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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, 1997
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 15, 1997 there were 8,551,382 shares of common stock
outstanding. The aggregate market value of the 7,472,820 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 $119,565,120.
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-Registered
Trademark- brand name and offers a more moderately priced line of products
under its Reed St. James-Registered Trademark- 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 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 income from the sale 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, 1997, the Company had opened 41 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 consist 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-REGISTERED TRADEMARK-. The Company's Haggar brands represented 77.3%
of total apparel sales in fiscal 1997. 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 CasualsTM. 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 CasualsTM is a fashionable line of coordinated coats,
vests, pants and shirts designed to meet the need for "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.
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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 41 outlet
malls throughout the United States.
THE HORIZON GROUP. The Company's mass retailer division, The Horizon Group,
markets Reed St. James-Registered Trademark- 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,
have been generally sold to mass market retailers, such as Wal-Mart, Bradlees
and Venture. The Horizon Group 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.
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 Company's private label products are
primarily sold to major department stores and mass market merchandisers,
including J.C. Penney, Wal-Mart 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 has
further expanded its product base in 1997 through the release of the Black
Label-TM- and Cotton Flex-TM- products. 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.
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 49.4%, 50.8%, and 50.7% of net sales
during the fiscal years ending September 30, 1997, 1996 and 1995,
respectively. The Company's largest current customer, J.C. Penney Company,
Inc., accounted for 27.3%, 26.3% and 28.7% of the Company's net sales during
the fiscal years ending September 30, 1997, 1996 and 1995, 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. 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 sport coats, and holds the number
two market share in men's casual pants.
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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 1997, approximately 25% 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 all of
its domestic-made products. A portion of all product lines manufactured by
the Company are produced domestically with the exception of shirts.
Approximately 22% of the Company's foreign-made products were manufactured by
facilities owned by the Company in Mexico and the Dominican Republic, with
the remaining 78% manufactured by unaffiliated companies in the Far East,
Asia, South America, Central America, Mexico and the Dominican Republic.
In 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 was completed in fiscal 1997. It is
anticipated that the restructuring will result in approximately 15% of the
Company's products being manufactured in the United States during fiscal
1998, with the other 85% manufactured in foreign countries. (See Item 7.-
Management's 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 56% of the Company's fabric and trim
requirements during the fiscal year ended September 30, 1997. The Company has
no long-term contracts with any of its suppliers, but does not anticipate
substantial shortages of raw materials in 1998.
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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 or more 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 2,600 persons domestically and 1,700
persons in foreign countries. In 1997, approximately 3,300 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. The Company
consolidated its three Texas sewing operations into one facility in 1997,
which resulted 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 are set forth below:
<TABLE>
<CAPTION>
Approximate Owned/ Lease
Location Use Square Footage Leased Expiration
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dallas, Texas Headquarters 443,000 Owned
Dallas, Texas Warehouse 157,000 Leased 1998
Fort Worth, Texas Warehouse
& Distribution 660,000 Owned
Dallas, Texas Storage 60,000 Owned
Weslaco, Texas Fabric Cutting 115,000 Owned
Weslaco, Texas (1) Excess Facility 95,000 Leased 1999
Weslaco, Texas Warehouse 137,000 Owned
Edinburg, Texas Fabric Cutting &
Manufacturing 121,000 Owned
Leon, Mexico Manufacturing 39,000 Owned
La Romana, Dom. Rep. Manufacturing 41,000 Leased 2001
Higuey, Dom. Rep. Manufacturing 13,000 Leased 2011
Robstown, Texas (1) Excess Facility 68,000 Owned
Oklahoma City (1) Excess Facility 95,000 Leased 2001
Various (42 locations) (2) Retail Sales 90,000 Leased 1997 - 2003
</TABLE>
(1) 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.
(2) These properties are the Company's 41 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 $2.8 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 Customer Service
Center (CSC) in Fort Worth, Texas 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 to 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.
In addition, the Company has been named as a defendant in two legal actions
arising out of the collapse of the roof of the Company's warehouse during the
storm of May 5, 1995. Although the amount of any liability that could arise
with respect to such actions cannot be accurately predicted, the Company does
not believe any such liability will have a material adverse effect on the
financial position of the Company.
The Company maintains general liability, workers' compensation, and employers
liability insurance. The Company intends to pass the costs associated with
lawsuits to its insurance carriers, under the applicable policies, if any,
subject to the deductible limits and other provisions and exclusions of those
policies.
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.
1997 FISCAL QUARTER
-------------------------------------------------------------
1st 2nd 3rd 4th
-------------------------------------------------------------
High 18 3/4 17 3/4 15 15 1/2
Low 14 1/2 11 7/8 11 1/2 11 5/8
Dividend $0.05 $0.05 $0.05 $0.05
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
As of November 15, 1997, the Company had approximately 250 stockholders of
record and approximately 3,600 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, 1997, is derived from
financial statements of the Company which have been audited by Arthur
Andersen LLP, independent public accountants.
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996 1995 1994 1993
----------- ------------ ----------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $ 406,030 $ 437,942 $ 448,532 $ 491,235 $ 394,059
Cost of goods sold 287,434 315,351 324,699 345,846 285,540
Restructuring charge (1) - 8,680 1,244 - -
----------- ------------ ----------- ----------- ----------
Gross profit 118,596 113,911 122,589 145,389 108,519
Selling, general and administrative expenses (113,061) (113,037) (110,432) (106,258) (87,473)
Restructuring charge (1) - (5,320) - - -
Gain from storm damage (2) - 1,140 4,807 - -
Royalty income 2,076 2,630 3,049 2,655 2,512
----------- ------------ ----------- ----------- ----------
Operating income (loss) 7,611 (676) 20,013 41,786 23,558
Other income, net 1,954 1,563 786 1,510 1,238
Interest expense (3,525) (4,293) (4,995) (1,273) (1,506)
----------- ------------ ----------- ----------- ----------
Income (loss) from operations before
provision (benefit) for income taxes 6,040 (3,406) 15,804 42,023 23,290
Provision (benefit) for income taxes 2,297 (986) 5,995 16,342 8,278
----------- ------------ ----------- ----------- ----------
Net income (loss) $ 3,743 $ (2,420) $ 9,809 $ 25,681 $ 15,012
----------- ------------ ----------- ----------- ----------
----------- ------------ ----------- ----------- ----------
Net income (loss) per common share $ 0.44 $ (0.28) $ 1.14 $ 2.95 $ 1.88
Cash dividends declared per common share $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.10
Weighted average number of common shares 8,555 8,552 8,623 8,700 7,956
BALANCE SHEET DATA (AT PERIOD END):
Working capital $ 126,554 $ 136,172 $ 178,849 $ 130,644 $ 111,679
Total assets 262,053 278,334 315,352 257,298 206,253
Long-term debt 31,800 42,112 78,585 15,032 5,455
Stockholders' equity 164,514 162,482 166,406 158,002 133,399
</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 year 1995, the Company elected
to close certain operating plants, which resulted in a $1.2 million
nonrecurring charge.
(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.
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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,
1997, 1996 and 1995.
Year Ended September 30,
1997 1996 1995
------- ------- -------
Net sales 100.0% 100.0% 100.0%
Cost of goods sold (70.8) (72.0) (72.4)
Restructuring charge - (2.0) (0.3)
------- ------- -------
Gross profit 29.2 26.0 27.3
Selling, general and
administrative expenses (27.8) (25.8) (24.6)
Restructuring charge - (1.2) -
Gain from storm damage - 0.2 1.1
Royalty income 0.5 0.6 0.7
------- ------- -------
Operating income (loss) 1.9 (0.2) 4.5
Other income, net 0.5 0.4 0.1
Interest expense (0.9) (1.0) (1.1)
------- ------- -------
Income (loss) from operations
before provision (benefit)
for income taxes 1.5 (0.8) 3.5
Provision (benefit) for taxes 0.6 (0.2) 1.3
------- ------- -------
Net income (loss) 0.9% (0.6)% 2.2%
------- ------- -------
FISCAL 1997 COMPARED TO FISCAL 1996.
Net sales decreased 7.3% to $406.0 million in fiscal 1997 compared to net
sales of $437.9 million in fiscal 1996. The decrease in net sales during
fiscal 1997 reflects a 9.9% decrease in unit sales offset by a 2.4% increase
in average sales price. Net sales for 1997 decreased from the 1996 level
mainly due to two major product conversions for two of the Company's more
significant customers. Net sales were also less than expected in 1997 mainly
related to shipping difficulties as a result of the implementation of a new
order fulfillment system. The order fulfillment system is currently
operating substantially as intended.
Gross profit as a percent of net sales increased to 29.2% in 1997 compared to
26.0% in 1996. The increase in gross profit as a percent of net sales was
due in part to a reduction in manufacturing costs as a result of the
consolidation of manufacturing operations completed in 1997.
Selling, general and administrative expenses as a percent of net sales
increased to 27.8% in fiscal 1997 from 25.8% in fiscal 1996. Selling,
general and administrative expenses remained constant at $113.0 million for
1997 and 1996. The consistency in selling, general and administrative
expenses during fiscal 1997 was primarily the cumulative result of (i) an
increase in depreciation expense of approximately $2.6 million related to the
Customer Service Center ("CSC"), (ii) a decrease of approximately $7.2
million in distribution costs in 1997 resulting from reduced labor required
to operate the CSC in 1997, (iii) severance costs of $2.4 million
resulting from a reorganization of the Company's sales force and a reduction
in corporate personnel, (iv) a
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decrease of $2.3 million in commissions due to decreased sales, and (v) an
increase of approximately $4.4 million in expenses related to the opening and
operations of 13 new retail stores during fiscal 1997 and a full year of
operations for stores opened in fiscal 1996.
The Company is currently negotiating leases for 11 new retail outlet stores
which are planned to be opened in fiscal 1998. The Company intends to
continue to evaluate the growth potential for retail outlet malls and may
open additional retail stores as opportunities arise.
Other income, net, increased in fiscal 1997 to $2.0 million from $1.6 million
in fiscal 1996, primarily as the result of an approximate $1.0 million
recovery of historical losses from the dissolution of the Company's joint
venture in the United Kingdom with Coats Viyella, Plc.
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. The Company has
been able to overcome 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 1995. However, gross profit
in both years was adversely impacted by inventory and sales price markdowns
resulting from the Company's efforts to reduce excess inventories.
The manufacturing restructuring charge was 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. 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.
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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.
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.
Other income, net, 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.
INCOME TAXES.
The Company's income tax provision, as a percent of income from operations
before income tax, was 38.0% in fiscal 1997. Comparatively, the Company's
income tax provision/benefit, as a percent of income/loss from operations
before income tax, was 28.9% and 37.9% in fiscal 1996 and 1995, respectively.
For fiscal 1997, 1996 and 1995 the effective income tax rates differed from
the statutory rates because of state income taxes, tax credits utilized and
certain permanent tax differences.
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
13
<PAGE>
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>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(1) (2) (2),(3)
<S> <C> <C> <C> <C> <C>
Net sales 1997 $104,157 $98,608 $87,996 $115,269
1996 98,418 110,840 103,769 124,915
1995 121,033 121,118 85,182 121,199
Gross profit 1997 $30,738 $28,424 $24,504 $34,930
1996 27,084 30,100 28,933 27,794
1995 35,353 31,030 21,931 34,275
Selling, general and administrative expenses 1997 $27,797 $28,485 $27,550 $29,229
1996 26,629 26,999 26,667 32,742
1995 27,047 27,001 28,794 27,590
Income (loss) before income taxes 1997 $2,295 $746 $(3,213) $6,212
1996 1,614 2,553 1,762 (9,335)
1995 8,607 3,620 (31,116) 34,693
Net income (loss) 1997 $1,383 $440 $(1,926) $3,846
1996 1,004 1,584 1,082 (6,090)
1995 5,336 2,167 (19,737) 22,043
Net income (loss) per common share and 1997 $0.16 $0.06 $(0.23) $0.45
common share equivalent 1996 0.12 0.19 0.13 (0.71)
1995 0.62 0.25 (2.30) 2.57
</TABLE>
(1) In the second quarter of fiscal 1997, the Company had decreased
sales due to product conversions and to shipment delays commencing in
the month of March as a result of problems encountered during the
implementation of an upgraded customer service, order processing and
billing software system. The Company has addressed the
implementation issues and improved the system's functionality.
Internal changes to the system continue to be made to improve its
operational efficiencies and ease of use.
(2) 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.
(3) 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
improved to 43 days on September 30, 1997, down from 45 as of September 30,
1996.
Inventories at the end of fiscal 1997 decreased to $105.2 million from $116.4
million at the end of fiscal 1996. The reduction in inventory levels during
fiscal 1997 reflects the Company's ongoing efforts to manage inventory.
The Company's 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, 1999. As of September 30, 1997, the
Company had $3.0 million outstanding under the Facility and had additional
borrowing capacity of $84.0 million.
The Company's Haggar UK subsidiary maintains a $3.2 million line of credit
with a bank in the United Kingdom to fund its operating activities. At
September 30, 1997, approximately $2.4 million was outstanding under this
line of credit. The line of credit is collateralized by an approximate $3.2
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.
In 1997, the Company reached an agreement 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 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 $38.0 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 in 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, 1997 of $23.4 million, as a result of the reduction in
inventory of $11.1 million, net income, and depreciation and amortization
offset by a decrease in accrued liabilities of $12.0 million. Additionally,
the Company used cash in investing activities of $12.3 million during fiscal
1997, the result of purchases of property, plant, and equipment of $15.0
million primarily in connection with the opening of retail stores during the
fiscal year. The Company had 41 retail stores open at the end of the 1997
fiscal year compared to 28 at the end of fiscal 1996. Furthermore, cash flows
used in financing activities of $11.9 million for the 1997 fiscal year were
primarily the result of a net reduction in long-term debt of $10.5 million.
Comparatively, the Company provided cash from operating activities of $45.6
million for the fiscal year ended September 30, 1996, primarily as a result
of the reduction in inventory of $22.5 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 connection 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,
15
<PAGE>
cash flows used in financing activities of $37.8 million for the 1996 fiscal
year were primarily the result of a net reduction in long-term debt of $36.4
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 1997, 1996 or 1995.
NEW ACCOUNTING STANDARD.
The Company will adopt the provisions of SFAS No. 128, "Earnings per share,"
in the first quarter of fiscal 1998. SFAS No. 128 replaces the primary
earnings per share calculation with a basic earnings per share calculation
and modifies the calculation of diluted earnings per share. Had the Company
adopted the provisions of SFAS No. 128 during fiscal 1997, the Company would
have reported both basic and diluted earnings per share of $0.44 per share,
the same as the actual net income per share reported of $0.44 per share.
YEAR 2000 CONSIDERATIONS
The Company is taking actions to determine that its computer systems are
capable of processing periods for the year 2000 and beyond. The Company has
assessed and continues to assess the impact of the year 2000 on its
operations, including the development of cost estimates for and the extent of
programming changes required to address the issue, and to date has determined
the costs related thereto would not have a material impact on its ongoing
results of operations. Also, the Company is assessing the impact of their
customers' and vendors' compliance to year 2000 and what the impact will be
on the Company's ongoing results of operation.
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.
16
<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, 1997 and 1996,
and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended September 30,
1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1997, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Dallas, Texas
October 31, 1997
17
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------
1997 1996 1995
----------- ---------- ------------
<S> <C> <C> <C>
Net sales $406,030 $437,942 $448,532
Cost of goods sold 287,434 315,351 324,699
Restructuring charge - 8,680 1,244
----------- ---------- ------------
Gross profit 118,596 113,911 122,589
Selling, general and administrative expenses (113,061) (113,037) (110,432)
Restructuring charge - (5,320) -
Gain from storm damage - 1,140 4,807
Royalty income 2,076 2,630 3,049
----------- ---------- ------------
Operating income (loss) 7,611 (676) 20,013
Other income, net 1,954 1,563 786
Interest expense (3,525) (4,293) (4,995)
----------- ---------- ------------
Income (loss) from operations before provision
(benefit) for income taxes 6,040 (3,406) 15,804
Provision (benefit) for income taxes 2,297 (986) 5,995
----------- ---------- ------------
Net income (loss) $ 3,743 $ (2,420) $ 9,809
----------- ---------- ------------
----------- ---------- ------------
Net income (loss) per common share and common
share equivalent $ 0.44 $ (0.28) $ 1.14
----------- ---------- ------------
----------- ---------- ------------
Weighted average number of common shares
and common share equivalents outstanding 8,555 8,552 8,623
----------- ---------- ------------
----------- ---------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
18
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30,
--------------------------
1997 1996
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 2,176 $ 2,944
Accounts receivable, net 70,969 74,556
Inventories 105,242 116,356
Deferred tax benefit 10,073 12,410
Other current assets 3,833 3,646
----------- -----------
Total current assets 192,293 209,912
Property, plant, and equipment, net 68,697 65,760
Other assets 1,063 2,662
----------- -----------
Total assets $ 262,053 $ 278,334
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,423 $ 23,596
Accrued liabilities 26,195 38,254
Accrued wages and other
employee compensation 3,481 3,447
Accrued workers' compensation 4,948 5,895
Short-term borrowings 2,362 2,067
Current portion of long-term debt 330 481
----------- -----------
Total current liabilities 65,739 73,740
Long-term debt 31,800 42,112
----------- -----------
Total liabilities 97,539 115,852
Stockholders' equity:
Common stock - par value $0.10 per share; 25,000,000
shares authorized and 8,560,636 shares issued
in 1997 and 1996 856 856
Additional paid-in capital 41,641 41,641
Retained earnings 122,018 119,986
----------- -----------
164,515 162,483
Less - Treasury stock, 9,254 shares at par value (1) (1)
----------- -----------
Total stockholders' equity 164,514 162,482
----------- -----------
Total liabilities and stockholders' equity $ 262,053 $ 278,334
----------- -----------
----------- -----------
The accompanying notes are an integral part of these consolidated
financial statements.
19
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
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, 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)
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)
Recovery of unrealized
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
Common stock
dividends declared
($0.20 per share) - - - - (1,711) - (1,711)
Net income - - - - 3,743 - 3,743
-------------------------------------------------------------------------------------------------
BALANCE,
September 30, 1997 8,560,636 $856 $41,641 $ - $122,018 $ (1) $164,514
-------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
20
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------
1997 1996 1995
---------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,743 $ (2,420) $ 9,809
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 11,447 6,839 3,268
(Gain) loss on disposal of property, plant, and equipment (480) (1,608) 144
Net (gain) loss on sale of marketable securities - 542 (117)
Changes in assets and liabilities -
Accounts receivable, net 3,587 (7,589) 13,117
Inventories 11,114 22,551 (21,343)
Insurance receivable - 23,890 (23,990)
Current deferred tax benefit 2,337 288 (1,872)
Other current assets (187) 148 (23)
Accounts payable 4,827 (2,852) (12,403)
Accrued liabilities (12,059) 6,999 1,448
Accrued wages and other employee compensation 34 104 (3,259)
Accrued workers' compensation expense (947) (1,338) (214)
---------- ----------- ------------
Net cash provided by (used in) operating activities 23,416 45,554 (35,435)
---------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment, net (14,989) (16,070) (30,613)
Proceeds from sale of property, plant, and equipment, net 1,085 1,695 -
Proceeds from the sale of marketable securities - 5,018 3,156
(Increase) decrease in other assets 1,599 2,234 (130)
---------- ----------- ------------
Net cash used in investing activities (12,305) (7,123) (27,587)
---------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from short-term borrowings 295 432 501
Proceeds from issuance of long-term debt 61,000 422,000 517,000
Payments on long-term debt (71,463) (458,439) (453,423)
Payments of cash dividends (1,711) (1,710) (1,709)
Net proceeds from the issuance of common stock - - 271
---------- ----------- ------------
Net cash provided by (used in) financing activities (11,879) (37,717) 62,640
---------- ----------- ------------
Increase (decrease) in cash and cash equivalents (768) 714 (382)
Cash and cash equivalents, beginning of period 2,944 2,230 2,612
---------- ----------- ------------
Cash and cash equivalents, end of period $ 2,176 $ 2,944 $ 2,230
---------- ----------- ------------
---------- ----------- ------------
Supplemental disclosure of cash flow information
Cash paid (received) for:
Interest, net of amounts capitalized $ 3,806 $ 3,350 $ 3,275
Income taxes, net $ (589) $ (1,359) $ 9,236
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
21
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, 1996 AND 1995
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-Registered Trademark- brand name, and also offers a
more moderately priced line of products under its Reed St. James-Registered
Trademark- brand name through its mass market retailer division, The Horizon
Group. In addition, the Company 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 Apparel Limited, which markets the
Company's branded products in Europe. Additionally, the Company derives
royalty income from the use of its Haggar-Registered Trademark- and Reed St.
James-Registered Trademark-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 Apparel Limited, 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 $931,000
and $900,000 at September 30, 1997 and 1996, respectively.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk, as defined by Statement of Financial Accounting Standards
(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 27.3%, 26.3%
and 28.7% of the Company's net sales during the year ended September 30,
1997, 1996 and 1995, 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.
22
<PAGE>
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market,
and consisted of the following at September 30, 1997 and 1996 (in thousands):
1997 1996
---------- ----------
Piece goods $ 17,455 $ 23,335
Trimming and supplies 3,841 5,991
Work-in-process 16,162 13,248
Finished garments 67,784 73,782
---------- ----------
Total inventories $ 105,242 $ 116,356
---------- ----------
---------- ----------
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, 1997 and 1996 (in thousands):
1997 1996
---------- ---------
Land $ 3,428 $ 3,428
Buildings 29,880 29,878
Furniture, fixtures and equipment 76,931 80,786
Leasehold improvements 13,143 11,856
Construction in progress 3,526 369
---------- ---------
Total 126,908 126,317
Less: Accumulated depreciation
and amortization (58,211) (60,557)
---------- ---------
Net property, plant, and equipment $ 68,697 $ 65,760
---------- ---------
---------- ---------
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 3-7
Leasehold improvements Life of Lease
23
<PAGE>
FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosure about Fair Value of Financial Instruments,"
requires the disclosure of the fair market value of off- and on-balance sheet
financial instruments. The carrying value of all financial instruments,
including long-term debt and cash and temporary cash investments,
approximates their fair value at year-end.
Realized gains and losses on investments in preferred stocks are determined
on a specific identification basis. During the second quarter of fiscal 1996,
the Company sold all of its investments in preferred stock and equity
securities. These investments had been classified as available-for-sale
securities and were reported at their fair values with unrealized gains and
losses excluded from earnings and reported as a separate component of
stockholders' equity, net of tax. The Company had no realized gains or
losses in fiscal 1997 and recognized realized losses of $542,000 in 1996.
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, 1997 and 1996.
MINORITY INTEREST
In 1993, the Company established a subsidiary, Haggar UK, for the purpose of
expanding its operations in the United Kingdom. The Company held a 51%
interest in the subsidiary and its partner owned the remaining 49% interest.
The assets and liabilities of Haggar UK have been reflected in the
consolidated financial statements as of September 30, 1996. 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.
In 1997, the Company dissolved the joint venture with its partner, Coats
Viyella, Plc., and the Company received $1,050,000 from Coats Viyella, Plc.
for payment of historical losses. The payment is recorded in Other income,
net.
In conjunction with the dissolution of the joint venture, the Company
obtained the remaining 49% interest in the subsidiary's assets and
liabilities. Consequently, the subsidiary's financial position and results of
operations have been consolidated and included in the Company's financial
statements for fiscal 1997. Also, the remaining entity changed it's name to
Haggar Apparel, Limited.
The Haggar UK subsidiary established lines of credit with banks to fund
operating activities. Available borrowing capacity at September 30, 1997 was
approximately $800,000 with approximately $2,400,000 and $2,067,000 outstanding
as of September 30, 1997 and 1996, respectively. Interest is payable at 1%
above the bank's base rate, as defined (7.25% at September 30, 1997). The lines
of credit are collateralized by an approximate $3.2 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. For
fiscal years 1997, 1996, and 1995 total advertising expense was $22.9
million, $21.5 million and $28.0 million, respectively.
24
<PAGE>
OTHER INCOME
Other income consisted of the following for the years ended September 30,
1997, 1996 and 1995 (in thousands):
1997 1996 1995
------ ------ -----
Gain (loss) on sale of assets, net $ 480 $1,608 $(144)
Interest income 218 61 81
Dissolution of Haggar UK joint venture 1,050 - -
Investment income (loss), net - (436) 657
Other 206 330 192
------ ------ -----
Total Other income, net $1,954 $1,563 $ 786
------ ------ -----
------ ------ -----
NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT
Net income per common share and common share equivalent is calculated by
dividing net income 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 common stock options issued under a long-term incentive
plan. Common stock equivalents have been determined in 1997, 1996 and 1995
using a common stock market price of $14.88, $14.50 and $21.26, respectively,
per share.
The Company will adopt the provisions of SFAS No. 128, "Earnings Per Share,"
in the first quarter of fiscal 1998. SFAS No. 128 replaces the primary
earnings per share calculation with a basic earnings per share calculation
and modifies the calculation of diluted earnings per share. Had the Company
adopted the provisions of SFAS No. 128 during fiscal 1997, the Company would
have reported both basic and diluted earnings per share of $0.44 per share,
the same as the actual net income per share reported of $0.44 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, 1997, 1996 and 1995 (in thousands):
1997 1996 1995
-------- -------- --------
Current federal income tax $ (116) $ (347) $ 7,473
Deferred federal income tax 2,366 (595) (2,212)
State income tax 47 (44) 734
-------- -------- --------
Provision (benefit) for income taxes $ 2,297 $ (986) $ 5,995
-------- -------- --------
-------- -------- --------
25
<PAGE>
Temporary differences and carryforwards which give rise to a significant
portion of net deferred income tax assets are as follows (in thousands):
1997 1996
-------- --------
Deferred income tax assets:
Workers' compensation accrual $ 1,731 $ 2,063
Inventory cost capitalization
and valuation 5,460 3,741
Allowances for
accounts receivable - 1,237
Health and life insurance accrual 947 982
Reserve for reorganization 2,643 4,900
Other 1,107 2,396
-------- --------
11,888 15,319
Less - Valuation allowance (250) (250)
-------- --------
11,638 15,069
Deferred income tax liability:
Property, plant, and equipment, net (2,202) (1,015)
Prepaid insurance (561) (1,050)
-------- --------
Net deferred income tax asset 8,875 13,004
Less - Current deferred tax benefit 10,073 12,410
-------- --------
Long-term deferred tax (liability)
benefit $ (1,198) $ 594
-------- --------
-------- --------
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):
1997 1996 1995
------ ------- ------
Tax computed at the
statutory rate $2,053 $(1,158) 5,531
State income taxes 47 (44) 734
Tax credits utilized (186) (96) (491)
Other 383 312 221
------ ------- ------
$2,297 $ (986) $5,995
------ ------- ------
------ ------- ------
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 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.
The insurance proceeds received in 1995 as a result of the storm damage were
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 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. As of September 30, 1997, no
insurance receivable exists related to the storm damage.
26
<PAGE>
4. LONG-TERM DEBT
Long-term debt consisted of the following at September 30, 1997 and 1996 (in
thousands):
1997 1996
--------- ---------
Borrowings under revolving
credit line $ 3,000 $ 13,000
Industrial Development Revenue
Bonds with interest at a rate equal
to that of high-quality, short-term,
tax-exempt obligations, as defined
(4.20% at September 30, 1997),
payable in annual installments of
$100 to $200, and a final payment
of $2,000 in 2005, secured by
certain buildings and equipment 2,800 2,900
Allstate notes 25,000 25,000
Other 1,330 1,693
--------- ---------
32,130 42,593
Less - Current portion 330 481
--------- ---------
Total Long-Term Debt $ 31,800 $ 42,112
--------- ---------
--------- ---------
Net assets mortgaged or subject to lien under the Industrial Development
Revenue Bonds totaled approximately $1,200,000 at September 30, 1997.
As of September 30, 1997, the Company had a revolving credit line agreement
(the "Agreement") with certain banks subject to certain borrowing base
limitations. During 1997, the Agreement was amended to extend the maturity
date to December 31, 1999. The Company had additional available borrowing
capacity of approximately $84,000,000 under this Agreement at September 30,
1997. The Company incurred approximately $170,000 in commitment fees related
to the available borrowing capacity during the year ended September 30, 1997.
The interest rates for the year ended September 30, 1997, ranged from 6.03%
to 8.50%, and the weighted average interest rate for the year was 8.13%. The
facility will mature December 31, 1999, 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 $151,000,000 and $55,000,000, respectively, as of September 30,
1997. For fiscal years after 1997, 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 a default exists after
giving effect to such a dividend.
In 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 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.
27
<PAGE>
Principal payments due during the next five years on debt are as follows (in
thousands):
Years Ending September 30, Amount
-------------------------- -------
1998 $ 330
1999 3,854
2000 6,870
2001 3,888
2002 3,908
Thereafter 13,280
-------
Total $32,130
-------
-------
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, 1997 (in thousands):
Years Ending September 30, Amount
-------------------------- -------
1998 $ 6,149
1999 5,147
2000 4,031
2001 2,676
2002 951
Thereafter 1,079
-------
$20,033
-------
-------
Rental expense was $6,910,000, $6,410,000 and $4,896,000 in the years ended
September 30, 1997, 1996 and 1995, respectively.
COMMITMENTS AND CONTINGENCIES
The Company had approximately $20,485,000 in outstanding letters of credit at
September 30, 1997, 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 and $327,000 to certain stockholders primarily for
rent on a building in the fiscal years ended September 30, 1996 and 1995,
respectively. No related party payments were made in fiscal 1997.
7. RESTRUCTURING CHARGES
In 1996, 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 was
included in cost of sales and consisting
28
<PAGE>
principally of severance costs for manufacturing employees and $5,320,000 was
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. The
consolidation of the three Texas sewing operations was completed in 1997.
As of September 30, 1997, approximately $8.8 million (primarily severance and
professional fees) of such restructuring costs have been paid or otherwise
charged against the $14 million accrual. The remaining obligations are
currently recorded in accrued liabilities and are expected to be
substantially paid by September 30, 1998. The amounts disclosed represent
management's best estimate of the costs to be incurred. The actual amounts
incurred could vary from these estimates if future developments differ from
the underlying assumptions used by management in developing the accrual.
In fiscal 1995, the Company closed its Robstown, Texas, sewing operation. 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 $800,000, $700,000 and
$2,000,000 for each of the years ended September 30, 1997, 1996 and 1995,
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 $7,785,000, $10,378,000 and
$9,100,000 to the Trust for the years ended September 30, 1997, 1996 and
1995, respectively.
In 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, 1997, 1996 and 1995. Additionally, such benefits are expected to be
insignificant in future years.
The Company has 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.
29
<PAGE>
LONG-TERM INCENTIVE PLAN
The Company has a long-term incentive plan ("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 1997, 1996 and 1995:
Weighted Average
----------------
Shares Exercise Option Price
-------- ---------------------
Options outstanding
as of September 30, 1994 667,400 $17.50
Options granted 244,000 21.63
Options exercised (14,531) 21.37
Options canceled (32,401) 18.33
------- ------
Options outstanding as
of September 30, 1995 864,468 18.64
Options granted 109,000 16.26
Options canceled (7,000) 17.50
------- ------
Options outstanding as
of September 30, 1996 966,468 18.38
Options granted 514,938 13.51
Options canceled (716,469) 18.15
------- ------
Options outstanding as
of September 30, 1997 764,937 $15.32
------- ------
Options available for grant
as of September 30, 1997 510,532
Options exercisable as of
September 30, 1997 196,932 $18.73
------
The range of option prices for the options outstanding as of September 30,
1997, was $12.13 to $37.88 with a weighted average remaining contractual life
of approximately 6 years. The number of stock options exercisable in fiscal
1996 and 1995 are 466,770 and 233,716, respectively. The weighted average
exercise option prices for 1996 and 1995 were $18.16 and $17.39. During fiscal
1997, the Company canceled 521,134 options and reissued 423,938 options in
place of the original options at a reduced option price of $13.50 which was
the fair market value on the date of the reissuance.
The Company accounts for the stock option plan under Accounting Principles
Board Opinion No. 25, under which no compensation cost has been recognized.
Had compensation cost for these options been determined consistent with SFAS
No. 123, "Accounting for Stock-Based Compensation," the Company's net income
and earnings per share would have been reduced to the following pro forma
amounts (in thousands, except per share amounts):
1997 1996
------- --------
Net Income:
As reported $ 3,743 ($2,420)
Pro Forma $ 3,098 ($2,575)
Primary EPS:
As reported $ 0.44 ($ 0.28)
Pro Forma $ 0.36 ($ 0.30)
Because SFAS No. 123 method of accounting has not been applied to options
granted prior to October 1, 1995, the resulting pro forma compensation cost
may not be representative of that to be expected in future years.
The fair value of each option grant of $4.64 and $6.94 is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions for 1997 and 1996, respectively: risk-free
interest rates of 6.0% and 6.4%; expected lives of 5 years; expected
volatility of 44 percent; expected dividend rate of $0.20.
30
<PAGE>
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require input of
highly subjective assumptions including stock price volatility. Since the
Company's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
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 October 31, 1997. 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.
Arthur Andersen LLP
Dallas, Texas
October 31, 1997
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, 1997 AND 1996
(IN THOUSANDS)
1997 1996
---- ----
ASSETS:
Investment in subsidiaries $ 64,018 $ 65,545
Note receivable from Haggar Clothing Co. 109,200 100,632
---------- ----------
Total Assets $ 173,218 $ 166,177
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Dividend payable and other current liabilities $ 6,359 $ 3,052
Due to subsidiaries 2,345 643
---------- ----------
Total current liabilities 8,704 3,695
STOCKHOLDERS' EQUITY:
Common stock 856 856
Additional paid-in capital 41,641 41,641
Retained earnings 122,018 119,986
Less - treasury stock (1) (1)
---------- ----------
Total stockholders' equity 164,514 162,482
---------- ----------
Total Liabilities and Stockholders' Equity $ 173,218 $ 166,177
---------- ----------
---------- ----------
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, 1997, 1996 AND 1995
(IN THOUSANDS)
1997 1996 1995
--------- ---------- ---------
Equity in earnings of subsidiaries $ (1,526) $ (7,296) $ 5,011
Interest income 8,568 7,928 7,497
Income tax expense (3,299) (3,052) (2,699)
--------- ---------- ---------
Net income (loss) $ 3,743 $ (2,420) $ 9,809
--------- ---------- ---------
--------- ---------- ---------
34
<PAGE>
SCHEDULE II
HAGGAR CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
AS OF SEPTEMBER 30, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Charges to Balance at
Beginning of Costs and Deductions End of
Period Expenses (1) Period
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
September 30, 1997:
Allowance for doubtful accounts $ 900 $ (380) $ 411 $ 931
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
(1) Amounts deemed uncollectible and recoveries of previously
reserved amounts.
</TABLE>
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. 17
Consolidated Statements of Operations,
Years Ended September 30, 1997, 1996 and 1995. 18
Consolidated Balance Sheets, at September 30, 1997 and 1996. 19
Consolidated Statements of Stockholders' Equity,
Years Ended September 30, 1997, 1996 and 1995. 20
Consolidated Statements of Cash Flows,
Years Ended September 30, 1997, 1996 and 1995. 21
Notes to Consolidated Financial Statements. 22-31
(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) 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 ].)
38
<PAGE>
10(e) First Amended and Restated Credit Agreement between the Company
and Texas Commerce Bank, as agent for a bank syndicate.
(Incorporated by reference from Exhibit 10(k) to the Company's
Annual Report on Form 10-K for the year ended September 30, 1996
[File No. 0-2850].)
10(f) First Amendment to First Amended and Restated Credit Agreement
dated December 31, 1996, between the Company and Texas Commerce
Bank, as agent for a bank syndicate.
10(g) Second Amendment to First Amended and Restated Credit Agreement
dated June 30, 1997, between the Company and Texas Commerce Bank,
as agent for a bank syndicate.
10(h) Third Amendment to First Amended and Restated Credit Agreement
dated December 15, 1997, between the Company and Texas Commerce
Bank, as agent for a bank syndicate.
10(i) Commercial Contract of Sale dated effective October 21, 1996,
between Haggar Clothing Co. and Bruce L. Wilson regarding land
and storage building.
10(j) Commercial Contract of Sale dated effective January 28, 1997,
between Haggar Clothing Co. and National Fibernet, Inc.
regarding land and manufacturing building.
11 Statement Regarding Computation of Net Income (Loss) Per
Common Share.
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 1997.
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/ DAVID M. TEHLE
--------------------------------------------
David M. Tehle, December 19, 1997
(SENIOR 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:
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------- ------------------------------- ----------------------
<S> <C> <C>
/s/ J. M. HAGGAR, III Chairman and December 19, 1997
- ---------------------------- Chief Executive Officer
J. M. Haggar, III (Principal Executive Officer)
/s/ FRANK D. BRACKEN Director, President and December 19, 1997
- ---------------------------- Chief Operating Officer
Frank D. Bracken
/s/ DAVID M. TEHLE Senior Vice President December 19, 1997
- ---------------------------- and Chief Financial Officer (Principal
David M. Tehle Financial and Accounting Officer)
/s/ NORMAN E. BRINKER Director December 19, 1997
- ----------------------------
Norman E. Brinker
</TABLE>
41
<PAGE>
HAGGAR CORP. AND SUBSIDIARIES
INDEX TO ATTACHED EXHIBITS
EXHIBIT PAGES
10(f) First Amendment to First Amended and Restated Credit Agreement
dated December 31, 1996, between the Company and Texas Commerce
Bank, as Agent for a bank syndicate.
10(g) Second Amendment to First Amended and Restated Credit Agreement dated
June 30, 1997, between the Company and Texas Commerce Bank, as agent
for a bank syndicate.
10(h) Third Amendment to First Amended and Restated Credit Agreement dated
December 15, 1997, between the Company and Texas Commerce Bank, as
agent for a bank syndicate.
10(i) Commercial Contract of Sale dated effective October 21, 1996, between
Haggar Clothing Co. and Bruce L. Wilson regarding land and storage
building.
10(j) Commercial Contract of Sale dated effective January 28, 1997, between
Haggar Clothing Co. and National Fibernet, Inc., regarding land and
manufacturing building.
11 Statement Regarding Computation of Net Income (Loss) Per Common Share.
23 Consent of Independent Public Accountants
42
<PAGE>
FIRST AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this
"AGREEMENT") is entered into as of December 31, 1996, by and among Haggar
Clothing Co., a Nevada corporation, f/k/a Haggar Apparel Company (the
"COMPANY"), Haggar Corp., a Nevada corporation ("HAGGAR"), the banks listed on
the signature pages of this Agreement (collectively, the "BANKS"), Texas
Commerce Bank National Association, a national banking association, individually
and as agent (the "AGENT") for the Banks, and is consented to by Haggar and the
domestic subsidiaries of the Company listed on the signature pages of this
Agreement (collectively, the "SUBSIDIARIES").
R E C I T A L S:
WHEREAS, pursuant to that certain First Amended and Restated Credit
Agreement (the "CREDIT AGREEMENT") dated as of September 18, 1996, executed by
and among the Company, Haggar, the Banks and the Agent, the Banks agreed to make
advances to the Company on certain terms and conditions set forth therein (each
capitalized term used but not defined herein shall have the meaning given to
such term in the Credit Agreement as amended); and
WHEREAS, the Company has requested that the Credit Agreement be amended to
change the definition of the term "Fixed Charges" as set forth in Section 1.1
thereof; and
WHEREAS, the Agent and the Banks are agreeable to such request under the
present circumstances.
NOW, THEREFORE, 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, the Company, Haggar,
the Banks and the Agent hereby agree as follows:
A G R E E M E N T:
1. AMENDMENT TO DEFINITION. The definition of the term "Fixed Charges" is
hereby amended in its entirety to read as follows:
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 1
<PAGE>
"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 remodeling and refurbishment of and additions
to its existing corporate headquarters situated at 6113 Lemmon Avenue,
Dallas, Texas [to the extent such expenditures in the aggregate do not
exceed the sum of (A) $2,721,000, (B) additional insurance proceeds which
may be recovered due to prior building damage up to $406,000, and (C) the
net cash amount realized by the Company from any sale of the "G.M." and
"Cedar Springs" buildings situated, respectively, at 6007 Peeler Street and
6020 Cedar Springs, Dallas, Texas])."
2. CERTIFICATES. This Agreement shall be effective as of the date first
above written when executed by all parties hereto and consented to by the
Guarantors as provided on the signature pages hereto, and upon receipt by the
Agent of the following, each in form, substance and bearing a date satisfactory
to the Agent and its counsel:
(a) A certificate of the Secretary or Assistant Secretary of the
Company and the Guarantors, respectively, certifying (i) that, except as
indicated therein, there has been no change to the articles of
incorporation or bylaws of the Company or the Guarantors since the same
were furnished to the Agent in connection with the execution of the Credit
Agreement, and (ii) as to the name and title of the officers of the Company
and the Guarantors and the authority of such officers to execute this
Agreement.
(b) A certificate, signed by the Treasurer of the Company or the
Chief Financial Officer of the Company, stating that as of the date of this
Agreement and after giving effect to this Agreement the statements set
forth in Sections 4.2(a), (b) and (g) of the Credit Agreement are true and
correct.
3. EFFECTIVENESS OF DOCUMENTS. Except as expressly modified hereby,
all terms, provisions, representations, warranties, covenants and agreements of
the Company and Haggar related to the Loans, whether contained in the Notes, the
Credit Agreement as amended and/or any of the other Loan Documents, are hereby
ratified and confirmed by the Company and Haggar, and all such agreements shall
be and shall remain in full force and effect, enforceable in accordance with
their terms.
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 2
<PAGE>
4. NO CLAIMS OR DEFENSES. Each of the Company and Haggar, by the
execution of this Agreement, hereby declares that it has no offsets, claims,
counterclaims, defenses or other causes of action against the Agent or the Banks
related to any Loan, the Credit Agreement as amended, any of the other Loan
Documents or the modification of the Credit Agreement pursuant to this
Agreement.
5. AUTHORITY. Each of the Company and Haggar represents and warrants
that all requisite corporate action necessary for it to enter into this
Agreement has been taken.
6. BINDING AGREEMENT. This Agreement shall be binding upon, and shall
inure to the benefit of, each party hereto and such party's legal
representatives, successors and assigns.
7. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS AMONG THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES HERETO.
8. CHOICE OF LAW. THIS AGREEMENT 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.
9. COUNTERPARTS. This Agreement may be executed in any number of
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.
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
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 3
<PAGE>
HAGGAR CORP., a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------------
J.M. Haggar, III
Chief Executive Officer
TEXAS COMMERCE BANK National Association,
successor by merger to Texas Commerce Bank,
National Association, Individually, as the Agent
By: /s/ John P. Dean
----------------------------------------
John P. Dean
Senior Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ Sharon Ellis
----------------------------------------
Sharon Ellis
Vice President
COMERICA BANK - TEXAS
By: /s/ G. Christopher Jones
----------------------------------------
G. Christopher Jones
Senior Vice President
NBD BANK
By: /s/ Jenny A. Gilpin
----------------------------------------
Jenny A. Gilpin
Vice President
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 4
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.,
DALLAS OFFICE
By: /s/ John M. Mearns
----------------------------------------
John M. Mearns
Vice President/Manager
BANK OF SCOTLAND
By: /s/ Catherine M. Oniffrey
----------------------------------------
Catherine M. Oniffrey
Vice President
NATIONAL CITY BANK, KENTUCKY,
f/k/a First National Bank of Louisville
By: /s/ Donald R. Pullen, Jr.
----------------------------------------
Donald R. Pullen, Jr.
Vice President
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 5
<PAGE>
CONSENT OF HAGGAR
Haggar hereby (a) acknowledges its consent to this Agreement, (b) ratifies and
confirms all terms and provisions of the Parent Guaranty, (c) agrees that the
Parent Guaranty is and shall remain in full force and effect, (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
Parent Guaranty, (e) reaffirms all agreements and obligations under the Parent
Guaranty with respect to the Loans, the Notes, the Credit Agreement as amended
and all other documents, instruments or agreements governing, securing or
pertaining to the Loans, as the same may be modified by this Agreement, and
(f) represents and warrants that all requisite corporate action necessary for
it to execute this Agreement has been taken.
HAGGAR CORP.,
a Nevada corporation
By: /s/ J.M. Haggar, III
---------------------------------------
J.M. Haggar, III
Chief Executive Officer
Dated as of December 31, 1996.
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 6
<PAGE>
CONSENT OF DOMESTIC SUBSIDIARIES
Each of the undersigned Subsidiaries hereby (a) acknowledges its consent to this
Agreement, (b) ratifies and confirms all terms and provisions of the Subsidiary
Guaranty to which it is a signatory, (c) agrees that the Subsidiary Guaranty to
which it is a signatory is and shall remain in full force and effect, (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, (e) reaffirms
all agreements and obligations under the Subsidiary Guaranty to which it is a
signatory with respect to the Loans, the Notes, the Credit Agreement as amended
and all other documents, instruments or agreements governing, securing or
pertaining to the Loans, as the same may be modified by this Agreement, and (f)
represents and warrants that all requisite corporate action necessary for it to
execute this Agreement has been taken.
BOWIE MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
CORSICANA COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
DALLAS PANT MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 7
<PAGE>
GREENVILLE PANT MANUFACTURING
COMPANY, a Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
MCKINNEY PANT MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
OLNEY MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
WAXAHACHIE GARMENT COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 8
<PAGE>
LA ROMANA MANUFACTURING CORPORATION, a
Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
HAGGAR SERVICES, INC.,
a Texas corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
AIRHAGGAR, INC., f/k/a HAGAIR, INC.,
a Texas corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
DUNCAN MANUFACTURING COMPANY,
an Oklahoma corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 9
<PAGE>
WESLACO CUTTING, INC.,
a Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
WESLACO SEWING, INC.,
a Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
HAGGAR DIRECT, INC.,
a Nevada corporation
By: /s/ J.M. Haggar, III
-----------------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
Dated as of December 31, 1996.
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 10
<PAGE>
SECOND AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
(this "AGREEMENT") is entered into as of June 30, 1997, by and among Haggar
Clothing Co., a Nevada corporation, f/k/a Haggar Apparel Company (the
"COMPANY"), Haggar Corp., a Nevada corporation ("HAGGAR"), the banks listed
on the signature pages of this Agreement (collectively, the "BANKS"), Texas
Commerce Bank National Association, a national banking association,
individually and as agent (the "AGENT") for the Banks, and is consented to by
Haggar and the domestic subsidiaries of the Company listed on the signature
pages of this Agreement (collectively, the "SUBSIDIARIES").
RECITALS:
WHEREAS, pursuant to that certain First Amended and Restated Credit
Agreement (as heretofore and herein amended, the "CREDIT AGREEMENT") dated as
of September 18, 1996, executed by and among the Company, Haggar, the Banks
and the Agent, the Banks agreed to make advances to the Company on certain
terms and conditions set forth therein (each capitalized term used but not
defined herein shall have the meaning given to such term in the Credit
Agreement as amended); and
WHEREAS, the First Amended and Restated Credit Agreement was amended by
First Amendment to First Amended and Restated Credit Agreement dated as of
December 31, 1996, and pursuant to Article I thereof, the Termination Date
was extended to December 31, 1999, by notice from the Company dated April 25,
1997, and written concurrence by the Banks dated April 30, 1997; and
WHEREAS, the Company has requested that Sections 7.6 and 7.13 of the
Credit Agreement be amended as set forth below; and
WHEREAS, the Agent and the Banks are agreeable to such request under the
present circumstances.
NOW, THEREFORE, 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, the Company,
Haggar, the Banks and the Agent hereby agree as follows:
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 1
<PAGE>
A G R E E M E N T:
1. AMENDMENT TO SECTION 7.6. Section 7.6 is hereby amended in its
entirety to read as follows:
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, except for the fiscal quarters ending June 30, 1997, and
September 30, 1997, at which time the ratio shall not be or
become less than 0.9 to 1.0.
2. AMENDMENT TO SECTION 7.13. Section 7.13 is hereby amended in its
entirety to read as follows:
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 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.
3. CERTIFICATES. This Agreement shall be effective as of the date first
above written when executed by all parties hereto and consented to by the
Guarantors as provided on the signature pages hereto, and upon receipt by the
Agent of the following, each in form, substance and bearing a date satisfactory
to the Agent and its counsel:
(a) A certificate of the Secretary or Assistant Secretary of the
Company and the Guarantors, respectively, certifying (i) that, except
as indicated therein, there has been no change to the articles of
incorporation or bylaws of the Company or the Guarantors since the same
were furnished to the Agent in connection with the execution of the Credit
Agreement, and (ii) as to the name and title of the officers of the Company
and the Guarantors and the authority of such officers to execute this
Agreement.
(b) A certificate, signed by the Treasurer of the Company or the
Chief Financial Officer of the Company, stating that as of the date of this
Agreement and after giving effect to this Agreement the statements set
forth in Sections 4.2(a), (b) and (g) of the Credit Agreement are true and
correct.
4. EFFECTIVENESS OF DOCUMENTS. Except as expressly modified hereby, all
terms, provisions, representations, warranties, covenants and agreements of the
Company and Haggar
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 2
<PAGE>
related to the Loans, whether contained in the Notes, the Credit Agreement
and/or any of the other Loan Documents, are hereby ratified and confirmed by
the Company and Haggar, and all such agreements shall be and shall remain in
full force and effect, enforceable in accordance with their terms.
5. NO CLAIMS OR DEFENSES. Each of the Company and Haggar, by the
execution of this Agreement, hereby declares that it has no offsets, claims,
counterclaims, defenses or other causes of action against the Agent or the
Banks related to any Loan, the Credit Agreement, any of the other Loan
Documents or the modification of the Credit Agreement pursuant to this
Agreement.
6. AUTHORITY. Each of the Company and Haggar represents and warrants
that all requisite corporate action necessary for it to enter into this
Agreement has been taken.
7. BINDING AGREEMENT. This Agreement shall be binding upon, and shall
inure to the benefit of, each party hereto and such party's legal
representatives, successors and assigns.
8. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS AMONG THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES HERETO.
9. CHOICE OF LAW. THIS AGREEMENT 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. COUNTERPARTS. This Agreement may be executed in any number of
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.
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
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 3
<PAGE>
HAGGAR CORP., a Nevada corporation
By: /s/ J. M. Haggar, III
------------------------
J. M. Haggar, III
Chief Executive Officer
TEXAS COMMERCE BANK National Association,
successor by merger to Texas Commerce Bank,
National Association, Individually, as
the Agent
By: /s/ Mae Kantipong
------------------------
Mae Kantipong
Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ Sharon Ellis
------------------------
Sharon Ellis
Vice President
COMERICA BANK - TEXAS
By: /s/ G. Christopher Jones
------------------------
G. Christopher Jones
Senior Vice President
NBD BANK
By: /s/ Jenny A. Gilpin
------------------------
Jenny A. Gilpin
Vice President
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 4
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.,
DALLAS OFFICE
By: /s/ John M. Mearns
-------------------------
John M. Mearns
Vice President/Manager
BANK OF SCOTLAND
By: /s/ Annie Chin-Tac
-------------------------
Annie Chin-Tac
Vice President
NATIONAL CITY BANK, KENTUCKY,
f/k/a First National Bank of Louisville
By: /s/ Donald R. Pullen, Jr.
-------------------------
Donald R. Pullen, Jr.
Vice President
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 5
<PAGE>
CONSENT OF HAGGAR
Haggar hereby (a) acknowledges its consent to this Agreement, (b) ratifies
and confirms all terms and provisions of the Parent Guaranty, (c) agrees
that the Parent Guaranty is and shall remain in full force and effect, (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 Parent Guaranty, (e) reaffirms all agreements and
obligations under the Parent Guaranty with respect to the Loans, the Notes,
the Credit Agreement and all other documents, instruments or agreements
governing, securing or pertaining to the Loans, as the same may be modified
by this Agreement, and (f) represents and warrants that all requisite
corporate action necessary for it to execute this Agreement has been taken.
HAGGAR CORP.,
a Nevada corporation
By: /s/ J.M Haggar, III
-----------------------
J.M Haggar, III
Chief Executive Officer
Dated as of June 30, 1997.
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 6
<PAGE>
CONSENT OF DOMESTIC SUBSIDIARIES
Each of the undersigned Subsidiaries hereby (a) acknowledges its consent to
this Agreement, (b) ratifies and confirms all terms and provisions of the
Subsidiary Guaranty to which it is a signatory, (c) agrees that the
Subsidiary Guaranty to which it is a signatory is and shall remain in full
force and effect, (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, (e) reaffirms all agreements and obligations under the Subsidiary
Guaranty to which it is a signatory with respect to the Loans, the Notes, the
Credit Agreement and all other documents, instruments or agreements
governing, securing or pertaining to the Loans, as the same may be modified
by this Agreement, and (f) represents and warrants that all requisite
corporate action necessary for it to execute this Agreement has been taken.
BOWIE MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
CORSICANA COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
DALLAS PANT MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 7
<PAGE>
GREENVILLE PANT MANUFACTURING
COMPANY, a Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
MCKINNEY PANT MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
OLNEY MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
WAXAHACHIE GARMENT COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 8
<PAGE>
LA ROMANA MANUFACTURING CORPORATION, a
Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
HAGGAR SERVICES, INC.,
a Texas corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
AIRHAGGAR, INC., f/k/a HAGAIR, INC.,
a Texas corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
DUNCAN MANUFACTURING COMPANY,
an Oklahoma corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 9
<PAGE>
WESLACO CUTTING, INC.,
a Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
WESLACO SEWING, INC.,
a Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
HAGGAR DIRECT, INC.,
a Nevada corporation
By: /s/ J.M. Haggar, III
--------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
Dated as of June 30, 1997.
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 10
<PAGE>
THIRD AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
This THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
(this "AGREEMENT") is entered into as of December 15, 1997, by and among
Haggar Clothing Co., a Nevada corporation, f/k/a Haggar Apparel Company (the
"COMPANY"), Haggar Corp., a Nevada corporation ("HAGGAR"), the banks listed
on the signature pages of this Agreement (collectively, the "BANKS"), Texas
Commerce Bank National Association, a national banking association,
individually and as agent (the "AGENT") for the Banks, and is consented to by
Haggar and the domestic subsidiaries of the Company listed on the signature
pages of this Agreement (collectively, the "SUBSIDIARIES").
R E C I T A L S:
WHEREAS, pursuant to that certain First Amended and Restated Credit
Agreement (as heretofore and herein amended, the "CREDIT AGREEMENT") dated as
of September 18, 1996, executed by and among the Company, Haggar, the Banks
and the Agent, the Banks agreed to make advances to the Company on certain
terms and conditions set forth therein (each capitalized term used but not
defined herein shall have the meaning given to such term in the Credit
Agreement as amended); and
WHEREAS, the Credit Agreement was amended by First Amendment to First
Amended and Restated Credit Agreement dated as of December 31, 1996, and
pursuant to Article I thereof, the Termination Date was extended to December
31, 1999, by notice from the Company dated April 25, 1997, and written
concurrence by the Banks dated April 30, 1997; and
WHEREAS, the Credit Agreement was further amended by Second Amendment to
First Amended and Restated Credit Agreement dated as of June 30, 1997;
WHEREAS, the Company has requested that certain financial covenants be
modified as set forth below; and
WHEREAS, the Agent and the Banks are agreeable to such request under the
present circumstances and in consideration of certain additional amendments
to the Credit Agreement as set forth below.
NOW, THEREFORE, 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, the Company,
Haggar, the Banks and the Agent hereby agree as follows:
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 1
<PAGE>
A G R E E M E N T:
1. NEW DEFINITION. The following definition is hereby added to SECTION
1.1 of the Credit Agreement:
"Maintenance Capital Expenditures" means, for the twelve (12) month
period immediately preceding the date of determination, the aggregate
capital expenditures of the Company Group on a consolidated basis for
maintenance of existing property, equipment and facilities which shall, for
the purposes of this definition, be deemed to be $5,000,000 for each twelve
(12) month reporting period."
2. AMENDMENT TO DEFINITIONS. The following definitions are hereby amended
in their entirety to read as follows:
"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, and
(e) at any time when the Funded Debt Ratio is greater than 3.00 to 1, one
and one-quarter percent (1 1/4%) 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).
"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, and (e) at any time when the Funded Debt Ratio is greater
than 3.00 to 1, one and one-eighth percent (1 1/8%) 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).
"Fixed Charge Ratio" means the ratio of (i) Operating Cash Flow minus
federal and state income taxes, as determined in accordance with GAAP to
(ii) Fixed Charges, in each case, as measured in accordance with SECTION
7.6 and as measured at the end of each fiscal quarter.
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 2
<PAGE>
"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) Maintenance Capital Expenditures.
"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 303, Texas Financial Code, as amended (the "Act")
establishes the highest nonusurious rate, the Highest Lawful Rate shall be
the "weekly 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 "weekly 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 the Act and to be
automatically renewable for additional periods as therein provided.
"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, and any amendments, modifications, supplements or
restatements of any of the foregoing.
3. AMENDMENT TO SECTION 2.5(a). Section 2.5(a) is hereby amended in its
entirety to read as follows:
(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, and (c) at any time when the Funded Debt Ratio is greater than
2.00 to 1, one-quarter of one percent (1/4%) 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);
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 3
<PAGE>
4. AMENDMENT TO SECTION 7.6. Section 7.6 is hereby amended for the
specified periods to read as follows:
7.6 FIXED CHARGE REQUIREMENT. Commencing with the fiscal quarter
ending December 31, 1997, and for each fiscal quarter thereafter, permit
the ratio of (i) Operating Cash Flow minus federal and state income taxes,
as determined in accordance with GAAP to (ii) Fixed Charges, in each case,
for the prior twelve (12) months as measured at the end of each fiscal
quarter to be or become less than 1.25 to 1.00.
5. AMENDMENT TO SECTION 7.7. Section 7.7 is hereby amended for the
specified periods to read as follows:
7.7 FUNDED DEBT LIMITATION. Commencing with the fiscal quarter
ending December 31, 1997, and for each fiscal quarter thereafter, permit
the Funded Debt Ratio, as measured at the end of each fiscal quarter, to be
or become greater than 3.5 to 1.0.
6. CAPITAL EXPENDITURES LIMITATION. The following SECTION 7.15 is hereby
added to the Credit Agreement:
7.15 CAPITAL EXPENDITURES LIMITATION. Make or agree to make Capital
Expenditures in excess of (i) during the Company's fiscal year commencing
on October 1, 1997, $18,000,000.00 and (ii) during each fiscal year
thereafter, an amount equal to ten percent (10%) of the Company's Net
Worth; provided that (i) expenditures for remodeling and refurbishment of
and additions to its existing corporate headquarters situated at 6113
Lemmon Avenue, Dallas, Texas (to the extent such expenditures in the
aggregate do not exceed the sum of (A) $2,721,000 and (B) the net cash
amount realized by the Company from any sale of the "G.M." and "Cedar
Springs" buildings situated, respectively, at 6007 Peeler Street and 6020
Cedar Springs, Dallas, Texas) and (ii) expenditures for the repair or
replacement of property with insurance proceeds (to the extent such
expenditures do not exceed the net cash amount of such insurance proceeds)
shall not be included in Capital Expenditures for purposes of the foregoing
calculation.
7. AMENDMENT TO SECTION 10.14. Section 10.14 is hereby amended in its
entirety to read as follows:
10.14. REVOLVING CREDIT. Pursuant to Section 346.004 of Chapter 346
of the Texas Finance Code, the provisions of Chapter 346 shall not govern
or in any manner apply to this Agreement or the Loan.
8. ASSIGNMENT. Pursuant to Section 10.2 of the Credit Agreement and to
the same effect as if an assignment agreement had been executed complying with
Section 10.3 of the Credit Agreement, NBD Bank hereby assigns its interests,
rights and obligations of a Bank under the Credit Agreement to its affiliate,
The First National Bank of Chicago, which shall from and after
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 4
<PAGE>
the date hereof be a party to the Credit Agreement and have the rights and
obligations of a Bank thereunder.
9. AMENDMENT FEE. On or before the date hereof, the Company shall pay to
each of the Banks which consent to the amendments contained herein, which
consent shall be evidenced by such Bank's execution of this Agreement, an
amendment fee in the amount one-tenth of one percent (.01%) of such Bank's
Commitment under the Credit Agreement.
10. CERTIFICATES. This Agreement shall be effective as of the date first
above written when executed by all parties hereto and consented to by the
Guarantors as provided on the signature pages hereto, and upon receipt by the
Agent of the following, each in form, substance and bearing a date satisfactory
to the Agent and its counsel:
a. A certificate of the Secretary or Assistant Secretary of the
Company and the Guarantors, respectively, certifying (i) that, except as
indicated therein, there has been no change to the articles of
incorporation or bylaws of the Company or the Guarantors since the same
were furnished to the Agent in connection with the execution of the Credit
Agreement, and (ii) as to the name and title of the officers of the Company
and the Guarantors and the authority of such officers to execute this
Agreement.
b. A certificate, signed by the Treasurer of the Company or the
Chief Financial Officer of the Company, stating that as of the date of this
Agreement and after giving effect to this Agreement the statements set
forth in Sections 4.2(a), (b) and (g) of the Credit Agreement are true and
correct.
11. EFFECTIVENESS OF DOCUMENTS. Except as expressly modified hereby, all
terms, provisions, representations, warranties, covenants and agreements of the
Company and Haggar related to the Loans, whether contained in the Notes, the
Credit Agreement and/or any of the other Loan Documents, are hereby ratified and
confirmed by the Company and Haggar, and all such agreements shall be and shall
remain in full force and effect, enforceable in accordance with their terms.
12. NO CLAIMS OR DEFENSES. Each of the Company and Haggar, by the
execution of this Agreement, hereby declares that it has no offsets, claims,
counterclaims, defenses or other causes of action against the Agent or the Banks
related to any Loan, the Credit Agreement, any of the other Loan Documents or
the modification of the Credit Agreement pursuant to this Agreement.
13. AUTHORITY. Each of the Company and Haggar represents and warrants that
all requisite corporate action necessary for it to enter into this Agreement has
been taken.
14. BINDING AGREEMENT. This Agreement shall be binding upon, and shall
inure to the benefit of, each party hereto and such party's legal
representatives, successors and assigns.
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 5
<PAGE>
15. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS AMONG THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES HERETO.
16. CHOICE OF LAW. THIS AGREEMENT 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.
17. COUNTERPARTS. This Agreement may be executed in any number of
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.
[SEE SIGNATURES ON ATTACHED PAGES]
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 6
<PAGE>
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
HAGGAR CORP., a Nevada corporation
By: /s/ J.M. Haggar, III
-------------------------------------
J.M. Haggar, III
Chief Executive Officer
TEXAS COMMERCE BANK National Association,
successor by merger to Texas Commerce Bank,
National Association, Individually, as the Agent
By: /s/ Mae Kantipong
-------------------------------------
Mae Kantipong
Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ Barbara Gilley
-------------------------------------
Barbara Gilley
Vice President
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 7
<PAGE>
COMERICA BANK - TEXAS
By: /s/ G. Cristopher Jones
-------------------------------------
G. Cristopher Jones
Senior Vice President
NBD BANK
By: /s/ Jenny A. Gilpin
-------------------------------------
Jenny A. Gilpin
Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Jay A. Gilpin
-------------------------------------
Jay A. Gilpin
Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD.,
DALLAS OFFICE
By: /s/ John M. Mearns
-------------------------------------
John M. Mearns
Vice President/Manager
BANK OF SCOTLAND
By: /s/ Annie Chin-Tac
-------------------------------------
Annie Chin-Tac
Vice President
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 8
<PAGE>
NATIONAL CITY BANK, KENTUCKY,
f/k/a First National Bank of Louisville
By: /s/ Don R. Pullen, Jr.
-------------------------------------
Don R. Pullen, Jr.
Vice President
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 9
<PAGE>
CONSENT OF HAGGAR
Haggar hereby (a) acknowledges its consent to this Agreement, (b) ratifies and
confirms all terms and provisions of the Parent Guaranty, (c) agrees that the
Parent Guaranty is and shall remain in full force and effect, (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
Parent Guaranty, (e) reaffirms all agreements and obligations under the Parent
Guaranty with respect to the Loans, the Notes, the Credit Agreement and all
other documents, instruments or agreements governing, securing or pertaining to
the Loans, as the same may be modified by this Agreement, and (f) represents
and warrants that all requisite corporate action necessary for it to execute
this Agreement has been taken.
HAGGAR CORP.,
a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chief Executive Officer
Dated as of December 15, 1997.
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 10
<PAGE>
CONSENT OF DOMESTIC SUBSIDIARIES
Each of the undersigned Subsidiaries hereby (a) acknowledges its consent to this
Agreement, (b) ratifies and confirms all terms and provisions of the Subsidiary
Guaranty to which it is a signatory, (c) agrees that the Subsidiary Guaranty to
which it is a signatory is and shall remain in full force and effect, (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, (e) reaffirms
all agreements and obligations under the Subsidiary Guaranty to which it is a
signatory with respect to the Loans, the Notes, the Credit Agreement and all
other documents, instruments or agreements governing, securing or pertaining to
the Loans, as the same may be modified by this Agreement, and (f) represents and
warrants that all requisite corporate action necessary for it to execute this
Agreement has been taken.
BOWIE MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
CORSICANA COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
DALLAS PANT MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 11
<PAGE>
GREENVILLE PANT MANUFACTURING
COMPANY, a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
MCKINNEY PANT MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
OLNEY MANUFACTURING COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
WAXAHACHIE GARMENT COMPANY,
a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 12
<PAGE>
LA ROMANA MANUFACTURING CORPORATION, a
Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
HAGGAR SERVICES, INC.,
a Texas corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
AIRHAGGAR, INC., f/k/a HAGAIR, INC.,
a Texas corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
DUNCAN MANUFACTURING COMPANY,
an Oklahoma corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 13
<PAGE>
WESLACO CUTTING, INC.,
a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
WESLACO SEWING, INC.,
a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
HAGGAR DIRECT, INC.,
a Nevada corporation
By: /s/ J.M. Haggar, III
----------------------------------
J.M. Haggar, III
Chairman/Chief Executive Officer
Dated as of December 15, 1997.
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Page 14
<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 Co. (the "Seller") shall sell and convey to
Bruce L. Wilson (the "Purchaser") and Purchaser shall buy and pay for the
Property (defined below).
2. PROPERTY. Being an office/warehouse building with 12,300 sf of building on
44,631 sf of land with an address of 6020 Cedar Springs Road in the City of
Dallas, Dallas County, Texas, further 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."
/X/ 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 $300,000.00 (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: $300,000.00.
/X/ 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, 3131 Turtle Creek, Dallas, TX. Ph.
528-8916 (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. 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 owner's 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.
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 objections 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 Contact). If Purchaser does not properly and timely
terminate this Contract, then 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 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.
(8) 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.
PAGE 2
<PAGE>
INSERT A
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.
Page 2 (a)
<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.
[ ] 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; or (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 or the repairs are not able to be
completed prior to the Closing Date, to be made available is not able
to be determined 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. Except as allowed in Paragraph D of Addendum E,
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 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. [X] on December 16, 1996
(the "Closing Date") at the offices of the Title Company at its address
stated below.
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 Closing, and (at
an additional premium cost) [CHECK IF APPLICABLE] [X] 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 or 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.
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.
[X] (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 RELATIONSHIPS. 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
ONLY ONE]
(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: [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 an 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
assisting in the negotiation of this Contract as follows: Six (6) percent of the
purchase price specified in Paragraph 3 hereof with three (3) percent payable at
Closing to Principal Broker and three (3) percent to Cooperating Broker.
The fee shall be earned if, as 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.
PAGE 4
<PAGE>
INSERT B
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 whereupon the refundable portion of the Earnest Money will be promptly
returned by the Title Company to Purchaser and neither party will have any
further rights or obligations under this Contract (except for those which may
expressly survive the termination of this Contract).
Page 4 (a)
<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 shall pay the cost of the
Survey (if Survey costs ore 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, 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 of 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.
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>
<CAPTION>
<S> <C>
/X/ Addendum A Personal Property
/X/ Exhibit A Survey and/or Legal Description /X/ Addendum B Financing
/X/ Addendum C Inspection
/ / Exhibit C _______________________________ / / Addendum D Disclosure Notice
/X/ Addendum E Special Provisions
</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.
SELLER PURCHASER
HAGGAR CLOTHING CO. BRUCE L. WILSON
- ---------------------------------------- -----------------------------------
By [SIGNATURE]: /s/ J.M. Haggar, III By [SIGNATURE]: /s/ Bruce L. Wilson
-------------------------------------- ---------------------------------
Name: J.M. HAGGAR, III Name: Bruce L. Wilson
----------------------------------- ------------------------------
Title: Chief Executive Officer Title: Owner
---------------------------------- -----------------------------
Address: 6113 Lemmon Avenue Address:1845 Woodall Rodgers, Suite
-------------------------------- ---------------------------
Dallas, Texas 75209 1600, LB-16
- ---------------------------------------- -----------------------------------
Dallas, Texas 75201
- ---------------------------------------- -----------------------------------
Telephone: 352-8481 Fax: 956-4446 Telephone: 871-2432 Ext. 205
------------------------------ -------------------------
Fax: 871-0075
-------------------------------
Tax I.D. No: 75-0312650 Tax I.D. No: ###-##-####
---------------------------- -----------------------
Date of Execution: 10-18-96 Date of Execution: 10/21/96
---------------------- -----------------
PRINCIPAL BROKER COOPERATING BROKER
The Staubach Co.
- ---------------------------------------- -----------------------------------
By [SIGNATURE]: /s/ Paul A. Whitman By [SIGNATURE]: /s/ Bruce L. Wilson
------------------------- --------------------
Name: Paul A. Whitman Name: Bruce L. Wilson
----------------------------------- ------------------------------
Title: Sr. V.P. Title:
---------------------------------- -----------------------------
Address: 6750 LBJ, Suite 1100 Address: 1845 Woodall Rodgers,
------------------------------- --------------------------
Dallas, Texas 75240 Suite 1600, LB-16
- ---------------------------------------- -----------------------------------
Dallas, Texas 75201
- ---------------------------------------- -----------------------------------
- ---------------------------------------- -----------------------------------
Telephone: 972-960-4263 Fax: 385-8132 Telephone: 871-2432 Ext.205
------------------------------ -----------------------------------
Fax: 871-0075
------------------------------
TITLE COMPANY ACCEPTANCE. The Title Company acknowledges receipt of the Earnest
Money on 10-21-96 and accepts the Earnest Money subject to the terms and
conditions set forth in this Contract.
TITLE COMPANY
AMERICAN TITLE COMPANY
By SIGNATURE: /s/ Bo Feagin
-----------------------------
Name: Bo Feagin
------------------------------------
Title: Escrow Officer
------------------------------------
Address: 3131 Turtle Creek, Suite 101
----------------------------------
Dallas, TX 75219
----------------------------------
Telephone: 528-8916 Fax: 214-528-8927
--------------- -------------
PAGE 6
<PAGE>
EXHIBIT "A"
6020 Cedar Springs Parcel
BEING, a 1.025 acre tract of land located in City Block 5717, Dallas, Texas and
being situated in the Miles Bennett Survey, Abstract No. 52, Dallas County,
Texas; said tract being part of a 7.406 acre tract of land conveyed to THE
HAGGAR COMPANY by deed recorded in Volume 82242, Page 2583, Deed Records, Dallas
County, Texas; said 1.025 acre tract being more particularly described as
follows:
BEGINNING, at a 1/2-inch iron rod with "Pacheco Koch" cap found in the northeast
right-of-way line of Cedar Springs Avenue (a 50 foot wide right-of-way); said
point being South 45 deg. 00 min. 00 sec. East, a distance of 1080.70 feet from
the intersection of the said northeast line of Cedar Springs Avenue and the
southeast right-of-way line of Manor Way (a 50 foot wide right-of-way); said
point also being the most southerly corner of said 7.406 acre tract;
THENCE, North 45 deg. 00 min. 00 sec. West, along the said northeast line of
Cedar Springs Avenue and the southwest line of said 7.406 acre tract, a distance
of 130.50 feet to a "+" cut in concrete set for corner;
THENCE, North 45 deg. 00 min. 00 sec. East, a distance of 342.00 feet to a "+"
cut in concrete set for corner;
THENCE, South 45 deg. 00 min. 00 sec. East, a distance of 130.50 feet to a "+"
cut in concrete found for corner in the southeast line of said 7.406 acre tract;
THENCE, South 45 deg. 00 min. 00 sec. West, along the said southeast line of
said 7.406 acre tract, a distance of 342.00 feet to the POINT OF BEGINNING;
CONTAINING, 44,631 square feet or 1.025 acres of land, more or less.
<PAGE>
NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark-
ADDENDUM A TO CONTRACT OF SALE
PERSONAL PROPERTY
PROPERTY ADDRESS OR DESCRIPTION: 6020 CEDAR SPRINGS, DALLAS, TX. 75235
A. DOCUMENTS. Seller shall deliver to Purchaser within ten (10) days after the
Effective Date complete and legible copies of the following:
(1) All current leases pertaining to the Property, including all
modifications, amendments, supplements and extensions thereof (including
written descriptions of any oral agreements);
(2) A current rent roll certified by Seller to be true, complete and
accurate as of the date of delivery, including names of tenants, rents,
expenses paid by the tenants and by Seller, commencement dates, terms of
leases, renewal options, and other pertinent data;
(3) A current inventory of all tangible personal property and fixtures
owned by Seller and located on, attached to, or used in connection with the
Property, to be sold with the Property, certified by Seller to be true and
correct as of the date of delivery;
(4) Any Note(s), Deed(s) of Trust and other loan documents pertaining to
loan(s) assumed or taken subject to;
(5) All service, maintenance, management, or other contracts relating to
the ownership and operation of the Property;
(6) All warranties and guaranties relating to the Property, or any part
thereof, or to the tangible personal property and fixtures owned by Seller
and located on, attached to, or used in connection with the Property, if
available;
(8) All of the real estate and personal property tax statements with
respect to the Property for the previous two (2) years;
(9) All leasing and other commission agreements with respect to the
Property, which payments are being assumed by Purchaser;
(10) The "as built" or other plans and specifications with respect to the
Property, if available;
(12) A true and correct statement of income and expenses for the Property
from N/A to N/A.
B. REVIEW OF DOCUMENTS. Purchaser shall have until the end of the Review
Period set forth in Section 6 to review the information identified above. If
Purchaser objects to any matters contained therein, in Purchaser's sole
discretion, no matter how arbitrary, Purchaser may: (1) terminate this Contract
by delivery of written notice to Seller prior to expiration of the Review
Period, and the Earnest Money shall be promptly returned by the Title Company to
Purchaser and neither party shall have any further obligation to the other under
this Contract (except for those which may expressly survive the termination of
this Contract); or (2) waive the objections and close the transaction. If
Purchaser does not deliver a written termination notice to Seller prior to
expiration of the Review Period, any and all objections as to the information
provided by Seller pursuant to this Addendum shall be deemed to be waived by
Purchaser for all purposes.
D. OTHER PERSONAL PROPERTY. Seller shall convey to Purchaser, as part of the
Property, all fixtures and articles of personal property on the Property and
owned by Seller, including but not limited to:
(1) Lighting fixtures, signs, decorative accessories, barriers, traffic
control devices and similar equipment;
(2) Refrigeration, heating, ventilating and air conditioning units and
equipment;
(3) Electronic security equipment and remote transmitter devices;
(4) Tools, equipment, parts and supplies used only for the maintenance of
the Property, for example hoses, ladders, mowers, scaffolds, and__________
__________________________________________________________________________
(5) Furnishings and decorations situated within common areas, for example
rugs, artwork, lamps, plants, trash containers, window coverings, and
raised flooring in the front portion of the building;
(6) Operating manuals, service instructions and all records pertaining to
the installation, operation, maintenance and repair of equipment and
fixtures whether listed above as items of personal property or affixed as
part of the real property;
(7) Trade names and assumed names used in connection with the Property,
including______________________________________________________________;
(8) Telephone number(s) of the management office of the Property,
including ___________________________________;
(9) Licenses, permits, maintenance agreements, management agreements,
plans and specifications, as-built drawings, shop drawings, warranties,
guarantees, and any other agreements relating to the Property or any part
thereof, if available.
(10) Other items. ____________________________________________________.
Initials: Seller JMH Purchaser BLW
--- ---
<PAGE>
NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark-
ADDENDUM B TO CONTRACT OF SALE
FINANCING
Property address or description: 6020 CEDAR SPRINGS, DALLAS, TX. 75235
[CHECK ALL BOXES WHICH APPLY AND COMPLETE ALL BLANKS WHICH APPLY TO THIS
TRANSACTION. BOXES NOT CHECKED DO NOT APPLY TO THIS CONTRACT.]
/ / A. ASSUMPTION. Purchaser shall assume the unpaid principal balance of a
first lien promissory note payable to _________dated ___________________, which
unpaid balance at Closing will be approximately $__________________ , and those
obligations imposed by the Deed of Trust which secures the promissory note being
assumed. Purchaser's initial payment shall be the first payment due after
Closing.
The transaction described in this Contract / / is / / is not conditioned upon
Seller's obtaining a release of liability under the first lien promissory note
from the holder of the note.
The cash payable at Closing shall be adjusted by the amount of any variance
in the loan balance(s) stated above. However, if the total principal balance
of all assumed loans varies at Closing from the total of the amount stated
above by an amount greater than $ __________, either party may terminate this
Contract and the Earnest Money shall be refunded to Purchaser. If the
noteholder on assumption requires:
(1) Purchaser to pay an assumption fee in excess of $_______ and Seller
declines to pay such excess; or
(2) an increase in the interest rate above ___________%; or
(3) any other modification of the loan documents; then Purchaser may
terminate this Contract (and the Earnest Money shall be refunded to Purchaser.
The cash payable at Closing shall be adjusted by the amount of any variance
from the loan balance shown above.
NOTICE TO SELLER: You may still be liable for payment of the promissory note
after assumption of the Note by Purchaser. Please check with your attorney or
lender.
/ / B. SUBJECT TO. Purchaser shall take the Property subject to, but not
assuming, the unpaid principal balance of a first lien promissory note payable
to________________________________________________, dated ___________, which
unpaid balance at Closing will be approximately $ _______________, and those
obligations imposed by the Deed of Trust which secures the promissory note.
Purchaser's initial payment shall be the first payment due after Closing. If the
unpaid balance of the loan varies at Closing from the amount stated above by an
amount greater than $______________________, either party may terminate this
Contract and the refundable portion of the Earnest Money shall be refunded to
Purchaser. If the existing interest rate is increased above _____________% or
the terms of the loan documents are modified or Purchaser is required to pay a
transfer fee in excess of $_____________ and Seller declines to pay such excess,
Purchaser may terminate this Contract and the refundable portion of the Earnest
Money shall be refunded to Purchaser. The cash payable at Closing shall be
adjusted by the amount of any variance from the loan balance shown above.
NOTICE TO SELLER: You may still be liable for payment of the promissory note
after the Property is sold subject to the Note. Please check with your attorney
or lender.
/X/ C. THIRD PARTY FINANCING. This Contract is subject to approval for
Purchaser of a third party first lien note in the amount of $230,000.00
payable at monthly intervals based on an amortization of not less than
fifteen (15) years, with a payment term of not less than ten (10) years, and
with the initial interest rate not to exceed nine (9)% per annum for the
first five (5) year(s) of the loan.
D. APPLICATION PERIOD. IF A, B, OR C ABOVE IS CHECKED, Purchaser shall
apply for all third party financing or noteholder's waiver of any right to
accelerate the note within ten (10) days after the Effective Date and shall make
every reasonable effort to obtain the financing or waiver. If the financing or
noteholder's waiver is not obtained within forty-five (45) days after the
Effective Date, this Contract shall terminate and the refundable portion of the
Earnest Money shall be refunded to Purchaser.
NOTICE TO PURCHASER: Loan payments, interest rates or other terms of some loans
may be adjusted after Closing. Before signing this Contract, Purchaser is
advised to examine all notes and deeds of trust to determine their terms and the
possibility of future adjustments.
/ / E. SELLER FINANCING. At Closing, Purchaser shall execute and deliver a
promissory note (the "Note") from Purchaser to Seller in the amount of $
_______________________________ bearing _______ percent (____%) interest per
annum, and payable upon the following terms and conditions:
/ / (1) In one payment due in full on _________________ together with
accrued interest.
/ / (2) Amortized over _____________ year(s) in installments of $
_______________________, / / including interest / / plus interest, beginning
__________________ after the date of the Note and continuing at regular
___________ intervals thereafter for _______ year(s) when the entire unpaid
principal balance of the Note and the accrued unpaid interest shall then be due
and payable.
/ / (3) Interest only in _________ installments beginning on the
___________ day after the date of the Note for the first __________________
year(s) and continuing thereafter until _____________________________, and
thereafter in ______________ installments of $ __________________ / /
including interest / / plus interest beginning ____________ after the date of
the Note and continuing at regular __________________ intervals thereafter
for _______________ year(s), when the entire unpaid principal balance of the
Note and the accrued unpaid interest shall then be due and payable.
The Note [CHECK ONE] / / SHALL CONTAIN / / SHALL NOT CONTAIN provisions which
limit Purchaser's personal liability (non-recourse provisions). If personal
liability is limited, the noteholder shall look only to the collateral provided
by the Vendor's Lien, the Deed of Trust, and the Assignment of Leases to enforce
the payment of the indebtedness and shall not seek a deficiency against
Purchaser, except for: (i) failure to pay property taxes; (ii) misapplication of
insurance or condemnation awards, to the extent not applied to restore the
Property or pay the Note; (iii) misapplication of prepaid rents, to the extent
not applied to pay operating expenses or to pay the Note; and (iv) security
deposits.
The Note shall be secured by a Vendor's Lien, a Deed of Trust and an Assignment
of Leases. The Note may be prepaid in whole or in part at any time without
penalty. Any prepayments are to be applied to the payment of the installments
of principal last maturing and interest shall immediately cease on the prepaid
principal. The lien securing payment of the Note will be inferior to any lien
securing any other promissory note described in this Contract. If an Owner
Policy of Title Insurance is furnished, Purchaser shall furnish Seller with a
Mortgagee Title Policy, and the additional premium for simultaneous issuance of
the mortgagee policy shall be paid by Purchaser. The Deed of Trust securing the
Note shall include a provision that any act or occurrence which would constitute
default under the terms of any superior lien shall constitute a default under
the Deed of Trust securing the Note. The Deed of Trust shall contain provisions
for acceleration of maturity in the event of default or, at the noteholder's
option, in the event all or part of the Property is sold, transferred, or
further encumbered without the prior written consent of the noteholder. The
Deed of Trust shall include a provision for the payment of reasonable attorney's
fees if the Note is placed in the hands of an attorney for collection.
If any payments on the Note are not made when due, Seller may at Seller's
option, impose a late fee on any payment which is more than five days (5) past
due in an amount not to exceed five percent (5%) of the past due amount, but in
any event not to exceed the maximum amount allowed by law. A late charge may be
imposed only once on each past due payment. The Deed of Trust shall provide for
Purchaser to deposit in escrow with the noteholder additional monthly amounts
equal to one-twelfth (1/12) of the total annual costs of ad valorem taxes,
casualty insurance premiums, property owners' association dues, and other
assessments on the Property. Payments received by the noteholder shall be
applied first to late fees, second to escrow payments due, third to accrued and
unpaid interest, and last to the unpaid principal balance of the Note.
Initials: Seller JMH Purchaser BLW
<PAGE>
NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark-
ADDENDUM C TO CONTRACT OF SALE
INSPECTION
Property address or description: 6020 CEDAR SPRINGS, DALLAS, TX. 75235
A. INSPECTION PERIOD. Purchaser shall have a period of forty-five (45) 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 1" investigation into the existence of
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 A(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 will survive the termination of this Contract.
Initials: Seller JMH Purchaser BLW
<PAGE>
ADDENDUM E
SPECIAL PROVISIONS ADDENDUM
PROPERTY: 6020 Cedar Springs, Dallas, Texas
SELLER: Haggar Clothing Co
PURCHASER: Bruce L. Wilson
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 Co, as "Seller", and BRUCE L. WILSON, 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. 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 attorneys' fees) arising out of any
violation of the provisions of this Paragraph A of Addendum E.
Notwithstanding any provision of this Contract, no termination of this
Contract will terminate Purchaser's obligations pursuant to this
paragraph, and the limitation of damages as set forth in Paragraph
13.B. of this Contract will not be applicable to any cause of action
arising pursuant to this Paragraph A 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 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.
(3) Purchaser, at Purchaser's sole cost and expense, will obtain a Phase I
environmental site assessment of the Property during
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<PAGE>
the Inspection Period. Purchaser will deliver a copy of the Phase I
environmental site assessment to Seller as soon as such assessment
becomes available to Purchaser. If Purchaser elects not to purchase
the Property based on environmental concerns set forth in the Phase I
environmental site assessment, Seller will reimburse Purchaser for the
actual cost of the Phase I environmental site assessment up to a
maximum of $2,500.00. Seller's reimbursement obligation set forth in
the preceding sentence is contingent upon Seller's receipt of a copy
of the Phase I environmental site assessment.
B. CONDITIONS PRECEDENT TO CLOSING.
(1) The obligation of Seller or Purchaser to consummate the transactions
contemplated hereunder is conditioned upon the execution and delivery
at Closing by Seller, as tenant, and Purchaser, as landlord, of a
lease of the Property in form mutually satisfactory to Seller and
Purchaser. The lease will provide for, among other things, the
following:
(i) Rental of $4,000.00 per month payable in advance;
(ii) A term of 2 years from the Closing Date; however, Seller will
have the right to terminate the lease during the lease term upon
120 days prior written notice to Purchaser;
(iii) Purchaser will be responsible for property taxes, insurance and
structural repairs and maintenance. Commencing December, 1997,
Purchaser will be allowed to pass through property tax increases
over base year 1996;
(iv) No brokerage commission is owed by either Seller or Purchaser
with respect to negotiation or execution of the lease;
(v) Upon expiration or termination of the lease, Seller will (1)
scrape and repaint the ceiling of the warehouse portion of the
building to remove the peeling paint from the ceiling; and (2)
remove the trash compactor from the south side of the building
and repair the penetration in the south wall in a manner
reasonably satisfactory to Purchaser (e.g., masonry, glass or
other suitable material); and
(vi) The lease will be on the NTCAR Commercial Lease Agreement form
modified as agreed to by the parties.
If Seller and Purchaser are not able to agree upon the terms of the
lease prior to the Closing Date, either Seller or Purchaser will have
the right to terminate this Contract at or prior to Closing, whereupon
the refundable Earnest Money will 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).
(2) Seller's obligation to consummate the transactions contemplated
hereunder is conditioned upon receipt by Seller from R.H.A.
Partnership at or prior to Closing, of an amendment to an Easement
Agreement wherein the term of the Easement Agreement is extended as
long as Seller is in possession or entitled to possession of the
Property. If this condition is not satisfied at or prior to Closing,
Seller will have the right to terminate this Contract at or prior to
Closing, whereupon the refundable 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).
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
Page 2
<PAGE>
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, location, 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 the 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, none 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. EXCHANGE. Seller acknowledges that Purchaser desires to complete the
acquisition of the Property in the form of a tax deferred like-kind exchange as
permitted by the Internal Revenue Code. Accordingly, Seller agrees to cooperate
with Purchaser in effecting such tax deferred like-kind exchange as long as no
cost, expense or liability results to Seller. In connection with such tax
deferred like-kind exchange, Purchaser may assign its rights under the Contract
to a qualified intermediary provided that such assignment shall in no manner
release Purchaser from its obligations under the Contract and it is understood
that Purchaser shall remain liable for all of the obligations of the purchaser
under the Contract. The intent of the parties is that after any such exchange,
Purchaser shall be liable to Seller for all of the covenants, agreements and
obligations of the purchaser as set forth in the Contract. If Purchaser is
unable to effect and close an exchange on or prior to the date of Closing as set
forth in this Contract, then Purchaser shall close the transaction contemplated
by the Contract without further delay.
SELLER:
HAGGAR CLOTHING Co
By: /s/ J.M. Haggar III
-------------------------------
Name (Print): J.M. Haggar III
---------------------
Title: CHIEF EXECUTIVE OFFICER
----------------------------
PURCHASER:
/s/ Bruce L. Wilson
----------------------------------
Bruce L. Wilson
Page 3
<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. Waxahachie Garment Company - Nevada (the "Seller") shall sell and
convey to National Fibernet, Inc. (the "Purchaser") and Purchaser shall buy and
pay for the Property (defined below).
2. PROPERTY. Being a manufacturing facility situated on certain real property
at I-35 and Five Points Road in the City of Waxahachie, Ellis County, Texas,
further described as:________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
or as described in Exhibit A, SURVEY/LEGAL DESCRIPTION, 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 $90,000 (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: $90,000.
/ / C. The balance of the Purchase Price shall be payable according to the
provisions in ADDENDUM B, FINANCING.
4. EARNEST MONEY. ATTN: Judy Wallace
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 (the "Earnest Money")
payable to Trinity Abstract and Title Company, 613 Ferris Ave, Waxahachie, TX
75165 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 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.
Page 1
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6. REVIEW OF TITLE DOCUMENTS.
A. REVIEW PERIOD. Purchaser shall have five (5) 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 objections 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 Contact). If Purchaser does not properly and timely
terminate this Contract, then 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 to the current actual
knowledge of Seller without duty of further inquiry, 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.
(8) 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.
Page 2
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INSERT A
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, will merge into and
will not survive the inspection or investigation made by or on behalf of
Purchaser and the passage of title from Seller to Purchaser 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.
Page 2(a)
<PAGE>
9. INSPECTION. [CHECK ONE]
/ / 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; or
(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 /x/ 5 days after the expiration
of the Review Period or Inspection Period (whichever is later); or / / on
___________________________ (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 late of 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 proceeding 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 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.
Page 3
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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; See Insert B on Page
4(a)
[ ] (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.
15. PROFESSIONAL SERVICE FEE.
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.
Page 4
<PAGE>
INSERT B
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 whereupon the refundable portion of the Earnest Money will be promptly
returned by the Title Company to Purchaser and neither party will have any
further rights or obligations under this Contract (except for those which may
expressly survive the termination of this Contract).
Page 4(a)
<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.
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.
Page 5
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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>
<CAPTION>
<S> <C>
/ / Addendum A Personal Property
/X/ Exhibit A Survey and/or Legal Description / / Addendum B Financing
/ / Exhibit B Site Plan / / 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
(____) 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>
<CAPTION>
SELLER PURCHASER
<S> <C>
Waxahachie Garment Company - Nevada National Fibernet, Inc.
---------------------------- -----------------------------------------
By [SIGNATURE]: Joe Haggar III By [SIGNATURE]: D.I. Cole
--------------------------- --------------------------
Name: Joe Haggar III Name: D.I. Cole
------------------------------------ -----------------------------------
Title: Chairman/CEO Title: President
----------------------------------- ----------------------------------
Address: 6113 Lemmon Avenue Address: P.O. Box 1030
-------------------------------- --------------------------------
Dallas, Texas 75209 DeSoto, Texas 75123
- ----------------------------------------- -----------------------------------------
- ----------------------------------------- -----------------------------------------
Telephone: 214-352-8481 Fax:214-956-4446 Telephone: 972-224-1335 Fax: 972-228-8900
------------ ------------- ------------ ------------
Tax I.D. No: 75 0641494 Tax I.D. No:
---------------------------- -----------------------------
Date of Execution: January 28, 1992 Date of Execution:
---------------------- -----------------------
PRINCIPAL BROKER COOPERATING BROKER
None
- ---------------------------------------- -----------------------------------------
By [SIGNATURE]: By [SIGNATURE]:
-------------------------- --------------------------
Name: Name:
------------------------------------ ------------------------------------
Title: 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
Trinity Abstract and Title Company
- ----------------------------------------
By [SIGNATURE:]
--------------------------
Name: Judy Wallace
----------------------------------
Title: Executive Vice President
---------------------------------
Address: 613 Ferris Avenue
-------------------------------
Waxahachie, Texas 75165
- ----------------------------------------
Telephone: 972-938-7373 Fax:
------------ -----------
<PAGE>
EXHIBIT "A"
BEING all that certain lot, tract or parcel of land lying in the City of
Waxahachie, Ellis County, Texas and being part of the J.C. ARMSTRONG SURVEY,
A-6 and being part of a called 10.0 acre tract of land as conveyed by deed
and recorded in Volume 454, Page 487, of the Deed Records of Ellis County,
Texas, (DRECT) and including all of a called 0.56 acre tract of land as
conveyed by deed and recorded in Volume 454, Page 488, DRECT, said two tracts
being contiguous and hereinafter considered as one tract of land, and being
more particularly described as follows:
BEGINNING at a 1/2" steel rod set at the intersection of the south line of the
Armstrong Survey with the northeast right of way line of I.H. 35-E, said point
also being the southwest corner of the aforesaid 0.56 acre tract and being the
same for this tract, said point also being the northwest corner of a called 8.00
acre tract as conveyed by deed and recorded in Volume 688, Page 1034. DRECT;
THENCE N 34 DEG. 52'00" W, 399.04 feet (Record Reference Bearing, 398.7 feet)
along said northeast line of I.H. 35-E to a 1/2" steel rod set for corner;
THENCE N 01 DEG. 48'28" W, 84.91 feet (Deed - N 02 DEG. 25' W, 84.4 feet) to a
1/2" steel rod set at a fence corner in the south line of F.M. 876;
THENCE N 30 DEG. 08'27" E, 752.06 feet (Deed - N 30 DEG. 01' E, 733.4 feet)
along said south line of F.M. 876 to a 1/2" steel rod found for most
northernmost corner of this tract, said point also being the west corner of a
0.0359 acre tract conveyed to the Waxahachie I.S.D. as recorded in Volume
781, Page 773 DRECT;
THENCE S 59 DEG. 28'53" E, 74.85 feet (Deed - S 59 DEG. 59' E, 74.54 feet) to
a 1/2" steel rod found for corner in the east line of the aforesaid 10.0 acre
tract, said point also being the south corner of the aforesaid 0.0359 acre
tract and also being in the west line of a 14.30 acre tract of land as
conveyed by deed to the W.I.S.D. and recorded in Volume 745, Page 190 DRECT;
THENCE S 30 DEG. 19'27" E, 779.06 feet (S 30 DEG. 35' E, 780.51 feet) along said
east line of the 10.0 acre tract to a 1/2" steel rod found for the southwest
comer of the W.I.S.D. and the north line of the aforesaid 8.0 acre tract;
said point also being the southeast corner of the aforesaid 10.0 acre tract
and being the same for this tract, said point also being in the south line of
said J.C. Armstrong Survey;
THENCE S 59 DEG. 46'56" W, 699.74 feet (Deed - S 59 DEG. 30' W, 684.5 feet)
along the south line of the aforesaid 10.0 acre and 0.56 acre tracts and the
south line of the Armstrong Survey to the POINT OF BEGINNING.
<PAGE>
ADDENDUM E
SPECIAL PROVISIONS ADDENDUM
PROPERTY: Manufacturing facility and land located in Waxahachie, Texas
SELLER: Waxahachie Garment Company - Nevada
PURCHASER: National Fibernet, 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
Waxahachie Garment Company - Nevada, as "Seller", and National Fibernet, 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 on 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 as the description of the
Property and shall be incorporated herein by reference for all purposes.
B. INSPECTION. Any tests, studies and inspections desired by Purchaser
are to be conducted in a manner as not to physically damage the Property.
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 Purchaser's inspections 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 attorneys' 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, and the limitation of damages as set
forth in Paragraph 13.B. of this Contract shall not be applicable to any cause
of action arising pursuant to this Paragraph B of Addendum E.
C. DISCLOSURE. Seller has informed Purchaser and Purchaser is aware that
the Property has been vacant for approximately 10 years.
D. 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, 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 tank, 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, location, 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 the 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
Page 1
<PAGE>
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, none 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.
SELLER:
WAXAHACHIE GARMENT COMPANY - NEVADA
By: Joe Haggar III
-------------------------------
Name (Print): Joe Haggar III
----------------------
Title: Chairman/CEO
------------------------------
PURCHASER:
NATIONAL FIBERNET, INC.
By: D.I. Cole
------------------------------
D.I. Cole, President
Page 2
<PAGE>
EXHIBIT 11
HAGGAR CORP. AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
--------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net income (loss) $ 3,743 $ (2,420) $ 9,809 $ 25,681 $ 15,012
Weighted average common shares and
common share equivalents outstanding 8,555 8,552 8,623 8,700 7,956
--------- ----------- --------- ---------- ----------
Net Income (loss) per common share and
common share equivalent $ 0.44 $ (0.28) $ 1.14 $ 2.95 $ 1.88
--------- ----------- --------- ---------- ----------
--------- ----------- --------- ---------- ----------
Computation of weighted average common shares and
Common share equivalents outstanding:
Weighted average common shares outstanding 8,551 8,551 8,546 8,537 5,928
Share equivalents, due to stock options(1) 4 1 77 163 -
Preferred shares converted to common shares - - - - 622
New common shares issued - - - - 1,406
--------- ----------- --------- ---------- ----------
8,555 8,552 8,623 8,700 7,956
--------- ----------- --------- ---------- ----------
--------- ----------- --------- ---------- ----------
</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.
Arthur Andersen LLP
Dallas, Texas
December 19, 1997
<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 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 2,176
<SECURITIES> 0
<RECEIVABLES> 71,900
<ALLOWANCES> 931
<INVENTORY> 105,242
<CURRENT-ASSETS> 192,293
<PP&E> 126,908
<DEPRECIATION> 58,211
<TOTAL-ASSETS> 262,053
<CURRENT-LIABILITIES> 65,739
<BONDS> 0
0
0
<COMMON> 856
<OTHER-SE> 163,658
<TOTAL-LIABILITY-AND-EQUITY> 262,053
<SALES> 406,030
<TOTAL-REVENUES> 406,030
<CGS> 287,434
<TOTAL-COSTS> 110,985
<OTHER-EXPENSES> (1,954)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,525
<INCOME-PRETAX> 6,040
<INCOME-TAX> 2,297
<INCOME-CONTINUING> 3,743
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,743
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
</TABLE>
