreement. All payments
hereunder shall be made by the Company without setoff, counterclaim or
deduction of any kind.
This Note has been executed and delivered pursuant to, and shall be
governed by, the terms and provisions of the Agreement. Each capitalized term
used herein and not otherwise defined herein shall have the same meaning
attributed to such term in the Agreement.
If any Default described in the Agreement shall occur, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon
may become or be declared due and payable without notice or demand in the
manner and with the effect provided in the Agreement.
THIS WRITTEN NOTE, TOGETHER WITH THE AGREEMENT AND THE OTHER LOAN
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE COMPANY AND THE BANK
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENT OF THE COMPANY AND THE BANK. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE COMPANY AND THE BANK.
<PAGE>
The Bank may, and is hereby authorized to, record on the schedule attached
to this Note, or to otherwise record in accordance with its usual practice,
the date and amount of each Advance and the date and amount of each payment
of principal and/or interest on this Note, in the manner and with the effect
provided in the Agreement.
This Note has been executed and delivered in renewal of and substitution
and replacement for the Note dated September 14, 1992, payable to the order
of _______________ and originally delivered pursuant to the Prior Agreement.
HAGGAR CLOTHING CO., a Nevada corporation
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF HAGGAR CLOTHING CO.,
DATED___________, 199__
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Advance Period Paid Balance
- ---- --------- ----------- --------- -------
<PAGE>
EXHIBIT D
CONSENT OF HAGGAR
Haggar hereby (a) agrees that the Parent Guaranty is and shall remain in
full force and effect to the additional effect that the Obligations under the
First Amended and Restated Credit Agreement (the "Agreement") to which this
Consent of Haggar is attached are a part of the Obligations under the Parent
Guaranty, (b) ratifies and confirms all terms and provisions of the Parent
Guaranty, as amended hereby, (c) acknowledges that there are no claims or
offsets against, or defenses or counterclaims to, the terms and provisions of
and the obligations created and evidenced by the Parent Guaranty, as amended
hereby, (d) reaffirms all agreements and obligations under the Parent
Guaranty, as amended hereby, with respect to the Loans, the Notes, the
Agreement and all other documents, instruments or agreements governing,
securing or pertaining to the Loans, and (e) represents and warrants that all
requisite corporate action necessary for it to execute this Consent of Haggar
has been taken.
HAGGAR CORP.,
a Nevada corporation
By:
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
Dated:
------------------------
<PAGE>
EXHIBIT E
GUARANTY
OF DOMESTIC SUBSIDIARIES
THIS GUARANTY (this "GUARANTY") is executed as of ____________________,
199___, by each of the corporations that are signatories hereto (collectively,
the "GUARANTORS") in favor of TEXAS COMMERCE BANK National Association, a
national banking association, as agent (in such capacity, the "AGENT") for the
banks (the "BANKS") that are parties to the First Amended and Restated Credit
Agreement described below.
W I T N E S S E T H
WHEREAS, HAGGAR CLOTHING CO., a Nevada corporation (the "COMPANY"), is a
party to that certain First Amended and Restated Credit Agreement dated
July __, 1996, with the Agent and the Banks (as the same may from time to
time be amended, supplemented or otherwise modified, the "CREDIT AGREEMENT");
WHEREAS, pursuant to the terms of the Credit Agreement and the other Credit
Documents (as hereinafter defined), the Banks have agreed to make certain
Extensions of Credit (as hereinafter defined) to or for the benefit of the
Company;
WHEREAS, the Company owns directly or indirectly all of the issued and
outstanding stock of each Guarantor;
WHEREAS, the proceeds of Extensions of Credit will be used in part to
enable the Company to make Valuable Transfers (as hereinafter defined) to some
of the Guarantors in connection with the operation of their respective
businesses;
WHEREAS, the Company and the Guarantors are engaged in related businesses,
and each Guarantor will derive substantial direct and indirect benefit from the
making of the Extensions of Credit; and
WHEREAS, the obligation of the Banks to make the Extensions of Credit is
conditioned upon, among other things, the execution and delivery by the
Guarantors of this Guaranty;
<PAGE>
NOW, THEREFORE, in consideration of the premises and to induce the Banks to
enter into the Credit Agreement and to make Extensions of Credit, each Guarantor
hereby agrees with and for the benefit of the Agent and the Banks as follows:
1. DEFINED TERMS. As used in this Guaranty, terms defined in the Credit
Agreement are used herein as therein defined, and the following terms shall have
the following meanings:
"ADJUSTED NET WORTH" of any Guarantor shall mean, as of any date of
determination thereof, the excess of (i) the amount of the "present fair
saleable value" of the assets of such Guarantor as of the date of such
determination, over (ii) the amount of all "liabilities of such Guarantor,
contingent or otherwise", as of the date of such determination, as such
quoted terms are determined in accordance with applicable Federal and state
laws governing determinations of the insolvency of debtors. In determining
the Adjusted Net Worth of any Guarantor for purposes of calculating the
Maximum Guaranteed Amount for such Guarantor in respect of any Extension of
Credit, the liabilities of such Guarantor to be used in such determination
pursuant to clause (ii) of the preceding sentence shall in any event (a)
include the liabilities of such Guarantor hereunder and under the other
Credit Documents in respect of all Extensions of Credit other than the
Extension of Credit in respect of which such calculation is being made and
(b) exclude liabilities of such Guarantor owing to any member of the
Company Group.
"CREDIT DOCUMENTS" shall mean the Credit Agreement, the Notes and the
other loan documents.
"EXTENSION OF CREDIT" shall mean all loans or advances made to the
Company under any Credit Document.
"MAXIMUM GUARANTEED AMOUNT" for any Guarantor shall mean, as of any
date of determination thereof, the lesser of (i) the outstanding amount of
any Extension of Credit (or portion thereof) as of such date and (ii) the
greater of (a) ninety-five percent (95%) of the Adjusted Net Worth of such
Guarantor at the time of such Extension of Credit and (b) ninety-five
percent (95%) of the Adjusted Net Worth of such Guarantor at the earliest
of (x) such date, (y) the date of the commencement of a case under Title 11
of the United States Code in which such Guarantor is a debtor and (z) the
date enforcement hereunder is sought.
"OBLIGATIONS" shall mean the unpaid principal of and interest on the
Notes and all other obligations and liabilities of the Company to the Agent
or the Banks, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement,
<PAGE>
the Notes, the other Credit Documents or any other document made,
delivered or given in connection therewith, and each other obligation
and liability, whether direct or indirect, absolute or contingent, due
or to become due, or now existing or hereafter incurred, of the Company
to the Agent or the Banks, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees and disbursements of counsel to
the Agent or any Bank) or otherwise.
"VALUABLE TRANSFER" shall mean, in respect of any Guarantor, (i)
all loans, advances or capital contributions made to such Guarantor with
proceeds of Extensions of Credit, (ii) all debt securities or other
obligations of such Guarantor acquired from such Guarantor or retired by
such Guarantor with proceeds of Extensions of Credit, (iii) the fair
market value of all property acquired with proceeds for Extensions of
Credit, and transferred, absolutely and not as collateral, to such
Guarantor and (iv) all equity securities of such Guarantor acquired from
such Guarantor with proceeds of Extensions of Credit.
2. GUARANTY.
(a) Each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Agent and the Banks and
their respective successors, endorsees, transferees and assigns, the prompt
and complete payment by the Company when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, and each
Guarantor further agrees to pay any and all expenses (including, without
limitation, all fees and disbursements of counsel) which may be paid or
incurred by the Agent or any Bank in enforcing, or obtaining advice of
counsel in respect of or collecting, any or all of the Obligations and/or
enforcing any rights with respect to, or collecting against, such Guarantor
under this Guaranty; PROVIDED, HOWEVER, that, anything herein or in any
other Credit Document to the contrary notwithstanding, the maximum
liability of each Guarantor hereunder and under the other Credit Documents
shall in no event exceed such Guarantor's Maximum Guaranteed Amount as
determined at the earlier of the date of the commencement of a case under
Title 11 of the United States Code in which such Guarantor is a debtor and
the date enforcement hereunder is sought.
(b) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the Maximum Guaranteed Amount of such Guarantor or
of all of the Guarantors without impairing this Guaranty or affecting the
rights and remedies of the Agent and the Banks hereunder.
(c) No payment or payments made by the Company, any of the
Guarantors, any other guarantor or any other Person or received or
collected by the Agent or any Bank from the Company, any of the Guarantors,
any other guarantor or any other Person
<PAGE>
by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in
payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of any Guarantor.
(d) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Agent or any Bank on account of its
liability hereunder, it will notify the Agent in writing that such payment
is made under this Guaranty for such purpose.
3. RIGHT OF SET-OFF. Upon the occurrence of any Default specified in the
Credit Agreement, each Guarantor hereby irrevocably authorizes each Bank at any
time and from time to time without notice to such Guarantor or any other
Guarantor, any such notice being expressly waived by each Guarantor, to set-off
and appropriate and apply any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing to such Bank to or for the credit or the account of such Guarantor, or any
part thereof in such amounts as such Bank may elect, against and on account of
the obligations and liabilities of such Guarantor to such Bank hereunder and
claims of every nature and description of such Bank against such Guarantor, in
any currency, whether arising hereunder, under the Credit Agreement, the Notes,
the other Credit Documents or otherwise, as such Bank may elect, whether or not
the Agent or any Bank has made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured. Each Bank
agrees to notify such Guarantor promptly of any such set-off and the application
made by such Bank, PROVIDED that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Bank
under this paragraph are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which such Bank may have.
4. NO SUBROGATION. Notwithstanding any payment or payments made by any
of the Guarantors hereunder or any set-off or application of funds of any of the
Guarantors by any Bank, no Guarantor shall be entitled to be subrogated to any
of the rights of the Agent or any Bank against the Company or any other
Guarantor or any collateral security or guarantee or right of offset held by any
Bank for the payment of the Obligations, nor shall any Guarantor seek or be
entitled to seek any reimbursement from the Company or any other Guarantor in
respect of payments made by such Guarantor hereunder, until all amounts owing to
the Agent and the Banks by the Company on account of the Obligations are paid in
full and the Commitments are terminated. If any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full, such amount shall be held by such
Guarantor in trust for the Agent and the Banks, segregated from other funds of
such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned
over to the Agent in the exact form received by such Guarantor (duly indorsed by
such Guarantor to the
<PAGE>
Agent, if required), to be applied against the Obligations, whether matured
or unmatured, in such order as the Agent and the Banks may determine.
5. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF
RIGHTS. Each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to or
further assent by any Guarantor, any demand for payment of any of the
Obligations made by the Agent or any Bank may be rescinded by such party and any
of the Obligations continued, and the Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Agent or any Bank (subject
to any other applicable requirement relating to the taking of such action) and
the Credit Agreement, the Notes, the other Credit Documents, any other
collateral security document or other guarantee or document in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the Agent and/or any Bank may deem advisable from time to time (subject
to any other applicable requirement relating to the taking of such action), and
any collateral security, guarantee or right of offset at any time held by the
Agent or any Bank for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. When making any demand hereunder against any
of the Guarantors, the Agent or any Bank may, but shall be under no obligation
to, make a similar demand on the Company or any other Guarantor or guarantor,
and any failure by the Agent or any Bank to make any such demand or to collect
any payments from the Company or any such other Guarantor or guarantor or any
release of the Company or such other Guarantor or guarantor shall not relieve
any of the Guarantors in respect of which a demand or collection is not made or
any of the Guarantors not so released of their several obligations or
liabilities hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Agent or any Bank against any
of the Guarantors. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
6. GUARANTY ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Agent or any Bank upon
this Guaranty or acceptance of this Guaranty; the Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon this Guaranty; and all
dealings between the Company or any of the Guarantors and the Agent or any Bank
shall likewise be conclusively presumed to have been had or consummated in
reliance upon this Guaranty. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or any of the Guarantors with respect to the Obligations. Each
Guarantor understands and agrees that this Guaranty shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Credit Agreement, the
Notes, any of the other Credit
<PAGE>
Documents, any of the Obligations or any other collateral security therefor
or guarantee or right of offset with respect thereto at any time or from time
to time held by the Agent or any Bank (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at
any time be available to or be asserted by the Company against the Agent or
any Bank, or (c) any other circumstance whatsoever (with or without notice to
or knowledge of the Company or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Company for
the Obligations, or of such Guarantor under this Guaranty, in bankruptcy or
in any other instance. This Guaranty shall remain in full force and effect
and be binding in accordance with and to the extent of its terms upon each
Guarantor and the successors and assigns thereof, and shall inure to the
benefit of the Agent and the Banks, and their respective successors,
endorsees, transferees and assigns, until all the Obligations and the
obligations of each Guarantor under this Guaranty shall have been satisfied
by payment in full and the Commitments shall be terminated, notwithstanding
that from time to time during the term of the Credit Agreement the Company
may be free from any Obligations.
7. REINSTATEMENT. This Guaranty shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Agent or any Bank upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Company or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Company or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
8. PAYMENTS. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Agent without set-off or counterclaim in Dollars at the
office of the Agent located at 2200 Ross Avenue, Dallas, Texas 75201.
9. SUBORDINATION. Each Guarantor hereby subordinates in right of payment
with respect to any and all Intercompany Indebtedness now or hereafter owed to
Guarantor to the prior payment in full of the Obligations, and agrees with the
Agent and the Banks that:
(a) Guarantor shall not, after a Default (or an Unmatured Default, in
the case of payments or distributions made outside the ordinary course of
its business):
(i) demand, sue for, take, or accept or receive, directly or
indirectly, any payment of principal or interest with respect
to such Intercompany Indebtedness, whether in cash or other
property;
(ii) claim any offset or other reduction of Guarantor's obligations
hereunder because of any such Intercompany Indebtedness; or
<PAGE>
(iii) take any other action to make it the same.
(b) Any payments or distributions upon or with respect to the
Indebtedness subordinated hereby which are received by such Guarantor
following a Default (or an Unmatured Default, in the case of payments or
distributions made outside the ordinary course of business) shall be
collected, enforced and received by Guarantor as trustee for the Banks and
paid over to the Agent on account of the Obligations.
(c) In the event of any distribution of all or any of the assets of
such Guarantor to its creditors upon the dissolution, winding up,
liquidation, arrangement, reorganization, adjustment, protection or relief
of such Guarantor or its debts, whether in any bankruptcy, insolvency,
arrangement, reorganization, receivership, relief or similar proceedings or
upon an assignment for the benefit of creditors or any other marshalling of
the assets and liabilities of such Guarantor, any payment or distribution
of any kind (whether in cash, property, or securities) which otherwise
would be payable or deliverable upon or with respect to the Intercompany
Indebtedness subordinated hereby shall be paid or delivered directly to the
Agent for the benefit of the Banks for application to (in the case of cash)
or as collateral for (in the case of non-cash property or securities) the
payment of the Obligations until the Obligations shall have been paid in
full.
(d) If any proceeding referred to in subsection (c) above is
commenced by or against such Guarantor, the Agent is hereby irrevocably
authorized and empowered (in its own name or in the name of such
Guarantor), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in subsection (c) above,
and give acquittance therefor, and to file claims and proofs of claim and
take such other action (including, without limitation, voting the
Intercompany Indebtedness subordinated hereby or enforcing any security
interest or lien securing its payment) as it may deem necessary or
advisable for the exercise or enforcement of any of the rights of the Agent
and Banks hereunder.
(e) The Agent and/or the Banks are hereby authorized to demand
specific performance of this Guaranty at any time when such Guarantor shall
have failed to comply with any of the provisions of this Guaranty.
10. SEVERABILITY. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
<PAGE>
11. PARAGRAPH HEADINGS. The paragraph headings used in this Guaranty are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
12. NO WAIVER; CUMULATIVE REMEDIES. Neither the Agent nor any Bank shall
by any act (except by a written instrument pursuant to paragraph 13 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Unmatured Default or Default (as
such terms are defined in the Credit Agreement) or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Agent or any Bank, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Agent or any Bank of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Agent
or such Bank would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
13. INTEGRATION; WAIVERS AND AMENDMENTS AND SUCCESSORS AND ASSIGNS. THIS
GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN EACH GUARANTOR AND THE AGENT AND
THE BANKS AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENT OF EACH GUARANTOR, THE AGENT AND THE BANKS. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN EACH GUARANTOR, THE AGENT AND THE BANKS.
There are no promises or representations by the Agent or any Bank relative to
the subject matter hereof not reflected herein. None of the terms or provisions
of this Guaranty may be waived, amended or supplemented or otherwise modified
except by a written instrument executed by each Guarantor and the Agent,
PROVIDED that any provision of this Guaranty may be waived by the Agent and the
Banks in a letter or agreement executed by the Agent or by telex or facsimile
transmission from the Agent. This Guaranty shall be binding upon the successors
and assigns of each Guarantor and shall inure to the benefit of the Agent and
the Banks and their respective successors and assigns.
14. NOTICES. All notices, requests and demands to or upon the Guarantors
or the Agent or any Bank to be effective shall be in writing or by facsimile or
telex and, unless otherwise expressly provided herein, shall be deemed to have
been duly given or made as provided in Article 13 of the Credit Agreement, and
shall be addressed to a party at the address provided for such party pursuant to
SCHEDULE 1 hereto.
<PAGE>
15. COUNTERPARTS. This Guaranty may be executed by one or more of the
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
16. GOVERNING LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS Of THE STATE OF TEXAS.
17. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR WITH RESPECT TO THIS GUARANTY OR OTHER
LOAN DOCUMENT TO WHICH IT IS A PARTY MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE OF TEXAS, DALLAS COUNTY, AND BY
EXECUTION AND DELIVERY OF THIS GUARANTY, EACH GUARANTOR ACCEPTS, FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY AGREES TO BE
BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTY
FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. ANY GUARANTOR IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
JURISDICTION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW.
IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be
duly executed and delivered by its duly authorized officer as of the day and
year first above written.
---------------------------------------------,
a
---------------------------------------------
By:
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE>
EXHIBIT F
CONSENT OF DOMESTIC SUBSIDIARIES
Each of the undersigned Subsidiaries hereby (a) agrees that the
Subsidiary Guaranty to which it is a signatory is and shall remain in full
force and effect to the additional effect that the Obligations under the
First Amended and Restated Credit Agreement (the "Agreement") to which this
Consent of Domestic Subsidiaries is attached are a part of the Obligations
under the respective Subsidiary Guaranty, (b) ratifies and confirms all terms
and provisions of the Subsidiary Guaranty to which it is a signatory, as
amended hereby, (c) acknowledges its consent to the Agreement, (d)
acknowledges that there are no claims or offsets against, or defenses or
counterclaims to, the terms and provisions of and the obligations created and
evidenced by the Subsidiary Guaranty to which it is a signatory, as amended
hereby, (e) reaffirms all agreements and obligations under the Subsidiary
Guaranty to which it is a signatory, as amended hereby, with respect to the
Loans, the Notes, the Agreement and all other documents, instruments or
agreements governing, securing or pertaining to the Loans, and (f) represents
and warrants that all requisite corporate action necessary for it to execute
this Consent of Domestic Subsidiaries has been taken.
BOWIE MANUFACTURING COMPANY,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
CORSICANA COMPANY,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
<PAGE>
DALLAS PANT MANUFACTURING COMPANY,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
GREENVILLE PANT MANUFACTURING COMPANY,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
MCKINNEY PANT MANUFACTURING COMPANY,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
OLNEY MANUFACTURING COMPANY,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
<PAGE>
WAXAHACHIE GARMENT COMPANY,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
LA ROMANA MANUFACTURING CORPORATION,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
HAGGAR SERVICES, INC.,
a Texas corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
AIRHAGGAR, INC., f/k/a HAGAIR, INC.,
a Texas corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
<PAGE>
DUNCAN MANUFACTURING COMPANY,
an Oklahoma corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
WESLACO CUTTING, INC.,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
WESLACO SEWING, INC.,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
HAGGAR DIRECT, INC.,
a Nevada corporation
By:
-------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
Dated:
-----------------------------
<PAGE>
EXHIBIT G
COMPLIANCE CERTIFICATE
As of the date indicated below, the undersigned hereby certifies that
(i) as reflected on the attached annexes, no Default or Unmatured Default (as
defined in the Credit Agreement) has occurred and is continuing under that
certain First Amended and Restated Credit Agreement (the "Credit Agreement")
among Haggar Clothing Co., Haggar Corp., Texas Commerce Bank National
Association and the Banks listed therein, and (ii) the value of all inventory
(as defined in the Credit Agreement) as reflected in the Company's financial
statements does not exceed its net realizable value.
HAGGAR CLOTHING CO.
By:
-------------------------------------
Its:
------------------------------------
Dated:
----------------------------------
<PAGE>
ANNEX TO COMPLIANCE CERTIFICATE
Requirement Current Status
----------- --------------
Funded Debt Ratio - 4.00 to 1.00 ______________
Tangible Net Worth Company Group - $155,000,000 $_____________
Tangible Net Worth Company - $55,000,000 $_____________
Inventory Turns - 2.0 ______________
Fixed Change Ratio - 1.10 to 1 ______________
<PAGE>
ANNEX TO COMPLIANCE CERTIFICATE
HAGGAR CORP.
FUNDED DEBT RATIO
12 MONTHS ENDED _____________, 199___
($000'S)
Funded Debt
- -----------
Revolver $
Industrial Revenue Bonds + Other $
Notes $
Other Long Term Debt $______________
Subtotal $
Other Short Term Debt $______________
Total Funded Debt $
Operating Cash Flow
- -------------------
Net Income $
- -Gains/+Losses Cap/Extr Event $
+Depreciation $
+Interest Expense $
+Taxes $______________
Operating Cash Flow $_____________
Funded Debt/Operating Cash Flow ______________
<PAGE>
ANNEX TO COMPLIANCE CERTIFICATE
HAGGAR CORP.
INVENTORY TURNS ANALYSIS
($000'S)
________________, 199__
PRIOR 12 MONTHS' COST OF SALES MENSWEAR & R.S.J.
3rd Prior Quarter:
_____________________ $
_____________________ $
_____________________ $_____________________
Total $
2nd Prior Quarter:
_____________________ $
_____________________ $
_____________________ $_____________________
Total $
Prior Quarter:
_____________________ $
_____________________ $
_____________________ $_____________________
Total $
Current Quarter:
_____________________ $
_____________________ $
_____________________ $_____________________
Total $
Total 12 Months $
Cost of Sales
Inventory Level, ________________, 199__ $_____________________
Inventory Turns
Rolling 12 Months, ______________, 199__ ______________________
<PAGE>
ANNEX TO COMPLIANCE CERTIFICATE
HAGGAR CORP.
FIXED CHARGE RATIO
12 MONTHS ENDED ______________, 199__
($OOO'S)
12 Months
Qtr. Qtr. Qtr. Qtr. Ended
Net Income
[Gain Cap Sale]/Extr Evnt
+ Depreciation
+ Interest Expense
+ Taxes __________________________________________________
Total Cash Flow $ $ $ $ $
Interest Expense
Req. Principal Payments
Cash Dividends
Cash Capital Expenses* __________________________________________________
Total Fixed Charges $ $ $ $ $
Fixed Charge Ratio ______________
- -------------------
* Excludes 38,000 CSC Construction Project
<PAGE>
ANNEX TO COMPLIANCE CERTIFICATE
STANDBY
LETTERS OF CREDIT OUTSTANDING
_______________, 199__
LC# Maturity Amount
$_____________
$_____________
<PAGE>
ANNEX TO COMPLIANCE CERTIFICATE
PERMITTED INDEBTEDNESS
(a) Commercial Letters of Credit $
($30,000,000 permitted)
(b) Standby Letters of Credit (other than
those issued by the Agent) $
($2,000,000 permitted)
(c) Share Repurchase Obligations $
Severance ($2,500,000 permitted)
$10,000,000 total permitted
(d) Indebtedness and Capitalized $
Lease Obligations
($_______________ permitted)
(e) Intercompany Indebtedness
(no amount to be indicated)
(f) Accounts payable to officers, directors
(no amount to be indicated)
(g) Guarantees (no amount to be indicated)
(h) Guarantees (Haggar Direct less than (no amount to
one years rental) be indicated)
Guarantees (Haggar Direct exceeding
one years rental) $
($2,000,000 initially permitted through 9/30/96
$3,000,000 permitted through 9/30/97
$5,000,000 permitted through 9/30/98)
(i) Obligations $100,000,000
<PAGE>
NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark-
COMMERCIAL CONTRACT OF SALE
IN CONSIDERATION of the mutual terms, provisions, covenants and agreements
contained in this Contract (the "Contract"), the parties hereto agree as
follows. [CHECK ALL BOXES APPLICABLE TO THIS CONTRACT. BOXES NOT CHECKED DO
NOT APPLY TO THIS CONTRACT.]
1. PARTIES. Haggar Clothing Company (the "Seller") shall sell and convey to
Fred's Foreign Car Service, Inc. (the "Purchaser") and Purchaser shall buy
and pay for the Property (defined below).
2. PROPERTY. Being an approximate 23,562 square foot building situated on
approximately 1.5424 acres with an address of 5915 Peeler Street in the City
of Dallas, Dallas County, Texas, further described as: being Lot 6 of Block
5716, as recorded in Volume 82026/1922 or as described in EXHIBIT A,
SURVEY/LEGAL DESCRIPTION, and/or shown on EXHIBIT B, SITE PLAN, together
with, all and singular, all improvements thereon and all rights and
appurtenances pertaining thereto, including any right, title and interest of
Seller in and to adjacent streets, alleys and rights-of-way. Such real
estate, improvements, rights and appurtenances are collectively referred to
herein as the "Property."
/ / The Property also includes fixtures and articles of personal property
listed and described in ADDENDUM A, PERSONAL PROPERTY.
3. PURCHASE PRICE. The purchase price for the Property is $275,000.00 (the
"Purchase Price"), payable as follows:
/ / A. The Purchase Price shall be adjusted up or down based upon the [STRIKE
ONE] NET / GROSS land area of the Property determined by the Survey. The
applicable land area shall be multiplied by $_______ per square foot and the
product thereof shall become the Purchase Price at Closing.
/X/ B. Cash payable at Closing: $275,000.00.
/ / C. The balance of the Purchase Price shall be payable according to the
provisions in ADDENDUM B, FINANCING.
4. EARNEST MONEY.
A. EARNEST MONEY DEPOSIT. Within two business days after the Effective
Date of this Contract, Purchaser shall deposit earnest money in the form of a
certified or cashier's check in the amount of $5,000.00 (the "Earnest Money")
payable to American Title Company, Attention: Tim Hardin (the "Title
Company"), in its capacity as escrow agent, to be held in escrow pursuant to
the terms of this Contract. Seller's acceptance of this Contract is expressly
conditioned upon Purchaser's timely deposit of the Earnest Money with the
Title Company. If Purchaser fails to timely deposit the Earnest Money, Seller
may, at Seller's option, terminate this Contract by delivering a written
termination notice to Purchaser. Notwithstanding anything herein to the
contrary, a portion of the Earnest Money in the amount of $100.00 shall be
non-refundable and shall be distributed to Seller at Closing or other
termination of this Contract as full payment and independent consideration
for Seller's performance under this Contract. If this Contract is properly
terminated by Purchaser pursuant to a right of termination granted to
Purchaser by any provision of this Contract, or any attached Addenda, the
Earnest Money, less the non-refundable portion, shall be promptly refunded to
Purchaser, and the parties shall have no further rights or obligations under
this Contract (except for those which may expressly survive the termination).
The Earnest Money /X/ SHALL / / SHALL NOT be placed in an interest-bearing
account by the Title Company, and any interest earned thereon shall become a
part of the Earnest Money. At Closing the Earnest Money shall be applied to
the Purchase Price.
B. ESCROW. The Earnest Money is deposited with the Title Company with
the understanding that the Title Company (1) is not responsible for the
performance or non-performance of any party to this Contract, and (2) is not
liable for interest on the funds held unless required in Paragraph 4.A. The
Title Company shall deposit the Earnest Money in one or more fully insured
accounts in one or more Federally insured banking or savings institutions. If
both parties make demand for the payment of the Earnest Money, the Title
Company has the right to require from all parties and Broker(s) a written
release of liability of the Title Company which authorizes the disbursement
of the Earnest Money. If only one party makes demand for payment of the
refundable portion of the Earnest Money, the Title Company shall give notice
to the other party of the demand. The Title Company is authorized and
directed to honor the demand unless the other party delivers a written
objection to the Title Company within ten (10) days after the Title Company's
notice to that party.
5. SURVEY AND TITLE DOCUMENTS.
A. SURVEY. As soon as reasonably possible, and in any event within
twenty (20) days after the Effective Date, Seller shall, at Seller's expense,
deliver or cause to be delivered to Purchaser a copy of a current or updated
on-the-ground perimeter survey (the "Survey") of the Property prepared by a
Registered Professional Land Surveyor reasonably acceptable to the Purchaser.
The Survey shall show the location and size of all of the following on or
adjacent to the Property, if any:
buildings, building lines, improvements, streets, pavements, easements,
rights-of-way, protrusions, encroachments, fences, 100-year flood plain,
apparent public utilities, and recording information of easements.
The Survey shall show the gross land area and the Net Land Area. The Survey
shall be in a form and of a date acceptable to Purchaser and to the Title
Company, and in acceptable form in order to allow the Title Company to delete
the survey exception (except as to "shortages in area") from the Title
Policy. The term "NET LAND AREA" means the gross land area of the Property
less the land area included in utility easements, drainage easements,
ingress/egress easements, rights-of-way, 100-year flood plain and
encroachments on or across the Property. The area within the 100-year flood
plain shall be as defined by the Federal Emergency Management Agency or other
applicable governmental authority. If the transaction described in this
Contract does not close through no fault of Seller or except as provided in
Paragraph 16.C, in addition to the other rights of Seller, Purchaser shall
pay for the Survey on demand. At Closing, the metes and bounds description of
the Property reflected in the Survey shall be used in the warranty deed and
any other documents requiring a legal description of the Property.
B. TITLE COMMITMENT. As soon as reasonably possible, and in any event
within twenty (20) days after the Effective Date, Seller shall, at Seller's
expense, deliver or cause to be delivered to Purchaser (1) a title commitment
(the "Title Commitment") covering the Property binding the Title Company to
issue a Texas Owner Policy of Title Insurance (the "Title Policy") on the
standard form prescribed by the Texas State Board of Insurance at the
Closing, in the full amount of the Purchase Price, insuring Purchaser's fee
simple title to the Property to be good and indefeasible, subject only to the
Permitted Exceptions as defined below, and (2) the following documents
(collectively, the "Title Documents") (a) true and legible copies of all
recorded instruments affecting the Property and recited as exceptions in the
Title Commitment, (b) a current tax certificate, and (c) written notices as
required in Paragraph 5.C.
C. SPECIAL ASSESSMENT DISTRICTS. If the Property is situated within a
utility district or flood control district subject to the provisions of
Section 50.301, Texas Water Code, then Seller shall give to Purchase as part
of the Title Documents the required written notice and Purchaser agrees to
acknowledge receipt of the notice in writing. The notice must set forth the
current tax rate, the current bonded indebtedness and the authorized
indebtedness of the district, and must comply with all other applicable
requirements of the Texas Water Code. If the Property is subject to mandatory
membership in a property owner's association, Seller shall notify Purchaser
of the current annual budget of the property owners' association, and the
current authorized fees, dues and/or assessments relating to the Property.
D. ABSTRACT. At the time of the execution of this Contract, Purchaser
acknowledges that the Broker(s) (defined below) have advised and hereby
advise Purchaser, by this writing, that Purchaser should have the abstract
covering the Property examined by an attorney of Purchaser's own selection or
that Purchaser should be furnished with or obtain a policy of title insurance.
- -C- Copyright 1995 NTCAR form 01 (1/95) Page 1
<PAGE>
6. REVIEW OF TITLE DOCUMENTS.
A. REVIEW PERIOD. Purchaser shall have ten (10) days (the "Review
Period") after Purchaser's receipt of the last of (i) the Survey, (ii) the
Title Commitment, (iii) the Title Documents, and (iv) all other documents
required to be furnished by Seller as identified on ADDENDUM A, PERSONAL
PROPERTY, and/or on ADDENDUM C, INSPECTION, to review them. If Purchaser has
any objections to the Survey, Title Commitment or Title Documents, Purchaser
may deliver the objections to Seller in writing within the Review Period. Any
item to which Purchaser does not object shall be deemed a "Permitted
Exception." Items that the Title Company identifies as to be released at
closing will be deemed objections by Purchaser. Purchaser's failure to object
within the time provided shall be a waiver of the right to object. If there
are objections by Purchaser, or a third party lender, Seller shall make a
good faith attempt to satisfy the objections within ten (10) days after
receipt of Purchaser's objections (the "Cure Period"), but Seller is not
required to incur any cost to do so. Zoning ordinances and the lien for
current taxes are deemed to be Permitted Exceptions.
B. CURE PERIOD. If Seller cannot satisfy the objection within the Cure
Period, Seller shall deliver a written notice to Purchaser, prior to
expiration of the Cure Period, stating whether Seller is committed to cure
the objections at or before Closing. If Seller does not timely deliver the
written notice, or does not commit in the written notice to fully cure all of
the objections at or before Closing, then Purchaser may terminate this
Contract by delivering a written notice to Seller on or before the earlier to
occur of: (i) the date which is seven (7) days after the expiration of the
Cure Period; or (ii) the scheduled Closing Date. If Purchaser properly and
timely terminates this Contract, the refundable portion of the Earnest Money
shall be immediately returned to Purchaser and thereafter neither party shall
have any rights or obligations under this Contract (except for those which
may expressly survive the termination of this Contract). If Purchaser does
not properly and timely terminate this Contract, the Purchaser shall be
deemed to have waived any uncured objections and must accept such title as
Seller is able to convey as of Closing.
7. SELLER'S WARRANTIES AND REPRESENTATIONS.
A. STATEMENTS. Seller represents and warrants to Purchaser to the best
of Seller's knowledge as follows:
(1) TITLE. At the Closing, Seller will have the right to, and will,
convey to Purchaser good and indefeasible fee simple title to the Property
free and clear of any and all liens, assessments, unrecorded easements,
security interests and other encumbrances except the Permitted Exceptions.
Delivery of the Title Policy pursuant to Paragraph 12 below will be deemed to
satisfy the obligation of Seller as to the sufficiency of title required
under this Contract. However, delivery of the Title Policy will not release
Seller from the warranties of title set forth in the warranty deed.
(2) LEASES. There are no parties in possession of any portion of the
Property as lessees, tenants at sufferance or trespassers except for Davis
Material handling.
(3) NEGATIVE COVENANTS. Seller shall not further encumber the Property
or allow an encumbrance upon the title to the Property, or modify the terms
or conditions of any existing leases, contracts or encumbrances, if any,
without the written consent of Purchaser.
(4) LIENS AND DEBTS. There are no mechanic's liens, Uniform Commercial
Code liens or unrecorded liens against the Property, and Seller shall not
allow any such lines to attach to the Property prior to Closing, which will
not be satisfied out of the Closing proceeds. All obligations of Seller
arising from the ownership and operation of the Property and any business
operated on the Property, including, but not limited to, taxes, leasing
commissions, salaries, contracts, and similar agreements, have been paid or
will be paid prior to Closing. Except for obligations for which provisions
are made in this Contract for prorating at Closing and any indebtedness taken
subject to or assumed, there will be no obligations of Seller with respect to
the Property outstanding as of Closing.
(5) LITIGATION. There is no pending or threatened litigation,
condemnation, or assessment affecting the Property. Seller shall promptly
advise Purchase of any litigation, condemnation or assessment affecting the
Property which is instituted after the Effective Date.
(6) OPERATION OF THE PROPERTY. After the Effective Date until the
Closing Date, Seller shall (a) operate the Property in the same manner as the
Property has been operated, and (b) maintain the Property in the same
condition and in the same manner as existed on the Effective Date, except for
ordinary wear and tear and any casualty loss.
B. SURVIVAL. It is specifically acknowledged and agreed that
representations and warranties made by Seller as set forth in this Contract,
other than the special warranty as to title of the Property, shall survive
the inspection or investigation made by or on behalf of Purchaser and the
passage of title from the Seller to Purchaser at Closing for a period of one
year after Closing and shall not be merged into or waived by the instruments
executed at Closing. Additionally, all agreements and indemnities of Seller
and Purchaser set forth in this Contract shall, to the extent not consummated
at Closing, survive the Closing of the transaction contemplated by this
Contract.
- -C- Copyright 1995 NTCAR form 01 (1/95) Page 2
<PAGE>
9. INSPECTION. [CHECK ONE]
/X/ A. INSPECTION DESIRED. Purchaser desires to inspect the Property and
Seller grants to Purchaser the right to inspect the Property as described in
ADDENDUM C. INSPECTION.
/ / INSPECTION NOT NECESSARY. Purchaser acknowledges that Purchaser has
inspected the Property, including all buildings and improvements thereon, and
is thoroughly familiar with their condition, and Purchaser hereby accepts the
Property in its present condition, with such changes as may hereafter be
caused by normal wear and tear prior to Closing, but without waiving
Purchaser's rights by virtue of Seller's representations and warranties
expressed in this Contract.
10. CASUALTY LOSS. All risk of loss to the Property shall remain upon Seller
prior to the Closing. If, prior to the Closing, the Property is damaged or
destroyed by fire or other casualty, to a Material Extent (defined below),
Purchaser may either terminate this Contract by delivering a written
termination notice to Seller within ten days after the damage occurs, or
elect to close. If, prior to the Closing, the Property is damaged by fire or
other casualty to less than a Material Extent, the parties shall proceed to
Closing as provided herein. If the transaction is to proceed to Closing,
despite any damage or destruction, there shall be no reduction in the
Purchase Price and Seller shall, at Seller's option: (i) fully repair the
damage prior to Closing, at Seller's expense; (ii) reimburse Purchaser for
the entire cost of repairing the Property by allowing Purchaser to deduct the
cost from the cash payable to Seller at the Closing; or (iii) assign to
Purchaser all of Seller's right and interest in any insurance proceeds
resulting from the damage or destruction, plus an amount equal to any
insurance deductible. The term "Material Extent" means damage or destruction
if the cost of repairing and fully restoring the Property to its previous
condition exceeds ten percent (10%) of the Purchase Price. If the extent of
damage or the amount of insurance proceeds to be made available is not able to
be determined prior to the Closing Date, or the repairs are not able to be
completed prior to the Closing Date, either party may postpone the Closing
Date by delivering a written notice to the other party specifying an extended
Closing Date which is not more than thirty (30) days after the previously
scheduled Closing Date.
11. ASSIGNMENT. [CHECK ONLY ONE]
/ / A. ASSIGNMENT PROHIBITED. Purchaser may not assign this Contract
without Seller's prior written consent.
/ / B. ASSIGNMENT PERMITTED. Purchaser may assign this Contract provided
the assignee assumes in writing all obligations and liabilities of Purchaser
under this Contract, in which event Purchaser shall be relieved of any further
liability hereunder.
/X/ C. LIMITED ASSIGNMENT. Purchaser may assign this Contract only to a
related party, defined as (i) an entity in which Purchaser is an owner,
partner or corporate officer, or (ii) a member of the immediate family of the
Purchaser. Purchaser shall remain liable under this Contract after any
assignment to a related party.
12. CLOSING.
A. CLOSING DATE. The closing of the transaction described in this
Contract (the "Closing") shall be held at 10:00 a.m. on the later of
[CHECK ONE]: / / ______ days after the Effective Date; or / / ______ days
after the expiration of the Review Period or Inspection Period (whichever is
later); or /X/ on April 8, 1996 (the "Closing Date") at the offices of the
Title Company at its address stated below. However, if any objections which
were properly and timely made by Purchaser pursuant to this Contract have not
been cured on the scheduled Closing Date, then either party may postpone the
date of the Closing by delivering a written notice to the other party
specifying an extended Closing Date which is not more than thirty (30) days
after the previously scheduled Closing Date.
B. SELLER'S CLOSING DOCUMENTS. At the Closing, Seller shall deliver
to Purchaser at Seller's expense:
(1) A duly executed [CHECK ONE] / / GENERAL WARRANTY DEED /X/
SPECIAL WARRANTY DEED (with Vendor's Lien retained if not a cash purchase)
conveying the Property in fee simple according to the legal description
prepared by the surveyor as shown on the Survey, subject only to the
Permitted Exceptions;
(2) The Title Policy issued by the underwriter for the Title
Company pursuant to the Title Commitment, subject only to the Permitted
Exceptions, in the full amount of the Purchase Price, dated as of the date of
the Closing, and (at an additional premium cost) [CHECK IF APPLICABLE] / /
with the survey exception deleted except as to "shortages in area;"
(3) A Bill of Sale conveying the personal property identified in
Addendum A, PERSONAL PROPERTY, free and clear of liens, security interests
and encumbrances, subject only to the Permitted Exceptions (to the extent
applicable);
(4) Possession of the Property, subject to valid existing leases
and other applicable Permitted Exceptions;
(5) A duly executed assignment of all leases;
(6) A current rent roll certified by Seller to be complete and
accurate;
(7) Evidence of Seller's authority and capacity to close this
transaction;
(8) All other documents reasonably required by the Title Company
to close this transaction.
C. PURCHASER'S CLOSING DOCUMENTS. At the Closing. Purchaser shall
deliver to Seller at Purchaser's expense:
(1) The cash portion of the Purchase Price, with the Earnest Money
being applied thereto;
(2) The Note and the Deed of Trust, if any;
(3) An Assumption Agreement in recordable form agreeing to pay all
commissions payable under any lease of the Property;
(4) Evidence of Purchaser's authority and capacity to close this
transaction;
(5) All other documents reasonably required by the Title Company
to close this transaction.
D. CLOSING COSTS. Each party shall pay its share of the closing costs
which are customarily paid by a Seller or Purchaser in a transaction of this
character in the county where the Property is located, or as otherwise agreed.
E. PRORATIONS. Rents, lease commissions, interest, insurance
premiums, maintenance expenses, operating expenses, and ad valorem taxes for
the year of Closing shall be prorated at the Closing effective as of the date
of Closing. Any security deposits held by Seller shall be delivered to
Purchaser at the Closing. If the Closing occurs before the tax rate is
fixed for the year of Closing, the apportionment of the taxes shall be upon
the basis of the tax rate for the preceding year applied to the latest
assessed valuation, but any difference between estimated taxes for the year
of Closing the actual taxes paid by Purchaser shall be adjusted equitably
between the parties upon proof of payment of the taxes by Purchaser. This
provision shall survive the Closing.
F. LOAN ASSUMPTION. If Purchaser assumes an existing mortgage loan at
Closing, Purchaser shall pay (1) to the lender, any assumption fee charged by
the lender; and (2) to Seller, a sum equal to the amount of any reserve
accounts held by the lender for the payment of taxes and/or insurance.
Purchaser shall execute, at the option and expense of Seller, a Deed of Trust
to Secure Assumption. If consent to the assumption is required by the
lender, Seller shall obtain the lender's consent in writing and deliver the
consent to Purchaser at Closing. If Seller does not obtain the lender's
written consent (if required) and deliver it to Purchaser at or before
Closing, Purchaser may terminate this Contract by delivering a written
termination notice to Seller whereupon the refundable portion of the Earnest
Money will be promptly refunded to Purchaser and the parties shall have no
further rights or obligations under this Contract (except for those which may
expressly survive the termination of this Contract).
G. ROLLBACK TAXES. If a change in use of the Property or denial of a
special use valuation on the Property claimed by Seller results in the
assessment after Closing of additional taxes for periods of Seller's ownership,
the additional taxes plus any penalties and interest shall be paid by
Purchaser. This obligation shall survive the Closing.
H. FOREIGN PERSON NOTIFICATION. If Seller is a Foreign Person, as
defined by the U.S. Internal Revenue Code, or if Seller fails to deliver to
Purchaser a non-foreign affidavit pursuant to Section 1445 of the Internal
Revenue Code, then Purchaser may withhold from the sales proceeds an amount
sufficient to comply with applicable tax law and deliver the withheld
proceeds to the Internal Revenue Service, together with appropriate tax
forms. The required affidavit(s) from Seller(s) shall include (1) a
statement that Seller is not a foreign person, (2) the U.S. taxpayer
identification number(s) of Seller(s), and (3) other information required by
Section 1445 of the Internal Revenue Code.
-C- Copyright 1995 NTCAR form 01(1/95) Page 3
<PAGE>
13. DEFAULT.
A. PURCHASER'S REMEDIES. If Seller fails to close this Contract for
any reason except Purchaser's default or the termination of this Contract
pursuant to a right to terminate set forth in this Contract, Seller shall be
in default and Purchaser may elect one of the following as Purchaser's sole
remedy [CHECK ALL THAT MAY APPLY]:
/X/ (1) Enforce specific performance of this Contract against Seller
unless Seller is in default hereunder as a result of a warranty or
representation of Seller being untrue or inaccurate in any material respect
and Seller had no knowledge that such warranty or representation was untrue
or inaccurate in which case, Purchaser's sole and exclusive remedy shall be
to terminate this Contract by written notice delivered to Seller at or prior
to the Closing;
/ / (2) Bring suit for damages against Seller;
/ / (3) Enforce specific performance of this Contract and/or bring suit for
damages against Seller; or
/ / (4) Terminate and release Seller from this Contract and receive the
refundable portion of the Earnest Money immediately. Seller's failure to
satisfy Purchaser's objections under Paragraph 6 above shall not constitute a
default by Seller.
B. SELLER'S REMEDIES. If Purchaser fails to close this Contract for any
reason except Seller's default or the termination of this Contract pursuant
to a right to terminate set forth in this Contract, Purchaser shall be in
default and Seller may elect one of the following, as Seller's sole remedy
[CHECK ALL THAT MAY APPLY]:
/ / (1) Enforce specific performance of this Contract;
/ / (2) Bring suit for damages against Purchaser;
/ / (3) Enforce specific performance of this Contract and/or bring suit for
damages against Purchaser; or
/X/ (4) Have the Earnest Money paid to Seller as liquidated damages for the
Purchaser's breach of this Contract, thereby releasing Purchaser from this
Contract.
14. AGENCY DISCLOSURE.
A. AGENCY RELATIONSHIP. The term "Broker(s)" refers to the Principal
Broker and/or the Cooperating Broker, if applicable, as set forth on the
signature page. Each Broker has fiduciary duties only to the party(s) the
Brokers represents as identified below. If either Broker is representing
both Seller and Purchaser, then such representation is a dual agency and the
dual agency disclosure and consent provisions apply as set forth below.
[EACH BROKER CHECK ONE ONLY].
(1) The Principal Broker is agent for: /X/ the Seller only; or / /
the Purchaser only; or / / both Purchaser and Seller.
(2) The Cooperating Broker is agent for: / / the Seller only; or
/ / the Purchaser only; or / / both Purchaser and Seller.
B. OTHER BROKERS. Each party to this Contract represents and warrants to
the other party that such party has had no dealings with any person, firm,
agent or finder in connection with the negotiation of this Contract and/or
the consummation of the purchase and sale contemplated herein, other than the
Broker(s) named in this Contract, and no real estate broker, agent, attorney,
person, firm or entity, other than the Broker(s) is entitled to any
commission or finder's fee in connection with this transaction as the result
of any dealings or acts of such party. Each party hereby agrees to
indemnify, defend, protect and hold the other party harmless from and against
any costs, expenses or liability for compensation, commission, fee, or
charges which may be claimed by any agent, finder or other similar party,
other than the named Broker(s), by reason of any dealings or acts of the
indemnifying party.
C. FEE SHARING. Each party acknowledges that the Principal Broker
may pay a portion (defined below) to the Cooperating Broker. Payment of a
portion of the Fee by the Principal Broker to the Cooperating Broker shall
not alter the fiduciary relationship between the parties and the Brokers.
Seller is liable for payment of the Fee to the Principal Broker only. The
Cooperating Broker shall have no claims directly against Seller.
D. DUAL AGENCY. If either of the Brokers has indicated in Section
14.A above that Broker is representing both Purchaser and Seller, then
Purchaser and Seller hereby consent to the dual agency, authorize the
respective Broker(s) to represent more than one party to this transaction,
and acknowledge that the source of any expected compensation to the
Broker(s) will be the Seller, and the Broker(s) may also be paid a fee by
Purchaser. IF THE BROKER(S) ARE ACTING IN A DUAL AGENCY CAPACITY, BROKER(S)
SHALL:
(1) NOT DISCLOSE TO PURCHASER THAT SELLER WILL ACCEPT A PRICE LESS
THAN THE ASKING PRICE UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY
SELLER;
(2) NOT DISCLOSE TO SELLER THAT PURCHASER WILL PAY A PRICE GREATER
THAN THE PRICE SUBMITTED IN A WRITTEN OFFER TO THE SELLER UNLESS OTHERWISE
INSTRUCTED IN A SEPARATE WRITING BY THE PURCHASER;
(3) NOT DISCLOSE ANY CONFIDENTIAL INFORMATION, OR ANY INFORMATION
A PARTY SPECIFICALLY INSTRUCTS THE BROKER(S) IN WRITING NOT TO DISCLOSE,
UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY THE RESPECTIVE PARTY OR
REQUIRED TO DISCLOSE SUCH INFORMATION BY LAW;
(4) TREAT ALL PARTIES TO THE TRANSACTION HONESTLY AND IMPARTIALLY
SO AS NOT TO FAVOR ONE PARTY OR WORK TO THE DISADVANTAGE OF ANY PARTY.
15. PROFESSIONAL SERVICE FEE.
The Fee shall be earned if, so and when the transaction contemplated
by this Contract is closed and funded.
A. PAYMENT OF FEE. Seller agrees to pay the Principal Broker a
professional service fee in cash (the "Fee") for procuring the Purchaser and
for asisting in the negotiation of this Contract as follows: six percent (6%)
of the purchase price. The Fee shall be paid at the Closing of a sale of the
Property by Seller pursuant to this Contract (as may be amended or assigned).
The Title Company or other escrow agent is authorized and directed to pay the
Fee to the Principal Broker out of the closing proceeds.
16. MISCELLANEOUS PROVISIONS.
A. EFFECTIVE DATE. The term "Effective Date" means the latter of the
two dates on which this Contract is signed by Seller and Purchaser, as indicated
by their signatures below. If the last party to execute this Contract fails
to complete the date of execution below that party's signature, the Effective
Date shall be the date this fully executed Contract is delivered to the Title
Company.
B. NOTICES. All notices and other communications required or
permitted under this Contract must be in writing and shall be deemed
delivered, whether actually received or not, on the earlier of: (i) actual
receipt, if delivered in person or by messenger with evidence of delivery; or
(ii) receipt of an electronic facsimile transmission ("Fax"); or (iii) upon
deposit in the United States Mail as required below. Notices may be
transmitted by Fax to the Fax telephone numbers specified below, if any.
Notices delivered by mail must be deposited in the U.S. Postal Service, first
class postage prepaid, and properly addressed to the intended recipient at
the address set forth below. Any party may change its address for notice
purposes by delivering written notice of its new address to all other parties
in the manner set forth above. Copies of all written notices should also be
delivered to the Principal Broker and to the Title Company, but failure to
notify the Principal Broker or the Title Company will not cause an otherwise
properly delivered notice to be ineffective.
-C- Copyright 1995 NTCAR form 01(1/95) Page 4
<PAGE>
C. MUTUAL TERMINATION. If this Contract is terminated by agreement of
both parties at any time prior to Closing, the obligations of each party
under this Contract shall terminate, except that (1) Seller and Purchaser
shall each pay one-half of the cost of the Survey (if Survey costs are
incurred), (2) Purchaser shall pay the costs to repair any damage to the
Property caused by Purchaser or its agents, (3) Purchaser shall deliver to
Seller any reports or documents in Purchaser's possession concerning the
Property, (4) Seller shall pay the Fee owned to the Principal Broker, and (5)
each party shall perform any other obligations which expressly survive the
termination of this Contract. The obligations of this paragraph shall survive
the termination of this Contract.
D. FORMS. In case of a dispute as to the form of any document required
under this Contract, the most recent form prepared by the State Bar of Texas,
modified as necessary to conform to the requirements of this Contract, shall
be deemed reasonable.
E. ATTORNEYS FEES. The prevailing party in any legal proceeding
brought in relation to this Contract or transaction shall be entitled to
recover from the non-prevailing parties court costs, reasonable attorneys'
fees and all other reasonable litigation expenses.
F. INTEGRATION. This Contract contains the complete agreement between
the parties with respect to the Property and cannot be varied except by
written agreement. The parties agree that there are no oral or signed
agreements, understandings, representations or warranties made by the parties
which are not expressly set forth herein.
G. SURVIVAL. Any warranty, representation, covenant, condition or
obligation contained in this Contract not otherwise consummated at the
Closing will survive the Closing of this transaction.
H. BINDING EFFECT. This Contract shall inure to the benefit of and be
binding upon the parties to this Contract and their respective heirs, legal
representatives, successors and assigns.
I. TIME FOR PERFORMANCE. Time is of the essence under each provision
of this Contract. Strict compliance with the times for performance is
required.
J. RIGHT OF ENTRY. Upon reasonable advance notice and during normal
business hours, Purchaser, Purchasers' representatives and the Brokers have
the right to enter upon the Property prior to Closing for purposes of
viewing, inspecting and conducting studies of the Property, so long as they
do not unreasonably interfere with the use of the Property by Seller or any
tenants, or cause undue damage to the Property.
K. BUSINESS DAY. If any date of performance under this Contract falls
on a Saturday, Sunday or Texas legal holiday, such date of performance shall
be deferred to the next day which is not a Saturday, Sunday or Texas legal
holiday.
L. GOVERNING LAW. This Contract shall be construed under and governed
by the laws of the State of Texas, and unless otherwise provided herein, all
obligations of the parties created under this Contract are to be performed in
the county where the Property is located.
M. SEVERABILITY. If any provision of this Contract is held to be
invalid, illegal, or unenforceable by a court of competent jurisdiction, the
invalid, illegal or unenforceable provision shall not affect any other
provisions, and this Contract shall be construed as if the invalid, illegal,
or unenforceable provision is severed and deleted from this Contract.
N. DISCLAIMER. Purchaser understands that a real estate broker is
qualified to advise on matters concerning real estate and is not an expert in
matters of law, tax, financing, surveying, hazardous materials, engineering,
construction, safety, zoning, land planning, architecture, or the Americans
with Disabilities Act. However, the Broker(s) will disclose to Purchaser any
material factual knowledge which Broker may possess about the condition of
the Property. Purchaser acknowledges that Purchaser has been advised by the
Broker(s) to seek expert assistance on such matters. The Broker(s) do not
investigate a property's compliance with building codes, governmental
ordinances, statutes and laws that relate to the use or condition of the
Property or its construction, or that relate to its acquisition. If the
Broker(s) provide names of consultants or sources for advice or assistance,
the Broker(s) do not warrant the services of the advisors or their products
and cannot warrant the suitability of property to be acquired. The Broker(s)
do not warrant that the Seller will disclose any or all property defects or
other matters pertaining to the Property or its condition.
O. COUNTERPARTS. This Contract may be executed in a number of
identical counterparts. Each counterpart is deemed an original and all
counterparts shall, collectively, constitute one agreement.
P. GENDER; NUMBER. Unless the context requires otherwise, all pronouns
used in this Contract shall be construed to include the other genders,
whether used in the masculine, feminine or neuter gender. Words in the
singular number shall be construed to include the plural, and words in the
plural shall be construed to include the singular.
Q. MEDIATION. If any dispute arises relating to this Contract (the
"Dispute"), including but not limited to payment of the Fee, then any party
may give written notice to the other party(s) requiring all involved parties
to attempt to Dispute by mediation. Except in those circumstances when a
party reasonably believes that an applicable statute of limitations period is
about to expire, or a party requires injunctive or equitable relief, the
parties are obligated to use this mediation procedure prior to initiating
arbitration or any other action. Within seven (7) days after receiving the
mediation notice, each party must deliver a written designation to all other
parties stating the names of one or more individuals with authority to
resolve the Dispute on such party's behalf. Within ten (10) days after the
date of designation, the parties shall make a good faith effort to select a
qualified mediator to mediate the Dispute. If the parties are unable to
timely agree upon a mutually acceptable mediator, the parties shall request
any State or Federal district judge to appoint a mediator. In consultation
with the mediator, the parties shall promptly designate a mutually convenient
time and place for the mediation which is no later than thirty (30) days
after selection of the mediator. In the mediation, each party shall be
represented by persons with authority and discretion to negotiate a
resolution of the Dispute, and may be represented by counsel. The mediation
shall be governed by the provisions of Chapter 154 of the Texas Remedies and
Practice Code, and such other rules as the mediator may prescribe. The fees
and expenses of the mediator shall be shared equally by all parties.
R. ARBITRATION. If the parties are unable to resolve any Dispute by
mediation, then the parties agree to submit the Dispute to binding
arbitration before a single arbitrator. The Dispute shall be decided by
arbitration in accordance with the applicable arbitration statute and the
then existing rules of the American Arbitration Association. Any party may
initiate the arbitration procedure by delivering a written notice of demand
for arbitration to the other parties. Within ten (10) days after the receipt
by all parties of the written notice of demand for arbitration, the parties
shall attempt to select a qualified arbitrator who is acceptable to all
parties. If the parties are unable to agree upon an arbitrator who is
acceptable to all parties, then upon application of any party a court of
competent jurisdiction shall appoint an arbitrator. This agreement to
arbitrate shall be specifically enforceable under the prevailing arbitration
law.
S. CONSULT AN ATTORNEY. This document is an enforceable, legally
binding agreement. Read it carefully. The Broker(s) involved in the
negotiation of the transaction described in this Contract cannot give you
legal advice. By law, the Broker(s) are limited to discussing factual and
business details of the transaction. The parties to this Contract
acknowledge that they have been advised by the Broker(s) to have this
Contract reviewed by legal counsel before signing this Contract to discuss
the legal effects of its terms and provisions.
- -C- Copyright 1995 NTCAR form 01 (1/95) Page 5
<PAGE>
17. ADDITIONAL PROVISIONS. [ADDITIONAL PROVISIONS AS DIRECTED BY SELLER OR
PURCHASER MAY BE SET FORTH BELOW.]
18. EXHIBITS AND ADDENDA. All Exhibits and Addenda attached to this
Contract are incorporated herein by reference and are made a part of this
Contract for all purposes. [CHECK ALL THAT APPLY.]
<TABLE>
<S> <C>
/ / Addendum A Personal Property
/ / Exhibit A Survey and/or Legal Description / / Addendum B Financing
/X/ Exhibit B Site Plan /X/ Addendum C Inspection
/ / Exhibit C _______________________________ / / Addendum D Disclosure Notice
/X/ Addendum E Special Provisions Addendum
</TABLE>
19. CONTRACT AS OFFER. The execution of this Contract by the first party to
do so constitutes an offer to purchase or sell the Property. Unless within
five (5) days from the date of execution of this Contract by the first party,
this Contract is accepted by the other party by signing the offer and
delivering a fully executed copy to the first party, the offer of this
Contract shall be deemed automatically withdrawn and terminated, and the
Earnest Money, if any, shall be promptly returned to Purchaser.
EXECUTED on the dates stated below, to be effective on the Effective Date.
<TABLE>
<S> <C>
SELLER PURCHASER
Haggar Clothing Company Fred's Foreign Car Service, Inc.
- ----------------------------------------- ------------------------------------------
By [SIGNATURE]: Frank D. Bracken By [SIGNATURE]: Jose Guevara
-------------------------- ---------------------------
Name: Frank D. Bracken Name: Jose Guevara
------------------------------------ -------------------------------------
Title: President & Chief Operating Officer Title: Owner
----------------------------------- ------------------------------------
Address: 6113 Lemmon Avenue Address: 5111 A West Lovers Lane
--------------------------------- ----------------------------------
Dallas, Texas 75209 Dallas, Texas 75209
- ----------------------------------------- ------------------------------------------
- ----------------------------------------- ------------------------------------------
Telephone: 352-8481 Fax: 956-4446 Telephone: 350-6787 Fax: N/A
-------------- ------------ -------------- -------------
Tax I.D. No: 75-0312650 Tax I.D. No: 75-1717760
----------------------------- ------------------------------
Date of Execution: 3/28/96 Date of Execution: 3/25/96
----------------------- ------------------------
PRINCIPAL BROKER COOPERATING BROKER
The Staubach Company None
- ----------------------------------------- ------------------------------------------
By [SIGNATURE]: Paul A. Whitman By [SIGNATURE]:
-------------------------- ---------------------------
Name: Paul A. Whitman, SIOR Name:
------------------------------------ -------------------------------------
Title: Senior Vice President Title:
----------------------------------- ------------------------------------
Address: Address:
--------------------------------- ----------------------------------
- ----------------------------------------- ------------------------------------------
- ----------------------------------------- ------------------------------------------
Telephone: Fax: Telephone: Fax:
-------------- ------------ -------------- -------------
</TABLE>
TITLE COMPANY ACCEPTANCE. The Title Company acknowledges receipt of the
Earnest Money on ________________________________ and accepts the Earnest
Money subject to the terms and conditions set forth in this Contract.
TITLE COMPANY
American Title Company
- ---------------------------------------------
By [SIGNATURE]:
------------------------------
Name: Attention: Tim Hardin
----------------------------------------
Title:
---------------------------------------
Address:
-------------------------------------
- ---------------------------------------------
- ---------------------------------------------
Telephone: Fax:
-------------- ------------
COPYRIGHT NOTICE: THIS FORM IS PROVIDED FOR THE USE OF MEMBERS OF THE NORTH
TEXAS COMMERCIAL ASSOCIATION OF REALTORS, INC. PERMISSION IS HEREBY GRANTED
TO MAKE LIMITED COPIES OF THIS FORM FOR USE IN A PARTICULAR TEXAS REAL ESTATE
TRANSACTION. CONTACT THE NTCAR OFFICE TO CONFIRM THAT YOU ARE USING THE
CURRENT VERSION OF THIS FORM
- -C- Copyright 1995 NTCAR form 01 (1/95) Page 6
<PAGE>
EXHIBIT B
[MAP]
<PAGE>
NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark-
ADDENDUM C TO CONTRACT OF SALE
INSPECTION
PROPERTY ADDRESS OR DESCRIPTION: 5915 Peeler Street, Dallas, Texas
A. INSPECTION PERIOD. Purchaser shall have a period of ten (10) days after
the Effective Date (the "Inspection Period") to inspect the Property and to
conduct feasibility studies regarding Purchaser's intended use of the
Property. Purchaser's studies may include without limitation: (i) core
borings; (ii) environmental and architectural tests and investigations; (iii)
physical inspections of all improvements, fixtures, equipment, subsurface
soils, structural members, and personal property; and (iv) examination of
plans, specifications, manuals, and other documents relating to the
construction and condition of the Property. Purchaser and Purchaser's
agents, employees, consultants and contractors shall have the right of
reasonable entry onto the Property during normal business hours, and upon
reasonable advance notice to Seller and/or Seller's tenants, for purposes of
the inspections, studies, tests and examinations deemed necessary by
Purchaser. All inspections, studies, tests and examinations performed
hereunder shall be at Purchaser's expense.
B. REPORTS.
/ / (1) Within ________________ (____) days after the Effective Date, Seller
shall deliver to Purchaser a written report of an environmental assessment of
the Property. The report shall be prepared, at Seller's expense, by a
Registered Professional Engineer reasonably acceptable to Purchaser, who is
proficient or certified in environmental risk assessment. The environmental
assessment report must include a "Phase I" investigation into the existence
to Hazardous Materials (as defined in Paragraph 7.A.(7) of this Contract) on
or around the Property. The environmental assessment must also include a
land use history search, engineering inspections, studies and/or tests which
may be necessary to discover the existence, past or present, of Hazardous
Materials.
/X/ (2) See paragraph B(2) of Addendum E.
/X/ (3) As soon as reasonably possible after they become available to
Purchaser, Purchaser shall deliver to Seller, at Purchaser's expense, copies
of all written reports, inspections, plats, drawings and studies made by
Purchaser and Purchaser's agents, consultants and contractors. This
provision shall survive the termination of this Contract.
C. TERMINATION. If Purchaser determines, in Purchaser's sole discretion, no
matter how arbitrary, that the Property is not in satisfactory condition or
is not suitable for Purchaser's intended use or purpose, then Purchaser may
terminate this Contract by delivering a written notice to Seller on or before
the last day of the Inspection Period, and the refundable portion of the
Earnest Money shall be promptly returned by the Title Company to Purchaser
and neither party shall have any further rights or obligations under this
Contract (except for those which may expressly survive the termination of
this Contract).
D. ACCEPTANCE. If Purchaser does not properly and timely terminate this
Contract before the expiration of the Inspection Period (or if Purchaser
accepts the Property in writing) then Purchaser will be deemed to have waived
all objections to the Property under this Contract, except for any title
objections which may be outstanding pursuant to Section 6 of this Contract.
In that event, Purchaser agrees to purchase the Property in its current
condition without any further representations or warranties of Seller, except
any objections which Seller may expressly agree in writing to cure, and this
Contract shall continue in full force and effect and the parties shall
proceed to Closing. However, this provision does not limit or invalidate any
express representations or warranties Seller has made in this Contract.
E. RESTORATION. If the transaction described in this Contract does not
close, through no fault of Seller, and the condition of the Property was
altered due to tests and inspections performed by Purchaser or on Purchaser's
behalf, Purchaser must restore the Property to its original condition. This
provision shall survive the termination of this Contract.
<PAGE>
ADDENDUM E
SPECIAL PROVISIONS ADDENDUM
---------------------------
PROPERTY: 5915 Peeler Street, Dallas, Texas
SELLER: Haggar Clothing Company
PURCHASER: Fred's Foreign Car Service, Inc.
This Special Provisions Addendum (herein so called) is attached to and
made a part of that one certain Contract of Sale (the "Contract"), by and
between HAGGAR CLOTHING COMPANY, as "Seller", and FRED'S FOREIGN CAR SERVICE,
INC., as "Purchaser." In the event a conflict arises between the provisions
of this Special Provisions Addendum and any other part of this Contract, this
Special Provisions Addendum shall modify and supersede such other part of
this Contract to the extent necessary to eliminate any such conflict but no
further. All terms which are defined in the Contract shall have the same
meaning when used herein, unless otherwise defined herein.
A. PROPERTY DESCRIPTION. The property described in EXHIBIT "B"
attached hereto is an approximate description of the Property to be conveyed
hereunder and is attached for reasonable identification of the Property.
The exact description to be used for purposes of this Contract and the
conveyance documents shall be the metes and bounds description set forth on
the Survey, which description shall become a part of this Contract at the
description of the Property and shall be incorporated herein by reference for
all purposes.
B. INSPECTION. In addition to the provisions set forth in Addendum C
to the Contract, the following provisions shall apply:
1. All tests, studies and inspections are to be conducted in a
manner as not to physically damage the Property or unreasonably
interfere with the usual operation of the Property by Seller.
Purchaser and its agents and representatives shall: (a)
promptly pay when due the costs of all tests, investigations
and examinations done with regard to the Property in connection
with Purchaser's inspection; (b) not permit any liens to attach
to the Property by reason of the exercise of Purchaser's rights
hereunder; (c) restore the surface of the Property and any
improvements thereon to the condition in which the same were
found before any such inspections or tests were undertaken; and
(d) not reveal or disclose any information obtained during the
Inspection Period concerning the Property to anyone outside
Purchaser's organization. Purchaser hereby indemnifies and
holds Seller harmless from and against any and all liens,
claims, causes of action, and expenses (including reasonable
attorney's fees) arising out of any
<PAGE>
violation of the provisions of this Paragraph B of Addendum E.
Notwithstanding any provision of this Contract, no termination
of this Contract shall terminate Purchaser's obligations
pursuant to this Paragraph 13.B. of this Contract shall not be
applicable to any cause of action arising pursuant to this
Paragraph B. of Addendum E.
2. Within two (2) business days after the Effective Date, Seller
agrees to allow Purchaser, its authorized agents or
representatives, to inspect and make copies at its own expense
of engineering investigations, tests and/or environmental
studies in Seller's possession which have been made with
respect to the Property within the one-year period prior to the
Effective Date. Purchaser acknowledges that any and all of the
studies are proprietary and confidential in nature, and will be
made available to Purchaser solely to assist Purchaser in
determining the feasibility of purchasing the Property.
Purchaser agrees not to disclose the studies, or any of the
provisions, terms or conditions thereof, to any party outside
of Purchaser's organization, except as to its attorneys,
accountants, lenders or investors. Purchaser shall return all
of the studies, and any and all copies Purchaser has made of
the studies, and all copies of any studies, reports or test
results obtained by Purchaser in connection with its inspection
of the Property, on the first to occur of (a) such time as
purchaser determines that it shall not acquire the Property, or
(b) such time as this Contract is terminated for any reason.
Purchaser hereby acknowledges that Seller has not made and does
not make any warranty or representation regarding the truth or
accuracy of the studies or the source thereof. Seller has not
undertaken any independent investigation as to the truth or
accuracy of the studies and is providing the studies solely as
an accommodation to Purchaser. In permitting Purchaser to
review such studies or information to assist Purchaser, no
third-party benefits or relationships of any kind, either
express or implied, have been offered, intended, or created by
Seller, and any such claims are expressly rejected by Seller
and waived by Purchaser.
C. AS-IS. Notwithstanding anything contained in this Contract to the
contrary except for the representations and warranties set forth herein,
Purchaser has examined and investigated or may examine or investigate the
Property prior to the expiration of the Inspection Period, and Purchaser will
rely solely on its own investigation of the Property and not on any
information provided or to be provided by or on behalf of Seller except for
the representations and warranties set forth herein. Except as expressly
set forth herein, it is understood and agreed that Seller is making no
representations or warranties, whether express or implied, by operation of
law or otherwise with respect to (i) environmental matters of any nature or
kind whatsoever relating to the Property or any portion thereof, including,
without limitation, compliance with any environmental protection, underground
storage tanks, pollution or land use laws, rules, regulations,
2
<PAGE>
orders or requirements and the existence in or on the Property of any
hazardous or toxic materials; (ii) geological conditions, including, without
limitation, subsidence, subsurface conditions, water table, underground water
reservoirs, and limitations regarding withdrawal of water therefrom; (iii)
whether or not and to the extent to which the Property or any portion thereof
is affected by any stream (surface or underground), body of water, floodprone
area, flood plain, floodway or special flood hazard; (iv) drainage; (v) soil
conditions; (vi) zoning to which the Property or any portion thereof may be
subject; (vii) availability of any utilities to the Property or any portion
thereof, including without limitation, water, sewage, gas and electric;
(viii) usage of any adjoining property; (ix) access to the Property or any
portion thereof; (x) the compliance or non-compliance of any of the Property
with any applicable federal, state or local building codes, ordinances, laws,
statutes, rules or regulations; (xi) the value, compliance with plans or
specifications, locations, use, merchantability, construction, workmanlike
condition, order, repair, maintenance, design, quality, description,
durability, operation or condition of the Property or any portion thereof;
(xii) the quality of labor and materials included in the Improvements; (xiii)
the suitability of the Property or any portion thereof for Purchaser's
purposes or fitness for any usage or purpose whatsoever; or (xiv) any other
matter relating to the Property. Except as expressly provided herein,
Purchaser hereby agrees that Purchaser is accepting the Property "AS IS,
WHERE IS, WITH ALL FAULTS AND WITHOUT ANY REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED", subject to all deficiencies or other matters
whether known or unknown; however, non of the foregoing shall impair or
further restrict the special warranty of title by which the Property is to be
conveyed pursuant to the Contract or the representations and warranties set
forth herein.
SELLER:
HAGGAR CLOTHING COMPANY
By: /s/ FRANK D. BRACKEN
-----------------------------------------
Name (print): Frank D. Bracken
-------------------------------
Title: President and Chief Operating Officer
--------------------------------------
PURCHASER:
FRED'S FOREIGN CAR SERVICE, INC.
By: /s/ JOSE GUEVARA
-----------------------------------------
Jose Guevara
Owner
3
<PAGE>
FIRST AMENDMENT TO COMMERCIAL CONTRACT OF SALE
STATE OF TEXAS )
)
COUNTY OF DALLAS )
THIS FIRST AMENDMENT TO COMMERCIAL CONTRACT OF SALE (the "First
Amendment") is made by and between Haggar Clothing Co., a Nevada corporation
(the "Seller") and Fred's Foreign Car Service, Inc., a Texas corporation (the
"Purchaser").
INTRODUCTORY PROVISIONS:
The following provisions form a part of and are incorporated into this
First Amendment:
A. Seller and Purchaser have previously entered into that certain
Commercial Contract of Sale dated effective March 28, 1996 (the "Contract"),
which Contract is incorporated herein by reference, wherein Seller agreed to
sell and convey to Purchaser, upon the terms and conditions therein
contained, that certain property (the "Property") described in the Contract.
B. Seller and Purchaser now desire to amend the Contract as set forth
herein.
NOW, THEREFORE, for and in consideration of the agreements set forth
herein and the sum of Ten and No/100 Dollars ($10.00) paid by the Purchaser
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged and confessed, the parties hereby agree as
follows:
1. CLOSING DATE. The Closing Date shall be extended from April 8, 1996
until April 30, 1996, or such earlier date as may be agreed to by
Purchaser and Seller.
2. MISCELLANEOUS.
(a) The terms of the Contract, as modified by this First Amendment,
are valid, binding and in full force and effect.
(b) Except as otherwise defined herein, all defined terms set forth
herein shall have the same meaning as set forth in the Contract. The
Contract, as amended by this First Amendment, embodies the entire
agreement between the parties hereto, supersedes all prior agreements
and understandings, if any, relating to the subject matter hereof, and
may be amended or supplemented
FIRST AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 1
<PAGE>
only by an instrument in writing executed by the party against whom
enforcement is sought.
(c) This First Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.
(d) This First Amendment shall be binding upon and shall inure to the
benefit of the parties and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
(e) Each party is entitled to rely on a facsimile signature of any
other party to this First Amendment upon receipt by facsimile
transmission via telecopier. Any party initially providing his or her
signature via telecopier shall deliver an original signature page to
the other parties promptly after transmission of the facsimile.
(f) This First Amendment may be executed in a number of identical
counterparts, each of which constitute collectively one agreement;
but in making proof of this First Amendment, it shall not be
necessary to produce or account for more than one such counterpart.
It is not necessary that each party execute the same counterpart
so long as identical counterparts are executed by all parties.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to be effective as of the 8th day of April, 1996.
SELLER: PURCHASER:
- ------ ---------
HAGGAR CLOTHING CO. FRED'S FOREIGN CAR SERVICE, INC.
By: /s/ J.M. HAGGAR, III By: /s/ JOSE GUEVARA
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Name(Print): J.M. Haggar, III JOSE GUEVARA, President
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Title: Chairman & CEO
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FIRST AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 2
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NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark-
COMMERCIAL CONTRACT OF SALE
IN CONSIDERATION of the mutual terms, provisions, covenants and agreements
contained in this Contract (the "Contract"), the parties hereto agree as
follows. [CHECK ALL BOXES APPLICABLE TO THIS CONTRACT. BOXES NOT CHECKED DO
NOT APPLY TO THIS CONTRACT.]
1. PARTIES. Haggar Clothing Company (the "Seller") shall sell and convey to
R. H. A. Partnership (the "Purchaser") and Purchaser shall buy and pay for
the Property (defined below).
2. PROPERTY. Being a 103,500 square foot office and warehouse facility
situated on 4.4424 Acre with an address of 6120 Peeler Street in the City
of Dallas, Dallas County, Texas, further described as: _______________________
_________________________________________________ or as described in EXHIBIT A,
SURVEY/LEGAL DESCRIPTION, and/or shown on EXHIBIT B, SITE PLAN, together
with, all and singular, all improvements thereon and all rights and
appurtenances pertaining thereto, including any right, title and interest of
Seller in and to adjacent streets, alleys and rights-of-way. Such real
estate, improvements, rights and appurtenances are collectively referred to
herein as the "Property."
/ / The Property also includes fixtures and articles of personal property
listed and described in ADDENDUM A, PERSONAL PROPERTY.
3. PURCHASE PRICE. The purchase price for the Property is $1,500,000.00 (the
"Purchase Price"), payable as follows:
/ / A. The Purchase Price shall be adjusted up or down based upon the [STRIKE
ONE] NET / GROSS land area of the Property determined by the Survey. The
applicable land area shall be multiplied by $_______ per square foot and the
product thereof shall become the Purchase Price at Closing.
/X/ B. Cash payable at Closing: $1,500,000.00.
/ / C. The balance of the Purchase Price shall be payable according to the
provisions in ADDENDUM B, FINANCING.
4. EARNEST MONEY.
A. EARNEST MONEY DEPOSIT. Within two business days after the Effective
Date of this Contract, Purchaser shall deposit earnest money in the form of a
certified or cashier's check in the amount of $10,000.00 (the "Earnest
Money") payable to Chicago Title Insurance Co. c/o Tim Hardin, 717 N. Harwood
St., 2610 Maxus Energy Tower Dallas, TX 75201 969-5300 (the "Title
Company"), in its capacity as escrow agent, to be held in escrow pursuant to
the terms of this Contract. Seller's acceptance of this Contract is expressly
conditioned upon Purchaser's timely deposit of the Earnest Money with the
Title Company. If Purchaser fails to timely deposit the Earnest Money, Seller
may, at Seller's option, terminate this Contract by delivering a written
termination notice to Purchaser. Notwithstanding anything herein to the
contrary, a portion of the Earnest Money in the amount of $100.00 shall be
non-refundable and shall be distributed to Seller at Closing or other
termination of this Contract as full payment and independent consideration
for Seller's performance under this Contract. If this Contract is properly
terminated by Purchaser pursuant to a right of termination granted to
Purchaser by any provision of this Contract, or any attached Addenda, the
Earnest Money, less the non-refundable portion, shall be promptly refunded to
Purchaser, and the parties shall have no further rights or obligations under
this Contract (except for those which may expressly survive the termination).
The Earnest Money /X/ SHALL / / SHALL NOT be placed in an interest-bearing
account by the Title Company, and any interest earned thereon shall become a
part of the Earnest Money. At Closing the Earnest Money shall be applied to
the Purchase Price.
B. ESCROW. The Earnest Money is deposited with the Title Company with
the understanding that the Title Company (1) is not responsible for the
performance or non-performance of any party to this Contract, and (2) is not
liable for interest on the funds held unless required in Paragraph 4.A. The
Title Company shall deposit the Earnest Money in one or more fully insured
accounts in one or more Federally insured banking or savings institutions. If
both parties make demand for the payment of the Earnest Money, the Title
Company has the right to require from all parties and Broker(s) a written
release of liability of the Title Company which authorizes the disbursement
of the Earnest Money. If only one party makes demand for payment of the
refundable portion of the Earnest Money, the Title Company shall give notice
to the other party of the demand. The Title Company is authorized and
directed to honor the demand unless the other party delivers a written
objection to the Title Company within ten (10) days after the Title Company's
notice to that party.
5. SURVEY AND TITLE DOCUMENTS.
A. SURVEY. As soon as reasonably possible, and in any event within
twenty (20) days after the Effective Date, Seller shall, at Seller's expense,
deliver or cause to be delivered to Purchaser a copy of a current or updated
on-the-ground perimeter survey (the "Survey") of the Property prepared by a
Registered Professional Land Surveyor reasonably acceptable to the Purchaser.
The Survey shall show the location and size of all of the following on or
adjacent to the Property, if any:
buildings, building lines, improvements, streets, pavements, easements,
rights-of-way, protrusions, encroachments, fences, 100-year flood plain,
apparent public utilities, and recording information of easements.
The Survey shall show the gross land area and the Net Land Area. The Survey
shall be in a form and of a date acceptable to Purchaser and to the Title
Company, and in acceptable form in order to allow the Title Company to delete
the survey exception (except as to "shortages in area") from the Title
Policy. The term "NET LAND AREA" means the gross land area of the Property
less the land area included in utility easements, drainage easements,
ingress/egress easements, rights-of-way, 100-year flood plain and
encroachments on or across the Property. The area within the 100-year flood
plain shall be as defined by the Federal Emergency Management Agency or other
applicable governmental authority. If the transaction described in this
Contract does not close through no fault of Seller or except as provided in
Paragraph 16.C, in addition to the other rights of Seller, Purchaser shall
pay for the Survey on demand. At Closing, the metes and bounds description of
the Property reflected in the Survey shall be used in the warranty deed and
any other documents requiring a legal description of the Property.
B. TITLE COMMITMENT. As soon as reasonably possible, and in any event
within twenty (20) days after the Effective Date, Seller shall, at Seller's
expense, deliver or cause to be delivered to Purchaser (1) a title commitment
(the "Title Commitment") covering the Property binding the Title Company to
issue a Texas Owner Policy of Title Insurance (the "Title Policy") on the
standard form prescribed by the Texas State Board of Insurance at the
Closing, in the full amount of the Purchase Price, insuring Purchaser's fee
simple title to the Property to be good and indefeasible, subject only to the
Permitted Exceptions as defined below, and (2) the following documents
(collectively, the "Title Documents") (a) true and legible copies of all
recorded instruments affecting the Property and recited as exceptions in the
Title Commitment, (b) a current tax certificate, and (c) written notices as
required in Paragraph 5.C.
C. SPECIAL ASSESSMENT DISTRICTS. If the Property is situated within a
utility district or flood control district subject to the provisions of
Section 50.301, Texas Water Code, then Seller shall give to Purchaser as part
of the Title Documents the required written notice and Purchaser agrees to
acknowledge receipt of the notice in writing. The notice must set forth the
current tax rate, the current bonded indebtedness and the authorized
indebtedness of the district, and must comply with all other applicable
requirements of the Texas Water Code. If the Property is subject to mandatory
membership in a property owner's association, Seller shall notify Purchaser
of the current annual budget of the property owners' association, and the
current authorized fees, dues and/or assessments relating to the Property.
D. ABSTRACT. At the time of the execution of this Contract, Purchaser
acknowledges that the Broker(s) (defined below) have advised and hereby
advise Purchaser, by this writing, that Purchaser should have the abstract
covering the Property examined by an attorney of Purchaser's own selection or
that Purchaser should be furnished with or obtain a policy of title insurance.
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6. REVIEW OF TITLE DOCUMENTS.
A. REVIEW PERIOD. Purchaser shall have twenty (20) days (the "Review
Period") after Purchaser's receipt of the last of (i) the Survey, (ii) the
Title Commitment, (iii) the Title Documents, and (iv) all other documents
required to be furnished by Seller as identified on ADDENDUM A, PERSONAL
PROPERTY, and/or on ADDENDUM C, INSPECTION, to review them. If Purchaser has
any objections to the Survey, Title Commitment or Title Documents, Purchaser
may deliver the objections to Seller in writing within the Review Period. Any
item to which Purchaser does not object shall be deemed a "Permitted
Exception." Items that the Title Company identifies as to be released at
closing will be deemed objections by Purchaser. Purchaser's failure to object
within the time provided shall be a waiver of the right to object. If there
are objections by Purchaser, or a third party lender, Seller shall make a
good faith attempt to satisfy the objections within ten (10) days after
receipt of Purchaser's objections (the "Cure Period"), but Seller is not
required to incur any cost to do so. Zoning ordinances and the lien for
current taxes are deemed to be Permitted Exceptions.
B. CURE PERIOD. If Seller cannot satisfy the objection within the Cure
Period, Seller shall deliver a written notice to Purchaser, prior to
expiration of the Cure Period, stating whether Seller is committed to cure
the objections at or before Closing. If Seller does not timely deliver the
written notice, or does not commit in the written notice to fully cure all of
the objections at or before Closing, then Purchaser may terminate this
Contract by delivering a written notice to Seller on or before the earlier to
occur of: (i) the date which is seven (7) days after the expiration of the
Cure Period; or (ii) the scheduled Closing Date. If Purchaser properly and
timely terminates this Contract, the refundable portion of the Earnest Money
shall be immediately returned to Purchaser and thereafter neither party shall
have any rights or obligations under this Contract (except for those which
may expressly survive the termination of this Contract). If Purchaser does
not properly and timely terminate this Contract, the Purchaser shall be
deemed to have waived any uncured objections and must accept such title as
Seller is able to convey as of Closing.
7. SELLER'S WARRANTIES AND REPRESENTATIONS.
A. STATEMENTS. Seller represents and warrants to Purchaser to the best
of Seller's knowledge as follows:
(1) TITLE. At the Closing, Seller will have the right to, and will,
convey to Purchaser good and indefeasible fee simple title to the Property
free and clear of any and all liens, assessments, unrecorded easements,
security interests and other encumbrances except the Permitted Exceptions.
Delivery of the Title Policy pursuant to Paragraph 12 below will be deemed to
satisfy the obligation of Seller as to the sufficiency of title required
under this Contract. However, delivery of the Title Policy will not release
Seller from the warranties of title set forth in the warranty deed.
(2) LEASES. There are no parties in possession of any portion of the
Property as lessees, tenants at sufferance or trespassers except tenants
under written leases delivered to Purchaser pursuant to this Contract.
(3) NEGATIVE COVENANTS. Seller shall not further encumber the Property
or allow an encumbrance upon the title to the Property, or modify the terms
or conditions of any existing leases, contracts or encumbrances, if any,
without the written consent of Purchaser.
(4) LIENS AND DEBTS. There are no mechanic's liens, Uniform Commercial
Code liens or unrecorded liens against the Property, and Seller shall not
allow any such liens to attach to the Property prior to Closing, which will
not be satisfied out of the Closing proceeds. All obligations of Seller
arising from the ownership and operation of the Property and any business
operated on the Property, including, but not limited to, taxes, leasing
commissions, salaries, contracts, and similar agreements, have been paid or
will be paid prior to Closing. Except for obligations for which provisions
are made in this Contract for prorating at Closing and any indebtedness taken
subject to or assumed, there will be no obligations of Seller with respect to
the Property outstanding as of Closing.
(5) LITIGATION. There is no pending or further inquiry to the current
actual knowledge of Seller without duty of threatened litigation, condemnation,
or assessment affecting the Property. Seller shall promptly advise Purchaser
of any litigation, condemnation or assessment affecting the Property which is
instituted after the Effective Date.
(6) OPERATION OF THE PROPERTY. After the Effective Date until the
Closing Date, Seller shall (a) operate the Property in the same manner as the
Property has been operated, and (b) maintain the Property in the same
condition and in the same manner as existed on the Effective Date, except for
ordinary wear and tear and any casualty loss.
B. SURVIVAL. It is specifically acknowledged and agreed that
representations and warranties made by Seller as set forth in this Contract,
other than the special warranty as to title of the Property, shall survive
the inspection or investigation made by or on behalf of Purchaser and the
passage of title from the Seller to Purchaser at Closing for a period of one
year after Closing and shall not be merged into or waived by the instruments
executed at Closing. Additionally, all agreements and indemnities of Seller
and Purchaser set forth in this Contract shall, to the extent not consummated
at Closing, survive the Closing of the transaction contemplated by this
Contract.
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9. INSPECTION. [CHECK ONE]
/X/ A. INSPECTION DESIRED. Purchaser desires to inspect the Property and
Seller grants to Purchaser the right to inspect the Property as described in
ADDENDUM C, INSPECTION.
/ / B. INSPECTION NOT NECESSARY. Purchaser acknowledges that Purchaser has
inspected the Property, including all buildings and improvements thereon, and
is thoroughly familiar with their condition, and Purchaser hereby accepts the
Property in its present condition, with such changes as may hereafter be
caused by normal wear and tear prior to Closing, but without waiving
Purchaser's rights by virtue of Seller's representations and warranties
expressed in this Contract.
10. CASUALTY LOSS. All risk of loss to the Property shall remain upon Seller
prior to the Closing. If, prior to the Closing, the Property is damaged or
destroyed by fire or other casualty, to a Material Extent (defined below),
Purchaser may either terminate this Contract by delivering a written
termination notice to Seller within ten days after the damage occurs, or
elect to close. If, prior to the Closing, the Property is damaged by fire or
other casualty to less than a Material Extent, the parties shall proceed to
Closing as provided herein. If the transaction is to proceed to Closing,
despite any damage or destruction, there shall be no reduction in the
Purchase Price and Seller shall, at Seller's option: (i) fully repair the
damage prior to Closing, at Seller's expense; (ii) reimburse Purchaser for
the entire cost of repairing the Property by allowing Purchaser to deduct the
cost from the cash payable to Seller at the Closing; or (iii) assign to
Purchaser all of Seller's right and interest in any insurance proceeds
resulting from the damage or destruction, plus an amount equal to any
insurance deductible. The term "Material Extent" means damage or destruction
if the cost of repairing and fully restoring the Property to its previous
condition exceeds ten percent (10%) of the Purchase Price. If the extent of
damage or the amount of insurance proceeds to be made available is not able to
be determined prior to the Closing Date, or the repairs are not able to be
completed prior to the Closing Date, either party may postpone the Closing
Date by delivering a written notice to the other party specifying an extended
Closing Date which is not more than thirty (30) days after the previously
scheduled Closing Date.
11. ASSIGNMENT. [CHECK ONLY ONE]
/ / A. ASSIGNMENT PROHIBITED. Purchaser may not assign this Contract
without Seller's prior written consent.
/ / B. ASSIGNMENT PERMITTED. Purchaser may assign this Contract provided
the assignee assumes in writing all obligations and liabilities of Purchaser
under this Contract, in which event Purchaser shall be relieved of any further
liability hereunder.
/X/ C. LIMITED ASSIGNMENT. Purchaser may assign this Contract only to a
related party, defined as (i) an entity in which Purchaser is an owner,
partner or corporate officer, or (ii) a member of the immediate family of the
Purchaser. Purchaser shall remain liable under this Contract after any
assignment to a related party.
12. CLOSING.
A. CLOSING DATE. The closing of the transaction described in this
Contract (the "Closing") shall be held at 10:00 a.m. on the later of
[CHECK ONE]: / / ______ days after the Effective Date; or / / ______ days
after the expiration of the Review Period or Inspection Period (whichever is
later); or / / on August 1, 1996 (the "Closing Date") at the offices of the
Title Company at its address stated below. However, if any objections which
were properly and timely made by Purchaser pursuant to this Contract have not
been cured on the scheduled Closing Date, then either party may postpone the
date of the Closing by delivering a written notice to the other party
specifying an extended Closing Date which is not more than thirty (30) days
after the previously scheduled Closing Date.
B. SELLER'S CLOSING DOCUMENTS. At the Closing, Seller shall deliver
to Purchaser at Seller's expense:
(1) A duly executed [CHECK ONE] / / GENERAL WARRANTY DEED /X/
SPECIAL WARRANTY DEED (with Vendor's Lien retained if not a cash purchase)
conveying the Property in fee simple according to the legal description
prepared by the surveyor as shown on the Survey, subject only to the
Permitted Exceptions;
(2) The Title Policy issued by the underwriter for the Title
Company pursuant to the Title Commitment, subject only to the Permitted
Exceptions, in the full amount of the Purchase Price, dated as of the date of
the Closing, and (at an additional premium cost) [CHECK IF APPLICABLE] / /
with the survey exception deleted except as to "shortages in area;"
(3) A Bill of Sale conveying the personal property identified in
Addendum A, PERSONAL PROPERTY, free and clear of liens, security interests
and encumbrances, subject only to the Permitted Exceptions (to the extent
applicable);
(4) Possession of the Property, subject to valid existing leases
and other applicable Permitted Exceptions;
(5) A duly executed assignment of all leases;
(6) A current rent roll certified by Seller to be complete and
accurate;
(7) Evidence of Seller's authority and capacity to close this
transaction;
(8) All other documents reasonably required by the Title Company
to close this transaction.
C. PURCHASER'S CLOSING DOCUMENTS. At the Closing, Purchaser shall
deliver to Seller at Purchaser's expense:
(1) The cash portion of the Purchase Price, with the Earnest Money
being applied thereto;
(2) The Note and the Deed of Trust, if any;
(3) An Assumption Agreement in recordable form agreeing to pay all
commissions payable under any lease of the Property;
(4) Evidence of Purchaser's authority and capacity to close this
transaction;
(5) All other documents reasonably required by the Title Company
to close this transaction.
D. CLOSING COSTS. Each party shall pay its share of the closing costs
which are customarily paid by a Seller or Purchaser in a transaction of this
character in the county where the Property is located, or as otherwise agreed.
E. PRORATIONS. Rents, lease commissions, interest, insurance
premiums, maintenance expenses, operating expenses, and ad valorem taxes for
the year of Closing shall be prorated at the Closing effective as of the date
of Closing. Any security deposits held by Seller shall be delivered to
Purchaser at the Closing. If the Closing occurs before the tax rate is
fixed for the year of Closing, the apportionment of the taxes shall be upon
the basis of the tax rate for the preceding year applied to the latest
assessed valuation, but any difference between estimated taxes for the year
of Closing the actual taxes paid by Purchaser shall be adjusted equitably
between the parties upon proof of payment of the taxes by Purchaser. This
provision shall survive the Closing.
F. LOAN ASSUMPTION. If Purchaser assumes an existing mortgage loan at
Closing, Purchaser shall pay (1) to the lender, any assumption fee charged by
the lender; and (2) to Seller, a sum equal to the amount of any reserve
accounts held by the lender for the payment of taxes and/or insurance.
Purchaser shall execute, at the option and expense of Seller, a Deed of Trust
to Secure Assumption. If consent to the assumption is required by the
lender, Seller shall obtain the lender's consent in writing and deliver the
consent to Purchaser at Closing. If Seller does not obtain the lender's
written consent (if required) and deliver it to Purchaser at or before
Closing, Purchaser may terminate this Contract by delivering a written
termination notice to Seller whereupon the refundable portion of the Earnest
Money will be promptly refunded to Purchaser and the parties shall have no
further rights or obligations under this Contract (except for those which may
expressly survive the termination of this Contract).
G. ROLLBACK TAXES. If a change in use of the Property or denial of a
special use valuation on the Property claimed by Seller results in the
assessment after Closing of additional taxes for periods of Seller's ownership,
the additional taxes plus any penalties and interest shall be paid by
Purchaser. This obligation shall survive the Closing.
H. FOREIGN PERSON NOTIFICATION. If Seller is a Foreign Person, as
defined by the U.S. Internal Revenue Code, or if Seller fails to deliver to
Purchaser a non-foreign affidavit pursuant to Section 1445 of the Internal
Revenue Code, then Purchaser may withhold from the sales proceeds an amount
sufficient to comply with applicable tax law and deliver the withheld
proceeds to the Internal Revenue Service, together with appropriate tax
forms. The required affidavit(s) from Seller(s) shall include (1) a
statement that Seller is not a foreign person, (2) the U.S. taxpayer
identification number(s) of Seller(s), and (3) other information required by
Section 1445 of the Internal Revenue Code.
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13. DEFAULT.
A. PURCHASER'S REMEDIES. If Seller fails to close this Contract for
any reason except Purchaser's default or the termination of this Contract
pursuant to a right to terminate set forth in this Contract, Seller shall be
in default and Purchaser may elect one of the following as Purchaser's sole
remedy [CHECK ALL THAT MAY APPLY]:
/X/ (1) Enforce specific performance of this Contract against Seller
unless Seller is in default hereunder as a result of a warranty or
representation of Seller being untrue or inaccurate in any material respect
and Seller had no knowledge that such warranty or representation was untrue
or inaccurate in which case, Purchaser's sole and exclusive remedy shall be
to terminate this Contract by written notice delivered to Seller at or prior
to the Closing;
/ / (2) Bring suit for damages against Seller;
/ / (3) Enforce specific performance of this Contract and/or bring suit for
damages against Seller; or
/ / (4) Terminate and release Seller from this Contract and receive the
refundable portion of the Earnest Money immediately. Seller's failure to
satisfy Purchaser's objections under Paragraph 6 above shall not constitute a
default by Seller.
B. SELLER'S REMEDIES. If Purchaser fails to close this Contract for any
reason except Seller's default or the termination of this Contract pursuant
to a right to terminate set forth in this Contract, Purchaser shall be in
default and Seller may elect one of the following, as Seller's sole remedy
[CHECK ALL THAT MAY APPLY]:
/ / (1) Enforce specific performance of this Contract;
/ / (2) Bring suit for damages against Purchaser;
/ / (3) Enforce specific performance of this Contract and/or bring suit for
damages against Purchaser; or
/X/ (4) Have the Earnest Money paid to Seller as liquidated damages for the
Purchaser's breach of this Contract, thereby releasing Purchaser from this
Contract.
14. AGENCY DISCLOSURE.
A. AGENCY RELATIONSHIP. The term "Broker(s)" refers to the Principal
Broker and/or the Cooperating Broker, if applicable, as set forth on the
signature page. Each Broker has fiduciary duties only to the party(s) the
Broker represents as identified below. If either Broker is representing
both Seller and Purchaser, then such representation is a dual agency and the
dual agency disclosure and consent provisions apply as set forth below.
[EACH BROKER CHECK ONE ONLY].
(1) The Principal Broker is agent for: /X/ the Seller only; or / /
the Purchaser only; or / / both Purchaser and Seller.
B. OTHER BROKERS. Each party to this Contract represents and warrants to
the other party that such party has had no dealings with any person, firm,
agent or finder in connection with the negotiation of this Contract and/or
the consummation of the purchase and sale contemplated herein, other than the
Broker(s) named in this Contract, and no real estate broker, agent, attorney,
person, firm or entity, other than the Broker(s) is entitled to any
commission or finder's fee in connection with this transaction as the result
of any dealings or acts of such party. Each party hereby agrees to
indemnify, defend, protect and hold the other party harmless from and against
any costs, expenses or liability for compensation, commission, fee, or
charges which may be claimed by any agent, finder or other similar party,
other than the named Broker(s), by reason of any dealings or acts of the
indemnifying party.
C. FEE SHARING. Each party acknowledges that the Principal Broker may
pay a portion of the Fee (defined below) to the Cooperating Broker. Payment
of a portion of the Fee by the Principal Broker to the Cooperating Broker
shall not alter the fiduciary relationships between the parties and the
Brokers. Seller is liable for payment of the Fee to the Principal Broker
only. The Cooperating Broker shall have no claims directly against Seller.
D. DUAL AGENCY. If either of the Brokers has indicated in Section
14.A above that Broker is representing both Purchaser and Seller, then
Purchaser and Seller hereby consent to the dual agency, authorize the
respective Broker(s) to represent more than one party to this transaction,
and acknowledge that the source of any expected compensation to the
Broker(s) will be the Seller, and the Broker(s) may also be paid a fee by
Purchaser. IF THE BROKER(S) ARE ACTING IN A DUAL AGENCY CAPACITY, BROKER(S)
SHALL:
(1) NOT DISCLOSE TO PURCHASER THAT SELLER WILL ACCEPT A PRICE LESS
THAN THE ASKING PRICE UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY
SELLER;
(2) NOT DISCLOSE TO SELLER THAT PURCHASER WILL PAY A PRICE GREATER
THAN THE PRICE SUBMITTED IN A WRITTEN OFFER TO THE SELLER UNLESS OTHERWISE
INSTRUCTED IN A SEPARATE WRITING BY THE PURCHASER;
(3) NOT DISCLOSE ANY CONFIDENTIAL INFORMATION, OR ANY INFORMATION
A PARTY SPECIFICALLY INSTRUCTS THE BROKER(S) IN WRITING NOT TO DISCLOSE,
UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY THE RESPECTIVE PARTY OR
REQUIRED TO DISCLOSE SUCH INFORMATION BY LAW;
(4) TREAT ALL PARTIES TO THE TRANSACTION HONESTLY AND IMPARTIALLY
SO AS NOT TO FAVOR ONE PARTY OR WORK TO THE DISADVANTAGE OF ANY PARTY.
15. PROFESSIONAL SERVICE FEE.
A. PAYMENT OF FEE. Seller agrees to pay the Principal Broker a
professional service fee in cash (the "Fee") for procuring the Purchaser and
for asisting in the negotiation of this Contract as follows: six percent (6%)
of the first One Million Dollars ($1,000,000.00) of the purchase price and
three percent (3%) of the remaining total purchase price. The Fee shall be
earned if, so and when the transaction contemplated by this Contract is
closed and funded. The Fee shall be paid at the Closing of a sale of the
Property by Seller pursuant to this Contract (as may be amended or assigned).
The Title Company or other escrow agent is authorized and directed to pay
the Fee to the Principal Broker out of the closing proceeds.
16. MISCELLANEOUS PROVISIONS.
A. EFFECTIVE DATE. The term "Effective Date" means the latter of the
two dates on which this Contract is signed by Seller and Purchaser, as indicated
by their signatures below. If the last party to execute this Contract fails
to complete the date of execution below that party's signature, the Effective
Date shall be the date this fully executed Contract is delivered to the Title
Company.
B. NOTICES. All notices and other communications required or
permitted under this Contract must be in writing and shall be deemed
delivered, whether actually received or not, on the earlier of: (i) actual
receipt, if delivered in person or by messenger with evidence of delivery; or
(ii) receipt of an electronic facsimile transmission ("Fax"); or (iii) upon
deposit in the United States Mail as required below. Notices may be
transmitted by Fax to the Fax telephone numbers specified below, if any.
Notices delivered by mail must be deposited in the U.S. Postal Service, first
class postage prepaid, and properly addressed to the intended recipient at
the address set forth below. Any party may change its address for notice
purposes by delivering written notice of its new address to all other parties
in the manner set forth above. Copies of all written notices should also be
delivered to the Principal Broker and to the Title Company, but failure to
notify the Principal Broker or the Title Company will not cause an otherwise
properly delivered notice to be ineffective.
-C- Copyright 1995 NTCAR form 01(1/95) Page 4
<PAGE>
C. MUTUAL TERMINATION. If this Contract is terminated by agreement of
both parties at any time prior to Closing, the obligations of each party
under this Contract shall terminate, except that (1) Seller and Purchaser
shall each pay one-half of the cost of the Survey (if Survey costs are
incurred), (2) Purchaser shall pay the costs to repair any damage to the
Property caused by Purchaser or its agents, (3) Purchaser shall deliver to
Seller any reports or documents in Purchaser's possession concerning the
Property, (4) Seller shall pay the Fee owed to the Principal Broker, and (5)
each party shall perform any other obligations which expressly survive the
termination of this Contract. The obligations of this paragraph shall survive
the termination of this Contract.
D. FORMS. In case of a dispute as to the form of any document required
under this Contract, the most recent form prepared by the State Bar of Texas,
modified as necessary to conform to the requirements of this Contract, shall
be deemed reasonable.
E. ATTORNEYS FEES. The prevailing party in any legal proceeding
brought in relation to this Contract or transaction shall be entitled to
recover from the non-prevailing parties court costs, reasonable attorneys'
fees and all other reasonable litigation expenses.
F. INTEGRATION. This Contract contains the complete agreement between
the parties with respect to the Property and cannot be varied except by
written agreement. The parties agree that there are no oral or signed
agreements, understandings, representations or warranties made by the parties
which are not expressly set forth herein.
G. SURVIVAL. Any warranty, representation, covenant, condition or
obligation contained in this Contract not otherwise consummated at the
Closing will survive the Closing of this transaction.
H. BINDING EFFECT. This Contract shall inure to the benefit of and be
binding upon the parties to this Contract and their respective heirs, legal
representatives, successors and assigns.
I. TIME FOR PERFORMANCE. Time is of the essence under each provision
of this Contract. Strict compliance with the times for performance is
required.
J. RIGHT OF ENTRY. Upon reasonable advance notice and during normal
business hours, Purchaser, Purchaser's representatives and the Brokers have
the right to enter upon the Property prior to Closing for purposes of
viewing, inspecting and conducting studies of the Property, so long as they
do not unreasonably interfere with the use of the Property by Seller or any
tenants, or cause undue damage to the Property.
K. BUSINESS DAY. If any date of performance under this Contract falls
on a Saturday, Sunday or Texas legal holiday, such date of performance shall
be deferred to the next day which is not a Saturday, Sunday or Texas legal
holiday.
L. GOVERNING LAW. This Contract shall be construed under and governed
by the laws of the State of Texas, and unless otherwise provided herein, all
obligations of the parties created under this Contract are to be performed in
the county where the Property is located.
M. SEVERABILITY. If any provision of this Contract is held to be
invalid, illegal, or unenforceable by a court of competent jurisdiction, the
invalid, illegal or unenforceable provision shall not affect any other
provisions, and this Contract shall be construed as if the invalid, illegal,
or unenforceable provision is severed and deleted from this Contract.
N. DISCLAIMER. Purchaser understands that a real estate broker is
qualified to advise on matters concerning real estate and is not an expert in
matters of law, tax, financing, surveying, hazardous materials, engineering,
construction, safety, zoning, land planning, architecture, or the Americans
with Disabilities Act. However, the Broker(s) will disclose to Purchaser any
material factual knowledge which Broker may possess about the condition of
the Property. Purchaser acknowledges that Purchaser has been advised by the
Broker(s) to seek expert assistance on such matters. The Broker(s) do not
investigate a property's compliance with building codes, governmental
ordinances, statutes and laws that relate to the use or condition of the
Property or its construction, or that relate to its acquisition. If the
Broker(s) provide names of consultants or sources for advice or assistance,
the Broker(s) do not warrant the services of the advisors or their products
and cannot warrant the suitability of property to be acquired. The Broker(s)
do not warrant that the Seller will disclose any or all property defects or
other matters pertaining to the Property or its condition.
O. COUNTERPARTS. This Contract may be executed in a number of
identical counterparts. Each counterpart is deemed an original and all
counterparts shall, collectively, constitute one agreement.
P. GENDER; NUMBER. Unless the context requires otherwise, all pronouns
used in this Contract shall be construed to include the other genders,
whether used in the masculine, feminine or neuter gender. Words in the
singular number shall be construed to include the plural, and words in the
plural shall be construed to include the singular.
Q. MEDIATION. If any dispute arises relating to this Contract (the
"Dispute"), including but not limited to payment of the Fee, then any party
may give written notice to the other party(s) requiring all involved parties
to attempt to resolve the Dispute by mediation. Except in those circumstances
when a party reasonably believes that an applicable statute of limitations
period is about to expire, or a party requires injunctive or equitable
relief, the parties are obligated to use this mediation procedure prior to
initiating arbitration or any other action. Within seven (7) days after
receiving the mediation notice, each party must deliver a written designation
to all other parties stating the names of one or more individuals with
authority to resolve the Dispute on such party's behalf. Within ten (10) days
after the date of designation, the parties shall make a good faith effort to
select a qualified mediator to mediate the Dispute. If the parties are unable
to timely agree upon a mutually acceptable mediator, the parties shall
request any State or Federal district judge to appoint a mediator. In
consultation with the mediator, the parties shall promptly designate a
mutually convenient time and place for the mediation which is no later than
thirty (30) days after selection of the mediator. In the mediation, each
party shall be represented by persons with authority and discretion to
negotiate a resolution of the Dispute, and may be represented by counsel. The
mediation shall be governed by the provisions of Chapter 154 of the Texas
Remedies and Practice Code, and such other rules as the mediator may
prescribe. The fees and expenses of the mediator shall be shared equally by
all parties.
R. ARBITRATION. If the parties are unable to resolve any Dispute by
mediation, then the parties agree to submit the Dispute to binding
arbitration before a single arbitrator. The Dispute shall be decided by
arbitration in accordance with the applicable arbitration statute and the
then existing rules of the American Arbitration Association. Any party may
initiate the arbitration procedure by delivering a written notice of demand
for arbitration to the other parties. Within ten (10) days after the receipt
by all parties of the written notice of demand for arbitration, the parties
shall attempt to select a qualified arbitrator who is acceptable to all
parties. If the parties are unable to agree upon an arbitrator who is
acceptable to all parties, then upon application of any party a court of
competent jurisdiction shall appoint an arbitrator. This agreement to
arbitrate shall be specifically enforceable under the prevailing arbitration
law.
S. CONSULT AN ATTORNEY. This document is an enforceable, legally
binding agreement. Read it carefully. The Broker(s) involved in the
negotiation of the transaction described in this Contract cannot give you
legal advice. By law, the Broker(s) are limited to discussing factual and
business details of the transaction. The parties to this Contract
acknowledge that they have been advised by the Broker(s) to have this
Contract reviewed by legal counsel before signing this Contract to discuss
the legal effects of its terms and provisions.
- -C- Copyright 1995 NTCAR form 01 (1/95) Page 5
<PAGE>
17. ADDITIONAL PROVISIONS. [ADDITIONAL PROVISIONS AS DIRECTED BY SELLER OR
PURCHASER MAY BE SET FORTH BELOW.]
18. EXHIBITS AND ADDENDA. All Exhibits and Addenda attached to this
Contract are incorporated herein by reference and are made a part of this
Contract for all purposes. [CHECK ALL THAT APPLY.]
<TABLE>
<S> <C>
/ / Addendum A Personal Property
/X/ Exhibit A Survey and/or Legal Description / / Addendum B Financing
/X/ Exhibit B Site Plan /X/ Addendum C Inspection
/X/ Exhibit C-1 Hazco Letter / / Addendum D Disclosure Notice
/X/ Exhibit C-1 UST/Gas Pump Site Plan /X/ Addendum E Special Provisions Addendum
</TABLE>
19. CONTRACT AS OFFER. The execution of this Contract by the first party to
do so constitutes an offer to purchase or sell the Property. Unless within
five (5) days from the date of execution of this Contract by the first party,
this Contract is accepted by the other party by signing the offer and
delivering a fully executed copy to the first party, the offer of this
Contract shall be deemed automatically withdrawn and terminated, and the
Earnest Money, if any, shall be promptly returned to Purchaser.
EXECUTED on the dates stated below, to be effective on the Effective Date.
<TABLE>
<S> <C>
SELLER PURCHASER
Haggar Clothing Company R. H. A. Partnership
- ----------------------------------------- ------------------------------------------
By [SIGNATURE]: Frank D. Bracken By [SIGNATURE]: Robert W. Ricketts, III
-------------------------- ---------------------------
Name: Frank D. Bracken Name: Robert W. Ricketts, III
------------------------------------ -------------------------------------
Title: President & Chief Operating Officer Title: Managing Partner
----------------------------------- ------------------------------------
Address: 6113 Lemmon Avenue Address: 9101 Chancellor Row
--------------------------------- ----------------------------------
Dallas, Texas 75209 Dallas, Texas 75247
- ----------------------------------------- ------------------------------------------
- ----------------------------------------- ------------------------------------------
Telephone: 214-352-8481 Fax: 956-4446 Telephone: 214-905-0858 Fax:
-------------- ------------ -------------- ---------
Tax I.D. No: 75-0312650 Tax I.D. No:
----------------------------- ------------------------------
Date of Execution: 3/28/96 Date of Execution: 3/26/96
----------------------- ------------------------
PRINCIPAL BROKER COOPERATING BROKER
The Staubach Company None
- ----------------------------------------- ------------------------------------------
By [SIGNATURE]: Paul A. Whitman By [SIGNATURE]:
-------------------------- ---------------------------
Name: Paul A. Whitman Name:
------------------------------------ -------------------------------------
Title: Senior Vice President Title:
----------------------------------- ------------------------------------
Address: 6750 LBJ Freeway, Suite 1100 Address:
--------------------------------- ----------------------------------
Dallas, Texas 75240
- ----------------------------------------- ------------------------------------------
- ----------------------------------------- ------------------------------------------
Telephone: 214-385-0500 Fax: 214-385-8132 Telephone: Fax:
-------------- ------------- -------------- -------------
</TABLE>
TITLE COMPANY ACCEPTANCE. The Title Company acknowledges receipt of the
Earnest Money on ________________________________ and accepts the Earnest
Money subject to the terms and conditions set forth in this Contract.
TITLE COMPANY
- ---------------------------------------------
By [SIGNATURE]:
------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Address:
-------------------------------------
- ---------------------------------------------
- ---------------------------------------------
Telephone: Fax:
-------------- ------------
COPYRIGHT NOTICE: THIS FORM IS PROVIDED FOR THE USE OF MEMBERS OF THE NORTH
TEXAS COMMERCIAL ASSOCIATION OF REALTORS, INC. PERMISSION IS HEREBY GRANTED
TO MAKE LIMITED COPIES OF THIS FORM FOR USE IN A PARTICULAR TEXAS REAL ESTATE
TRANSACTION. CONTACT THE NTCAR OFFICE TO CONFIRM THAT YOU ARE USING THE
CURRENT VERSION OF THIS FORM
- -C- Copyright 1995 NTCAR form 01 (1/95) Page 6
<PAGE>
EXHIBIT A
SURVEY PLAT
TO ALL PARTIES INTERESTED IN PREMISES SURVEYED:
This is to certify that I have, this date, made a careful and accurate survey
on the ground of property located at Peeler Street in the City
of Dallas, Texas, described below:
BEING a tract of land situated in the MILES BENNETT SURVEY, ABSTRACT NO. 52,
Dallas County, Texas, and also a part of CITY BLOCK 5717 in the City of
Dallas, Texas, and being more particularly described by metes and bounds as
follows:
BEGINNING at an iron rod for corner at the intersection of the Southeast line
of Haggar Way (a 50' wide road) with the Southwest line of the M. K. & T.
right-of-way (40' wide);
THENCE South 43 degrees 30 minutes East along said Southwest line of the
M.K.& T. Railway for a distance of 590.0 feet to an iron rod for corner in the
Northwest line of Atwell Street (50' wide);
THENCE South 46 degrees 44 minutes West along said Northwest line of Atwell
Street for a distance of 300.9 feet to an iron rod for corner in the
Northeast line of Peeler Street (50' wide);
THENCE North 43 degrees 27 minutes 40 sec. W. along said Northeast line
Peeler Street for a distance of 590.0 feet to an iron rod for corner in the
Southeast line of Haggar Way;
THENCE North 46 degrees 44 minutes East along said Southeast line of Haggar
Way for a distance of 300.5 feet to the PLACE OF BEGINNING.
CONTAINING 177,411.53 square feet or 4.07 acres of land.
<PAGE>
EXHIBIT "B"
[MAP]
<PAGE>
EXHIBIT C-1
[LOGO]
[LETTERHEAD]
January 9, 1990
Texas Water Commission
1019 N. Duncanville Road
Duncanville, Texas 75116-2201
Attn: Dixon Bunt
Dear Mr. Bunt:
In regards to Haggar Apparel, 6120 Peeler Street, Dallas, Texas, Dallas
County. Hazco removed concrete in and around shop area where Haggar thought
fuel storage tanks were on this property. Property was bought from another
company. Haggar investigated people from the other company to try and locate
the tank or tanks on above property to no avail. The reason for excavation
was due to Haggar employees possibly remembering dispensing pump at location
around old shop area. Due to the time laps involving this matter Haggar felt
it necessary to explore area for tank or tanks. Hazco felt it necesarry to
explore area for tank or tanks. Hazco investigated area by excavating and
metal detectors. There is no sign of any tank or tanks or old excavation on
above site.
Hopefully Haggar and Hazco have demonstrated in good faith and effort
this site has never been used or exposed to dispensing of petroleum products.
If you have any further questions, please feel free to call.
Regards,
/s/ Jim McKee
Jim McKee
<PAGE>
EXHIBIT C-2
[MAP]
<PAGE>
NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark-
ADDENDUM C TO CONTRACT OF SALE
INSPECTION
PROPERTY ADDRESS OR DESCRIPTION: 6120 Peeler Street, Dallas, Texas
A. INSPECTION PERIOD. Purchaser shall have a period of thirty (30) days after
the Effective Date (the "Inspection Period") to inspect the Property and to
conduct feasibility studies regarding Purchaser's intended use of the
Property. Purchaser's studies may include without limitation: (i) core
borings; (ii) environmental and architectural tests and investigations; (iii)
physical inspections of all improvements, fixtures, equipment, subsurface
soils, structural members, and personal property; and (iv) examination of
plans, specifications, manuals, and other documents relating to the
construction and condition of the Property. Purchaser and Purchaser's
agents, employees, consultants and contractors shall have the right of
reasonable entry onto the Property during normal business hours, and upon
reasonable advance notice to Seller and/or Seller's tenants, for purposes of
the inspections, studies, tests and examinations deemed necessary by
Purchaser. All inspections, studies, tests and examinations performed
hereunder shall be at Purchaser's expense.
B. REPORTS.
/ / (1) Within ________________ (____) days after the Effective Date, Seller
shall deliver to Purchaser a written report of an environmental assessment of
the Property. The report shall be prepared, at Seller's expense, by a
Registered Professional Engineer reasonably acceptable to Purchaser, who is
proficient or certified in environmental risk assessment. The environmental
assessment report must include a "Phase I" investigation into the existence
to Hazardous Materials (as defined in Paragraph 7.A.(7) of this Contract) on
or around the Property. The environmental assessment must also include a
land use history search, engineering inspections, studies and/or tests which
may be necessary to discover the existence, past or present, of Hazardous
Materials.
/X/ (2) See paragraph B(2) of Addendum E.
/X/ (3) As soon as reasonably possible after they become available to
Purchaser, Purchaser shall deliver to Seller, at Purchaser's expense, copies
of all written reports, inspections, plats, drawings and studies made by
Purchaser and Purchaser's agents, consultants and contractors. This
provision shall survive the termination of this Contract.
C. TERMINATION. If Purchaser determines, in Purchaser's sole discretion, no
matter how arbitrary, that the Property is not in satisfactory condition or
is not suitable for Purchaser's intended use or purpose, then Purchaser may
terminate this Contract by delivering a written notice to Seller on or before
the last day of the Inspection Period, and the refundable portion of the
Earnest Money shall be promptly returned by the Title Company to Purchaser
and neither party shall have any further rights or obligations under this
Contract (except for those which may expressly survive the termination of
this Contract).
D. ACCEPTANCE. If Purchaser does not properly and timely terminate this
Contract before the expiration of the Inspection Period (or if Purchaser
accepts the Property in writing) then Purchaser will be deemed to have waived
all objections to the Property under this Contract, except for any title
objections which may be outstanding pursuant to Section 6 of this Contract.
In that event, Purchaser agrees to purchase the Property in its current
condition without any further representations or warranties of Seller, except
any objections which Seller may expressly agree in writing to cure, and this
Contract shall continue in full force and effect and the parties shall
proceed to Closing. However, this provision does not limit or invalidate any
express representations or warranties Seller has made in this Contract.
E. RESTORATION. If the transaction described in this Contract does not
close, through no fault of Seller, and the condition of the Property was
altered due to tests and inspections performed by Purchaser or on Purchaser's
behalf, Purchaser must restore the Property to its original condition. This
provision shall survive the termination of this Contract.
FDB
- -C- Copyright 1995 NTCAR form 01(1/95) Initials: Seller______ Purchaser: RWR
<PAGE>
ADDENDUM E
SPECIAL PROVISIONS ADDENDUM
---------------------------
PROPERTY: 6120 Peeler Street, Dallas, Texas
SELLER: Haggar Clothing Company
PURCHASER: R.H.A. Partnership
This Special Provisions Addendum (herein so called) is attached to and
made a part of that one certain Contract of Sale (the "Contract"), by and
between HAGGAR CLOTHING COMPANY, as "Seller", and R.H.A. PARTNERSHIP, as
"Purchaser." In the event a conflict arises between the provisions of this
Special Provisions Addendum and any other part of this Contract, this Special
Provisions Addendum shall modify and supersede such other part of this
Contract to the extent necessary to eliminate any such conflict but no
further. All terms which are defined in the Contract shall have the same
meaning when used herein, unless otherwise defined herein.
A. PROPERTY DESCRIPTION. The property described in EXHIBIT "A"
attached hereto is an approximate description of the Property to be conveyed
hereunder and is attached for reasonable identification of the Property.
The exact description to be used for purposes of this Contract and the
conveyance documents shall be the metes and bounds description set forth on
the Survey, which description shall become a part of this Contract at the
description of the Property and shall be incorporated herein by reference for
all purposes.
B. INSPECTION. In addition to the provisions set forth in Addendum C
to the Contract, the following provisions shall apply:
1. All tests, studies and inspections are to be conducted in a
manner as not to physically damage the Property or unreasonably
interfere with the usual operation of the Property by Seller.
Purchaser and its agents and representatives shall: (a) promptly
pay when due the costs of all tests, investigations and
examinations done with regard to the Property in connection with
Purchaser's inspection; (b) not permit any liens to attach to
the Property by reason of the exercise of Purchaser's rights
hereunder; (c) restore the surface of the Property and any
improvements thereon to the condition in which the same were
found before any such inspections or tests were undertaken; and
(d) not reveal or disclose any information obtained during the
Inspection Period concerning the Property to anyone outside
Purchaser's organization. Purchaser hereby indemnifies and
holds Seller harmless from and against any and all liens,
claims, causes of action, and expenses (including reasonable
attorney's fees) arising out of any violation of the provisions
of this Paragraph B of Addendum E. Notwithstanding any provision
of this Contract, no termination of this Contract shall
terminate Purchaser's obligations pursuant to this Paragraph
13.B. of this Contract shall not be applicable to any cause of
action arising pursuant to this Paragraph B of Addendum E.
2. Within ten (10) days after the Effective Date, Seller
agrees to allow Purchaser, its authorized agents or
representatives, to inspect and make copies at its own expense
of engineering investigations, tests and/or environmental
studies in Seller's possession which have been made with
respect to the Property
<PAGE>
within the one-year period prior to the Effective Date.
Purchaser acknowledges that any and all of the studies are
proprietary and confidential in nature, and will be made
available to Purchaser solely to assist Purchaser in determining
the feasibility of purchasing the Property. Purchaser agrees
not to disclose the studies, or any of the provisions, terms or
conditions thereof, to any party outside of Purchaser's
organization, except as to its attorneys, accountants, lenders
or investors. Purchaser shall return all of the studies, and
any and all copies Purchaser has made of the studies, and all
copies of any studies, reports or test results obtained by
Purchaser in connection with its inspection of the Property, on
the first to occur of (a) such time as Purchaser determines that
it shall not acquire the Property, or (b) such time as this
Contract is terminated for any reason. Purchaser hereby
acknowledges that Seller has not made and does not make any
warranty or representation regarding the truth or accuracy of
the studies or the source thereof. Seller has not undertaken
any independent investigation as to the truth or accuracy of the
studies and is providing the studies solely as an accommodation
to Purchaser. In permitting Purchaser to review such studies or
information to assist Purchaser, no third-party benefits or
relationships of any kind, either express or implied, have been
offered, intended, or created by Seller, and any such claims are
expressly rejected by Seller and waived by Purchaser.
C. AS-IS. Notwithstanding anything contained in this Contract to the
contrary except for the representations and warranties set forth herein,
Purchaser has examined and investigated or may examine or investigate the
Property prior to the expiration of the Inspection Period, and Purchaser will
rely solely on its own investigation of the Property and not on any
information provided or to be provided by or on behalf of Seller except for
the representations and warranties set forth herein. Except as expressly set
forth herein, it is understood and agreed that Seller is making no
representations or warranties, whether express or implied, by operation of
law or otherwise with respect to (i) environmental matters of any nature or
kind whatsoever relating to the Property or any portion thereof, including,
without limitation, compliance with any environmental protection, underground
storage tanks, pollution or land use laws, rules, regulations, orders or
requirements and the existence in or on the Property of any hazardous or
toxic materials; (ii) geological conditions, including, without limitation,
subsidence, subsurface conditions, water table, underground water reservoirs,
and limitations regarding withdrawal of water therefrom; (iii) whether or not
and to the extent to which the Property or any portion thereof is affected by
any stream (surface or underground), body of water, floodprone area, flood
plain, floodway or special flood hazard; (iv) drainage; (v) soil conditions;
(vi) zoning to which the Property or any portion thereof may be subject;
(vii) availability of any utilities to the Property or any portion thereof,
including without limitation, water, sewage, gas and electric; (viii) usage
of any adjoining property; (ix) access to the Property or any portion
thereof; (x) the compliance or non-compliance of any of the Property with any
applicable federal, state or local building codes, ordinances, laws,
statutes, rules or regulations; (xi) the value, compliance with plans or
specifications, locations, use, merchantability, construction, workmanlike
condition, order, repair, maintenance, design, quality, description,
durability, operation or condition of the Property or any portion thereof;
(xii) the quality of labor and materials included in the Improvements; (xiii)
the suitability of the Property or any portion thereof for Purchaser's
purposes or fitness for any usage or purpose whatsoever; or (xiv) any other
matter relating to the Property. Except as expressly provided herein,
Purchaser hereby agrees that Purchaser is accepting the Property "AS IS,
WHERE IS, WITH ALL FAULTS AND WITHOUT ANY REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED", subject to all
ADDENDUM E Page 2
<PAGE>
deficiencies or other matters whether known or unknown; however, non of the
foregoing shall impair or further restrict the special warranty of title by
which the Property is to be conveyed pursuant to this Contract or the
representations and warranties set forth herein.
D. DISCLOSURE-UNDERGROUND STORAGE TANKS. Attached to this Contract as
EXHIBIT "C-1" is a letter dated January 9, 1990 from Hazco to the Texas Water
Commission regarding the possible existence of underground storage tanks
under the Property. Attached to this Contract as EXHIBIT "C-2" is an old site
plan showing the possible existence at some point in time of gas pumps on the
Property. Purchaser acknowledges and understands that (i) the letter and the
site plan described in the preceding 2 sentences are provided to Purchaser as
full and complete disclosure by Seller of all information in the possession
of Seller in connection with the possible existence of underground storage
tanks under the Property, and (ii) Seller is making no representation or
warranty regarding the existence or non-existence of underground storage
tanks under the Property. Purchaser has reviwed EXHIBITS "C-1" and "C-2" and
Purchaser is entering into this Contract with knowledge of the disclosures
made by Seller as set forth in this Paragraph D.
SELLER:
HAGGAR CLOTHING COMPANY
By: /s/ FRANK D. BRACKEN
-----------------------------------------
Name (Print): Frank D. Bracken
-------------------------------
Title: President and Chief Operating Officer
--------------------------------------
PURCHASER:
R.H.A. PARTNERSHIP
By: /s/ ROBERT W. RICKETTS, III
-----------------------------------------
Robert W. Ricketts, III,
Managing Partner
ADDENDUM E Page 3
<PAGE>
AMENDMENT TO CONTRACT OF SALE
DATE: April 22, 1996
--------------------------
GF NO. 396506-S UP/cde
DATE OF CONTRACT: March 28, 1996
SELLER: HAGGAR CLOTHING COMPANY
PURCHASER: R.H.A. Partnership
PROPERTY:
6120 Peeler Street, City of Dallas, Dallas County, Texas.
(Item 4. A.) of the Earnest Money Contract shall be amended to read in its
entirety:
A. EARNEST MONEY DEPOSIT. Within two business days after the
Effective Date of this Contract, Purchaser shall deposit earnest money
in the form of a certified or cashier's check in the amount of
$10,000.00 (the "Earnest Money") payable to American Title Company c/o
Hardin & Hardin Associates, P. C. 717 North Harwood Street, 2610 Maxus
Energy Tower, Dallas, Texas 75201 214/969-5300--214/969-5348 FAX (the
"Title Company"), in its capacity as escrow agent, to be held in escrow
pursuant to the terms of this Contract. Seller's acceptance of this
contract is expressly conditioned upon Purchaser's timely deposit of the
Earnest Money with the Title Company. If Purchaser fails to timely
deposit the Earnest Money, Seller may, at Seller's option, terminate this
Contract by delivering a written termination notice to Purchaser.
Notwithstanding anything herein to the contrary, a portion of the
Earnest Money in the amount of $100.00 shall be non-refundable and shall
be distributed to Seller at Closing or other termination of this
Contract as full payment and independent consideration for Seller's
performance under this Contract. If this Contract is properly
terminated by Purchaser pursuant to a right of termination granted to
Purchaser by any provision of this Contract, or any attached Addenda,
the Earnest Money, less the non-refundable portion, shall be promptly
refunded to Purchaser, and the parties shall have no further rights or
obligations under this Contract (except for those which may expressly
survive the termination). The Earnest Money shall be placed in an
interest-bearing account by the Title Company, and any interest earned
thereon shall become a part of the Earnest Money. At Closing the Earnest
Money shall be applied to the Purchase Price.
The sole purpose of the amendment is to change the name of the Title Company
from Chicago Title Insurance Company to American Title Company.
All other provisions of the Contract of Sale shall remain unchanged.
<PAGE>
HAGGER CLOTHING COMPANY
By: [Name Illegible]
-----------------------------------
R.H.A. PARTNERSHIP
By:
-----------------------------------
<PAGE>
SECOND AMENDMENT TO COMMERCIAL CONTRACT OF SALE
STATE OF TEXAS )
)
COUNTY OF DALLAS )
THIS SECOND AMENDMENT TO COMMERCIAL CONTRACT OF SALE (the "Second
Amendment") is made by and between Haggar Clothing Co., a Nevada corporation
(the "Seller") and R.H.A. Partnership, a Texas general partnership (the
"Purchaser").
INTRODUCTORY PROVISIONS:
The following provisions form a part of and are incorporated into this
Second Amendment:
A. Seller and Purchaser have previously entered into that certain
Commercial Contract of Sale dated effective March 28, 1996 (the "Contract"),
which Contract is incorporated herein by reference, wherein Seller agreed to
sell and convey to Purchaser, upon the terms and conditions therein contained,
that certain real property (the "Property") described in the Contract.
B. By Amendment to Contract of Sale dated April 22, 1996, Seller and
Purchaser amended the Contract to change the name of Title Company.
C. Seller and Purchaser now desire to further amend the Contract as set
forth herein.
NOW, THEREFORE, for and in consideration of the agreements set forth herein
and the sum of Ten and No/100 Dollars ($10.00) paid by the Purchaser and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, the parties hereby agree as follows:
1. INSPECTION PERIOD. The Inspection Period is extended from April 29,
1996 until May 10, 1996.
2. MISCELLANEOUS.
a. The terms of the Contract, as modified by this Second Amendment,
are valid, binding and in full force and effect.
b. Except as otherwise defined herein, all defined terms set forth
herein shall have the same meaning as set forth in the Contract. The
Contract as amended by this Second Amendment, embodies the entire
agreement between
SECOND AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 1
<PAGE>
the parties hereto, supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof,
and may be amended or supplemented only by an instrument in writing
executed by the party against whom enforcement is sought.
(c) This Second Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.
(d) This Second Amendment shall be binding upon and shall inure to
the benefit of the parties and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
(e) Each party is entitled to rely on a facsimile signature of any
other party to this Second Amendment upon receipt by facsimile
transmission via telecopier. Any party initially providing his or her
signature via telecopier shall deliver an original signature page to
the other parties promptly after transmission of the facsimile.
(f) This Second Amendment may be executed in a number of identical
counterparts, each of which constitute collectively one agreement; but
in making proof of this Second Amendment, it shall not be necessary to
produce or account for more than one such counterpart. It is not
necessary that each party execute the same counterpart so long as
identical counterparts are executed by all parties.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
to be effective as of the 29th day of April, 1996.
SELLER:
HAGGAR CLOTHING CO.
By: /s/ FRANK D. BRACKEN
-----------------------------------
Name (Print): Frank D. Bracken
--------------------------
Title: President & CEO
---------------------------------
PURCHASER:
R.H.A. PARTNERSHIP
By: /s/ ROBERT W. RICKETTS, III,
-----------------------------------
ROBERT W. RICKETTS, III,
Managing Partner
SECOND AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 2
<PAGE>
THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE
STATE OF TEXAS )
)
COUNTY OF DALLAS )
THIS THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE (the "Third Amendment")
is made by and between HAGGAR CLOTHING CO., a Nevada corporation (the "Seller")
and R.H.A. PARTNERSHIP, a Texas general partnership (the "Purchaser").
INTRODUCTORY PROVISIONS:
The following provisions form a part of and are incorporated into this
Third Amendment:
A. Seller and Purchaser have previously entered into that certain
Commercial Contract of Sale dated effective March 28, 1996 (the "Original
Contract"), which Original Contract is incorporated herein by reference,
wherein Seller agreed to sell and convey to Purchaser, upon the terms and
conditions therein contained, that certain real property (the "Property")
described in the Original Contract.
B. By Amendment to Contract of Sale dated April 22, 1996 (the "First
Amendment"), Seller and Purchaser amended the Original Contract to change the
name of Title Company.
C. The Original Contract was further amended by that certain Second
Amendment to Commercial Contract of Sale dated to be effective as of April
29, 1996 (the "Second Amendment") whereby Seller and Purchaser agreed to
extend the Inspection Period (the Original Contract, the First Amendment and
the Second Amendment are hereinafter collectively referred to as the
"Contract").
D. Seller and Purchaser now desire to further amend the Contract as set
forth herein.
NOW, THEREFORE, for and in consideration of the agreements set forth
herein and the sum of Ten and No/100 Dollars ($10.00) paid by the Purchaser
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged and confessed, the parties hereby agree as
follows:
1. APPROVAL OF TITLE, SURVEY AND PROPERTY. Purchaser hereby acknowledges
and agrees that, except as set forth in paragraph 2 below, the Title
Commitment, the Survey and the Property are satisfactory to and are hereby
approved by Purchaser.
THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 1
<PAGE>
Except as set forth in paragraph 2 below, Purchaser waives all
contingencies set forth in the Contract.
2. APPRAISAL. Purchaser will have until the expiration of the Inspection
Period, as extended in paragraph 3 below, to deliver to Comerica Bank
(Purchaser's lender in connection with this transaction) an appraisal
satisfactory to Comerica Bank. If Purchaser is not able to satisfy
Comerica Bank regarding an appraisal of the Property, Purchaser shall have
the right to terminate the Contract by written notice delivered to Seller,
in which event the Earnest Money shall immediately be returned to Purchaser
and the parties shall have no further obligation one to the other, except
for those obligations which expressly survive the termination of the
Contract. If Purchaser fails to timely terminate the Contract as described
in the preceding sentence, Purchaser shall be deemed to have waived the
contingency described in this paragraph 2 and Purchaser shall proceed to
close the transaction as contemplated by the Contract.
3. INSPECTION PERIOD. The Inspection Period is extended from May 10,
1996 until June 7, 1996.
4. REMEDIATION WORK. Prior to Closing, Seller will remove the fire break
panels containing asbestos as described in that certain Environmental Site
Assessment and Limited Asbestos Survey dated April 22, 1996 prepared by
Koos & Associates. Such remediation work will be done at Seller's sole
cost and expense and will comply with all applicable laws, regulations and
ordinances. Seller and Purchaser agree that the removal of the fire break
panels in accordance with the terms set forth in this Paragraph 4 will be a
condition precedent to Purchaser's obligation to consummate the transaction
contemplated by the Contract.
5. WALKWAY, CONVEYOR AND CABLING.
(a) Seller and Purchaser acknowledge and agree that an elevated
walkway connects the building on the Property to another building
owned by Seller located north of the Property at 6113 Lemmon Avenue,
Dallas, Texas ("6113 Lemmon Avenue Property"). The elevated walkway
is labeled "Overpass" and is shown on a survey of the Property dated
April 24, 1996 prepared by Mark A. Pacheco, R.P.L.S. No. 4900. The
elevated walkway is constituted of a pedestrian walkway, certain
conveyor equipment and computer and telecommunication cabling. The
cabling connects computer and telecommunications equipment in the 6113
Lemmon Avenue Property to computer and telecommunications equipment in
the building owned by Seller at 6020 Cedar Springs, Dallas, Texas
("6020 Cedar Springs Property").
(b) At Closing, Seller and Purchaser shall execute and deliver
an Easement Agreement which will include the following provisions:
THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 2
<PAGE>
(i) Purchaser grants to Seller a nonexclusive easement (the
"Easement") allowing the cabling in the building on the Property
to remain in its current location and allowing Seller access to
the cabling for repairs and replacements. The Easement will also
allow the elevated walkway to remain in its current location.
(ii) the Easement will automatically terminate 30 days after
the closing and funding of the sale by Seller of the 6020 Cedar
Springs Property.
(iii) Prior to the termination of the Easement, Seller, at
Seller's expense, will remove from the Property, the walkway, the
conveyor, and if desired by Purchaser, the cabling.
(iv) the Easement Agreement will contain other provisions and
be in form and content satisfactory to Seller and Purchaser.
MISCELLANEOUS.
(a) The terms of the Contract, as modified by this Third Amendment,
are valid, binding and in full force and effect.
(b) Except as otherwise defined herein, all defined terms set forth
herein shall have the same meaning as set forth in the Contract. The
Contract, as amended by this Third Amendment, embodies the entire
agreement between the parties hereto, supersedes all prior agreements
and understandings, if any, relating to the subject matter hereof, and
may be amended or supplemented only by an instrument in writing
executed by the party against whom enforcement is sought.
(c) This Third Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.
(d) This Third Amendment shall be binding upon and shall inure to
the benefit of the parties and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
(e) Each party is entitled to rely on a facsimile signature of any
other party to this Third Amendment upon receipt by facsimile
transmission via telecopier. Any party initially providing his or her
signature via telecopier shall deliver an original signature page to
the other parties promptly after transmission of the facsimile.
(f) This Third Amendment may be executed in a number of identical
counterparts, each of which constitute collectively one agreement; but
in making proof of this Third Amendment, it shall not be necessary to
produce
THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 3
<PAGE>
or account for more than one such counterpart. It is not
necessary that each party execute the same counterpart so long
as identical counterparts are executed by all parties.
IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment
to be effective as of the 10th day of May, 1996.
SELLER:
HAGGAR CLOTHING CO.
By: /s/ J.M. HAGGAR III
-------------------------------------
Name (Print): J.M. Haggar III
----------------------------
Title: Chairman & CEO
----------------------------------
PURCHASER:
R.H.A. PARTNERSHIP
By: /s/ ROBERT W. RICKETTS, III,
--------------------------------
ROBERT W. RICKETTS, III,
Managing Partner
THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 4
<PAGE>
EXHIBIT 11
HAGGAR CORP. AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
<TABLE>
1996 1995 1994 1993 1992
--------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net income (loss) to common stockholders $ (2,420) $ 9,809 $ 25,681 $ 15,012 $ 11,315
Weighted average common shares and
common share equivalents outstanding 8,552 8,623 8,700 7,956 5,805
--------- -------- --------- --------- ---------
Net Income (loss) per common share and
common share equivalent $ (0.28) $ 1.14 $ 2.95 $ 1.88 $ 1.95
--------- -------- --------- --------- ---------
--------- -------- --------- --------- ---------
Computation of net income (loss) to
common stockholders:
Net income (loss) $ (2,420) $ 9,809 $ 25,681 $ 15,012 $ 12,432
Cumulative preferred stock dividend - - - - (1,117)
--------- -------- --------- --------- ---------
$ (2,420) $ 9,809 $ 25,681 $ 15,012 $ 11,315
--------- -------- --------- --------- ---------
--------- -------- --------- --------- ---------
Computation of weighted average common shares and
Common share equivalents outstanding:
Weighted average common shares outstanding 8,551 8,546 8,537 5,928 5,805
Share equivalents, due to stock options(1) 1 77 163 - -
Preferred shares converted to common shares - - - 622 -
New common shares issued - - - 1,406 -
--------- -------- --------- --------- ---------
8,552 8,623 8,700 7,956 5,805
--------- -------- --------- --------- ---------
--------- -------- --------- --------- ---------
</TABLE>
(1) Common share equivalents due to stock options have been calculated
using the treasury stock method and the average stock price for both
the primary and fully diluted earnings per share.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Company's previously
filed Registration Statement on Form S-8 File No. 33-75676. It should be
noted that we have not audited any financial statements of the Company
subsequent to September 30, 1996 or performed any audit procedures subsequent
to the date of our report.
/s/ ARTHUR ANDERSEN LLP
-----------------------------
Arthur Andersen LLP
Dallas, Texas
December 20, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF
THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 2,944
<SECURITIES> 0
<RECEIVABLES> 75,456
<ALLOWANCES> 900
<INVENTORY> 116,356
<CURRENT-ASSETS> 209,912
<PP&E> 126,317
<DEPRECIATION> 60,557
<TOTAL-ASSETS> 278,334
<CURRENT-LIABILITIES> 73,740
<BONDS> 0
0
0
<COMMON> 856
<OTHER-SE> 161,626
<TOTAL-LIABILITY-AND-EQUITY> 278,334
<SALES> 437,942
<TOTAL-REVENUES> 437,942
<CGS> 315,351
<TOTAL-COSTS> 324,031
<OTHER-EXPENSES> 8,680
<LOSS-PROVISION> (686)
<INTEREST-EXPENSE> 4,293
<INCOME-PRETAX> (3,406)
<INCOME-TAX> (986)
<INCOME-CONTINUING> (2,420)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,420)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
