<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1996
REGISTRATION NO. 333-_____
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
PILLOWTEX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 2392 75-2147728
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification Number)
Incorporation or
Organization)
4111 MINT WAY
DALLAS, TEXAS 75237
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------
JEFFREY D. CORDES
CHIEF FINANCIAL OFFICER
PILLOWTEX CORPORATION
4111 MINT WAY
DALLAS, TEXAS 75237
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
RONALD J. FRAPPIER
JENKENS & GILCHRIST,
A PROFESSIONAL CORPORATION
1445 ROSS AVENUE, SUITE 3200
DALLAS, TEXAS 75202
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered be Registered per Unit (1) Offering Price (1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10% Senior Subordinated Notes due 2006 $125,000,000 100% $125,000,000 $37,879
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AND OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 12, 1996
PILLOWTEX CORPORATION
OFFER TO EXCHANGE
ALL OUTSTANDING
10% SENIOR SUBORDINATED NOTES DUE 2006
($125,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR 10% SENIOR SUBORDINATED NOTES DUE 2006
The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on _________ ___, 1997 (as such date may be extended, the
"Expiration Date").
Pillowtex Corporation, a Texas corporation ("Pillowtex" or the "Company"),
hereby offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal"), to exchange $1,000 in principal
amount of its 10% Senior Subordinated Notes due 2006 (the "New Notes") for each
$1,000 in principal amount of its outstanding 10% Senior Subordinated Notes due
2006 (the "Old Notes") (the Old Notes and the New Notes are collectively
referred to herein as the "Notes"). An aggregate principal amount of
$125,000,000 of Old Notes is outstanding. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as
it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange for Notes
where such Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities. The Company has agreed that,
starting on the Expiration Date and ending on the close of business one year
after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company will accept for exchange any and all Old Notes that are validly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date.
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange Offer is not conditioned upon
any minimum principal amount of the Old Notes being tendered for exchange.
However, the Exchange Offer is subject to the terms and provisions of the
Registration Rights Agreement, dated as of November 12, 1996 (the "Registration
Rights Agreement"), among the Company, each domestic subsidiary of the Company
and NationsBanc Capital Markets, Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Initial Purchasers"). The Old Notes may be tendered only in
multiples of $1,000. See "The Exchange Offer."
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 9 HEREIN FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY HOLDERS IN EVALUATING THE EXCHANGE OFFER
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
THE DATE OF THIS PROSPECTUS IS ____________ ___, 1997
<PAGE>
The Old Notes were issued in a transaction (the "Prior Offering") pursuant
to which the Company issued an aggregate of $125,000,000 principal amount of the
Old Notes to the Initial Purchasers on November 12, 1996 pursuant to a Purchase
Agreement, dated November 6, 1996 (the "Purchase Agreement"), among the Company,
the Company's domestic subsidiaries and the Initial Purchasers. The Initial
Purchasers subsequently resold the Old Notes in reliance on Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act"). The Company and the
Initial Purchasers also entered into the Registration Rights Agreement, pursuant
to which the Company granted certain registration rights for the benefit of the
holders of the Old Notes. The Exchange Offer is intended to satisfy certain of
the Company's obligations under the Registration Rights Agreement with respect
to the Old Notes. See "The Exchange Offer--Purpose and Effect."
The Old Notes were, and the New Notes will be, issued under the Indenture,
dated as of November 12, 1996 (the "Indenture"), among the Company and Bank One,
Columbus, N.A., as trustee (in such capacity, the "Trustee"). The form and
terms of the New Notes will be identical in all material respects to the form
and terms of the Old Notes, except that (i) the New Notes have been registered
under the Securities Act and, therefore, will not bear legends restricting the
transfer thereof, (ii) holders of New Notes will not be entitled to liquidated
damages equal to $.05 per week per $1,000 principal amount of Old Notes held by
such holders (up to a maximum amount of $0.30 per week per $1,000 principal
amount) otherwise payable under the terms of the Registration Rights Agreement
in respect of the Old Notes held by such holders during any period in which a
Registration Default (as defined herein) is continuing (the "Liquidated
Damages") and (iii) holders of New Notes will not be, and upon the consummation
of the Exchange Offer, holders of Old Notes will no longer be, entitled to
certain rights under the Registration Rights Agreement intended for the holders
of unregistered securities. The Exchange Offer shall be deemed consummated upon
the occurrence of the delivery by the Company to Bank One, Columbus, N.A., as
registrar of the Old Notes (in such capacity, the "Registrar") under the
Indenture of New Notes in the same aggregate principal amount as the aggregate
principal amount of Old Notes that are validly tendered by holders thereof
pursuant to the Exchange Offer. See "The Exchange Offer--Termination of Certain
Rights," "--Procedures for Tendering Old Notes" and "Description of Notes."
The New Notes will bear interest at a rate equal to 10% per annum.
Interest on the New Notes is payable semiannually, commencing May 15, 1997, on
May 15 and November 15 of each year (each, an "Interest Payment Date") and shall
accrue from November 12, 1996 or from the most recent Interest Payment Date with
respect to the Old Notes to which interest was paid or duly provided for. The
New Notes will mature on November 15, 2006. See "Description of Notes."
The New Notes will not be redeemable at the Company's option prior to
November 15, 2001. Thereafter, the New Notes will be redeemable by the Company
at the redemption prices and subject to the conditions set forth in "Description
of Notes--Optional Redemption." Upon the occurrence of a Change of Control (as
defined herein), the Company will be required to make an offer to repurchase all
outstanding New Notes at 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of purchase. There is
no assurance that the Company will have adequate funds to repurchase the New
Notes upon a Change in Control. See "Description of Notes--Repurchase at the
Option of Holders--Change of Control."
The New Notes will be general unsecured obligations of the Company
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined herein) of the Company, including borrowings under the Restated
Credit Agreement, as amended, dated November 12, 1996 (the "Credit Agreement").
The New Notes will also be effectively subordinated to all of the indebtedness
of the Subsidiaries. As of November 30, 1996, the Notes were subordinate to
approximately $104.7 million of Senior Indebtedness. Under the Credit
Agreement, the Company had an unfunded commitment of $81.3 million at
November 30, 1996 which, if funded, would be Senior Indebtedness. See
"Description of Notes." See also "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
The Indenture permits the Company and its Subsidiaries to incur additional
indebtedness, including additional Senior Indebtedness, subject to certain
financial covenants.
Based on existing interpretations of the Securities Act by the staff of the
Securities and Exchange Commission (the "Commission") set forth in "no-action"
letters issued to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer to any holder of Old Notes in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by such holder
(other than a broker-dealer who purchased Old Notes directly from the Company or
resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act)
(i) (continued on next page)
<PAGE>
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such holder is not an affiliate of the
Company, is acquiring the New Notes in the ordinary course of business and is
not participating, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes. Holders wishing to accept
the Exchange Offer must represent to the Company, as required by the
Registration Rights Agreement, that such conditions have been met. In addition,
if such holder is not a broker-dealer, it must represent that it is not engaged
in, and does not intend to engage in, a distribution of the New Notes. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "The Exchange Offer--Resales of the New
Notes." This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making or other trading activities.
As of November 30, 1996, Cede & Co. ("Cede"), as nominee for The Depository
Trust Company, New York, New York ("DTC"), was the sole registered holder of the
Old Notes and held the Old Notes for 58 of its participants. The Company
believes that no such participant is an affiliate (as such term is defined in
Rule 405 of the Securities Act) of the Company. There has previously been only
a limited secondary market, and no public market, for the Old Notes. The Old
Notes are eligible for trading in the Private Offering, Resales and Trading
through Automatic Linkages ("PORTAL") market. In addition, the Initial
Purchasers have advised the Company that they currently intend to make a market
in the New Notes; however, the Initial Purchasers are not obligated to do so and
any market making activities may be discontinued by the Initial Purchasers at
any time. Therefore, there can be no assurance that an active market for the
New Notes will develop. If such a trading market develops for the New Notes,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending on such factors, the New Notes may
trade at a discount from their face value. See "Risk Factors--Absence of Public
Market."
The Company will not receive any proceeds from this Exchange Offer.
Pursuant to the Registration Rights Agreement, the Company will bear certain
registration expenses.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The Old Notes were issued originally in global form (the "Global Old
Note"). The Global Old Note was deposited with, or on behalf of, the DTC, as
the initial depository with respect to the Old Notes (in such capacity, the
"Depository"). The Global Old Note is registered in the name of Cede, as
nominee of DTC, and beneficial interests in the Global Old Note are shown on,
and transfers thereof are effected only through, records maintained by the
Depository and its participants. The use of the Global Old Note to represent
certain of the Old Notes permits the Depository's participants, and anyone
holding a beneficial interest in an Old Note registered in the name of such a
participant, to transfer interests in the Old Notes electronically in accordance
with the Depository's established procedures without the need to transfer a
physical certificate. New Notes issued in exchange for the Global Old Note will
also be issued initially as a note in global form (the "Global New Note," and,
together with the Global Old Note, the "Global Notes") and deposited with, or on
behalf of, the Depository. After the initial issuance of the Global New Note,
New Notes in certificated form will be issued in exchange for a holder's
proportionate interest in the Global New Note only as set forth in the
Indenture.
(ii)
<PAGE>
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . iv
NOTE REGARDING FORWARD-LOOKING INFORMATION . . . . . . . . . . . . . . . . iv
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA . . . . . . . . . . . . . 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . 25
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS . . . . . . . . . . . 43
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 44
DESCRIPTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
DESCRIPTION OF CREDIT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 65
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . .F-1
(iii)
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, is required to file periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. Such information is available for inspection at the public
reference facilities of the Commission at 450 Fifth Street, NW, Washington, DC
20549, and at the regional offices of the Commission located at Seven World
Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, IL 60661. Copies of such information are
obtainable, by mail, upon payment of the Commission's customary charges, by
writing to the Commission's principal office at 450 Fifth Street, NW,
Washington, DC 20549. Such material is also available for inspection at the
library of the New York Stock Exchange (the "NYSE"), 20 Broad Street, New York,
New York 10005. The Commission maintains a web site (http://www.sec.gov) that
contains reports proxy and information statements and other information
regarding registrants that file documents electronically with the Commission.
The Common Stock is listed and traded on the NYSE under the symbol "PTX."
The Company has agreed that, whether or not it is required to do so by the
rules and regulations of the Commission, for so long as any of the Notes remain
outstanding, it will furnish to the holders of Notes and submit to the
Commission (unless the Commission will not accept such materials) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's independent
accountants, and (ii) all reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports. In
addition, for so long as any of the Notes remain outstanding, the Company has
agreed to make available to any prospective purchaser of Notes in connection
with any sale thereof the information required by Rule 144A(d)(4) under the
Securities Act.
NOTE REGARDING FORWARD-LOOKING INFORMATION
INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH
AS "MAY, " "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE
NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE
STATEMENTS IN "RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS, INCLUDING CERTAIN RISKS AND
UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS.
(iv)
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
DATA, INCLUDING FINANCIAL STATEMENTS AND RELATED NOTES THERETO, APPEARING
ELSEWHERE HEREIN. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" OR
"PILLOWTEX" INCLUDES PILLOWTEX CORPORATION AND ITS SUBSIDIARIES. FOR A
DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PARTICIPANTS IN THE EXCHANGE OFFER, SEE "RISK FACTORS."
THE COMPANY
Pillowtex, founded in 1954, is a leading North American designer,
manufacturer and marketer of bed pillows, blankets, mattress pads and down
comforters. Other complementary bedroom textile furnishings offered by the
Company include comforter covers, featherbeds, pillow protectors, decorative
pillows, bedspreads, synthetic comforters, pillow shams, dust ruffles and window
treatments. Pillowtex has positioned itself as a single-source supplier to
retailers for bedroom textile furnishings (other than sheets), offering a broad
assortment of products across multiple price points.
The Company markets its products to virtually all major retailers through
channels of distribution that include department and specialty stores, mass
merchants, discounters and catalogs, as well as institutional suppliers. The
Company believes it is one of the principal suppliers of bedroom textile
products to several of the largest retailers in the United States, including
Wal-Mart Stores, Inc. (including Wal-Mart and Sam's Club) ("Wal-Mart"), Dayton
Hudson Corporation (including Dayton's, Hudson's, Mervyn's, Marshall Field's and
Target) ("Dayton Hudson") and Federated Allied Department Stores (including
Macy's, Bloomingdale's and Burdine's) ("Federated"). See "Business--Marketing,
Sales and Distribution."
Pillowtex markets its products under numerous Company-owned trademarks and
trade names and customer-owned private labels, as well as certain licensed
trademarks. Pillowtex uses trademarks, trade names and private labels as
merchandising tools to assist its customers in coordinating their product
offerings and differentiating their products from those of their competitors.
Pillowtex holds an exclusive license for the highly regarded Ralph Lauren Home
Collection for pillows, down comforters and blankets, and a non-exclusive
license for a variety of other bedroom textile products. The Company has also
entered into various trademark license agreements under which it markets
pillows, down comforters, blankets and related products. Such licenses include
Cannon-Registered Trademark-, Royal Velvet-Registered Trademark-,
Charisma-Registered Trademark-, Touch of Class-Registered Trademark-,
Comforel-Registered Trademark-, Martex-Registered Trademark-, Mickey &
Co.-Registered Trademark- and Dacron-Registered Trademark-.
Pillowtex operates an extensive network of manufacturing and distribution
facilities in Texas, California, Illinois, Mississippi, Pennsylvania, North
Carolina, South Carolina, Tennessee and Toronto, Canada. The Company's
nationwide manufacturing and distribution network enables Pillowtex to ship
pillows, mattress pads and down comforters cost effectively to all major cities
in the United States and Canada. The hub of the network for pillows and down
comforters is located in Dallas, Texas, where the Company operates what it
believes to be the largest feather and down processing facility in North
America, as well as an automated, high speed pillow shell manufacturing
facility. Raw materials for bed pillows and down comforters undergo initial
processing at the Dallas locations, which yields significant economies of scale,
and are shipped to the Company's regional facilities for final assembly and
distribution to customers. The Company produces blankets at manufacturing
facilities in North Carolina, South Carolina and Tennessee. These plants
provide full vertical production capability, including spinning, weaving, dying
and finishing.
BUSINESS STRATEGY
Pillowtex's business strategy is to capitalize on the strengths that have
distinguished the Company as a preferred supplier of high quality bedroom
textile products in North America. These strengths include the ability to:
- - provide customers with a "one-stop shop" for a broad array of
top-of-the-bed product lines (excluding sheets) across multiple price
points, with an emphasis on higher margin products;
- - maintain strong customer relationships by offering comprehensive
merchandising programs and promotional support tools, and by maximizing the
Company's product assortments and array of licensed and Company-owned
1
<PAGE>
trademarks, trade names and brands, with a focus on encouraging consumers
to "trade up" to higher margin products;
- - leverage its nationwide production and distribution network, which provides
comprehensive capability in electronic data interchange ("EDI") and "quick
response" shipments to major retailers;
- - enhance the Company's position as a low cost producer, both operationally
and in selling, general and administrative expenses, through increased
automation, process improvements, system controls and expansion of cost
effective international supply sources; and
- - identify acquisitions that will complement the Company's current product
lines and provide business synergies.
Pillowtex was incorporated in 1954 as an Illinois corporation and was
reincorporated in 1986 as a Texas corporation. The Company's common stock is
traded on the New York Stock Exchange under the symbol "PTX." The Company's
corporate offices are located at 4111 Mint Way, Dallas, Texas 75237 and its
telephone number is (214) 333-3225.
RECENT DEVELOPMENT
On November 18, 1996, the Company purchased (the "Acquisition") certain
assets from the blanket division of Fieldcrest Cannon, Inc. ("Fieldcrest")
pursuant to the terms of an Asset Purchase Agreement, dated as of October 3,
1996. The Acquisition involved the purchase by the Company of the following
assets for an aggregate purchase price of approximately $31.5 million: (i) an
exclusive worldwide trademark and related intellectual property license (the
"License Agreement") with respect to blankets, throws, pillows, mattress pads,
down comforters, featherbeds and related items; (ii) blanket inventory;
(iii) equipment and machinery used in connection with the manufacture of
blankets and throws; (iv) certain personal property leases for equipment; and
(v) the assumption of certain contracts relating to the business of Fieldcrest's
blanket division. The Company has allocated the purchase price among the
classes of assets as follows: $20.5 million for the blanket inventory (which the
Company expects to be adjusted to approximately $15.5 million upon final
verification of inventory levels as of the closing date; however, there can be
no assurance to that effect); $7.0 million for machinery and equipment; and
$4.0 million for intangibles. The Company intends to integrate substantially
all of the acquired equipment and machinery into its existing blanket
manufacturing operations on or before April 1, 1997.
The License Agreement provides for a 25-year worldwide exclusive right to
market certain products under the Fieldcrest family of trademarks, which include
Fieldcrest-Registered Trademark-, Cannon-Registered Trademark-, Royal
Velvet-Registered Trademark-, Charisma-Registered Trademark- and Touch of
Class-Registered Trademark- (the "Licensed Marks"). These products include all
types of blankets and throws (the "Blanket Products"), as well as bed pillows,
mattress pads and down comforters (the "Pillow Products"). The Company formerly
marketed and sold the Pillow Products under a trademark license with Fieldcrest.
The royalty rate applicable to the sale of Pillow Products under the License
Agreement is lower than the average royalty rate on the sale of such products
under the former license agreement. If the reduced royalty rate applicable to
the sale of the Pillow Products under the License Agreement had been in effect
for the year ended December 30, 1995 and the nine months ended September 28,
1996, the royalty payments under the existing license agreement for such periods
would have been reduced by $295,000 and $192,000, respectively.
THE PRIOR OFFERING
The outstanding $125.0 million principal amount of Old Notes were sold by
the Company to the Initial Purchasers on November 12, 1996, pursuant to the
Purchase Agreement. The Initial Purchasers subsequently resold the Old Notes in
reliance on Rule 144A under the Securities Act. The Company and the Initial
Purchasers also entered into the Registration Rights Agreement pursuant to which
the Company granted certain registration rights for the benefit of the holders
of the Old Notes. The Exchange Offer is intended to satisfy certain of the
Company's obligations under the Registration Rights Agreement with respect to
the Old Notes. See"The Exchange Offer--Purpose and Effect."
2
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer ........ The Company is offering upon the terms and subject
to the conditions set forth herein and in the
Letter of Transmittal to exchange the New Notes
for the outstanding Old Notes. As of the date of
this Prospectus, $125.0 million in aggregate
principal amount of the Old Notes is outstanding,
the maximum amount authorized by the Indenture for
all Notes. As of November 12, 1996, there was one
registered holder of the Old Notes, Cede & Co.,
which held the Old Notes for ___ of its
participants. See "The Exchange Offer--Terms of
the Exchange Offer."
Expiration Date . . . . . . 5:00 p.m., New York City time, on _______ __, 1997
as the same may be extended. See "The Exchange
Offer--Expiration Date; Extensions; Amendments."
Conditions of the
Exchange Offer. . . . . . The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange. The only condition to the
Exchange Offer is the declaration by the
Commission of the effectiveness of the
Registration Statement of which this Prospectus
constitutes a part (the "Exchange Offer
Registration Statement"). See "The Exchange
Offer--Conditions of the Exchange Offer."
Termination of Certain
Rights. . . . . . . . . . Pursuant to the Registration Rights Agreement and
the Old Notes, holders of Old Notes (i) have
rights to receive Liquidated Damages and (ii) have
certain rights intended for the holders of
unregistered securities. "Liquidated Damages"
means damages of $0.05 per week per $1,000
principal amount of Old Notes (up to a maximum of
$0.30 per week per $1,000 principal amount) during
the period in which a Registration Default is
continuing pursuant to the terms of the
Registration Rights Agreement. Holders of New
Notes will not be and, upon consummation of the
Exchange Offer, holders of Old Notes will no
longer be, entitled to (i) the right to receive
the Liquidated Damages or (ii) certain other
rights under the Registration Rights Agreement
intended for holders of unregistered securities.
See "The Exchange Offer--Termination of Certain
Rights" and "Procedures for Tendering Old Notes."
Accrued Interest. . . . . . The New Notes will bear interest at a rate equal
to 10% per annum. Interest shall accrue from
November 12, 1996 or from the most recent Interest
Payment Date with respect to the Old Notes to
which interest was paid or duly provided for. See
"Description of Notes--Principal, Maturity and
Interest."
Procedures for Tendering
Old Notes . . . . . . . . Unless a tender of Old Notes is effected pursuant
to the procedures for book-entry transfer as
provided herein, each holder desiring to accept
the Exchange Offer must complete and sign the
Letter of Transmittal, have the signature thereon
guaranteed if required by the Letter of
Transmittal, and mail or deliver the Letter of
Transmittal, together with the Old Notes or a
Notice of Guaranteed Delivery (as defined in the
Letter of Transmittal) and any other required
documents (such as evidence of authority to act,
if the Letter of Transmittal is signed by someone
acting in a fiduciary or representative capacity),
to the Exchange Agent (as defined herein) at the
address set forth on the back cover page of this
Prospectus prior to 5:00 p.m., New York City time,
on the Expiration Date. Any Beneficial Owner (as
defined herein) of the Old Notes whose Old Notes
are registered in the name of a nominee, such as a
broker, dealer, commercial bank or trust company
and who wishes to tender Old Notes in the Exchange
Offer, should instruct such entity or person to
promptly tender on such Beneficial Owner's behalf.
See "The Exchange Offer--Procedures for Tendering
Old Notes."
3
<PAGE>
Guaranteed Delivery
Procedures. . . . . . . . Holders of Old Notes who wish to tender their Old
Notes and (i) whose Old Notes are not immediately
available or (ii) who cannot deliver their Old
Notes or any other documents required by the
Letter of Transmittal to the Exchange Agent prior
to the Expiration Date (or complete the procedure
for book-entry transfer on a timely basis), may
tender their Old Notes according to the guaranteed
delivery procedures set forth in the Letter of
Transmittal. See "The Exchange Offer--Guaranteed
Delivery Procedures."
Acceptance of Old Notes and
Delivery of New Notes . . Upon effectiveness of the Exchange Offer
Registration Statement of which this Prospectus
constitutes a part and consummation of the
Exchange Offer, the Company will accept any and
all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be
delivered promptly after acceptance of the Old
Notes. See "The Exchange Offer--Acceptance of Old
Notes for Exchange; Delivery of New Notes."
Withdrawal Rights . . . . . Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer--Withdrawal Rights."
The Exchange Agent. . . . . Bank One, Columbus, N.A. is the exchange agent (in
such capacity, the "Exchange Agent"). The address
and telephone number of the Exchange Agent are set
forth in "The Exchange Offer--The Exchange Agent;
Assistance."
Fees and Expenses . . . . . All expenses incident to the Company's
consummation of the Exchange Offer and compliance
with the Registration Rights Agreement will be
borne by the Company. The Company will also pay
certain transfer taxes applicable to the Exchange
Offer. See "The Exchange Offer--Fees and
Expenses."
Resales of the New
Notes . . . . . . . . . . Based on existing interpretations by the staff of
the Commission set forth in "no-action" letters
issued to third parties, the Company believes that
New Notes issued pursuant to the Exchange Offer to
a holder in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a
holder (other than (i) a broker-dealer who
purchased the Old Notes directly from the Company
for resale pursuant to Rule 144A under the
Securities Act or any other available exemption
under the Securities Act or (ii) a person that is
an affiliate of the Company within the meaning of
Rule 405 under the Securities Act), without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such Holder is acquiring the New
Notes in the ordinary course of business and is
not participating, and has no arrangement or
understanding with any person to participate, in a
distribution of the New Notes. Each broker-dealer
that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were
acquired by such broker as a result of
market-making or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See
"The Exchange Offer--Resales of the New Notes" and
"Plan of Distribution."
Effect of Not Tendering
Old Notes for Exchange. . Old Notes that are not tendered or that are not
properly tendered will, following the expiration
of the Exchange Offer, continue to be subject to
the existing restrictions upon transfer thereof.
The Company will have no further obligations to
provide for the registration under the Securities
Act of such Old Notes and such Old Notes will,
following the expiration of the Exchange Offer,
bear interest at the same rate as the New Notes.
4
<PAGE>
DESCRIPTION OF NEW NOTES
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that (i) the New Notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, (ii) holders of the New Notes will not
be entitled to Liquidated Damages and (iii) holders of the New Notes will not
be, and upon consummation of the Exchange Offer, holders of the Old Notes will
no longer be, entitled to certain rights under the Registration Rights Agreement
intended for the holders of unregistered securities, except in limited
circumstances. See "Exchange Offer--Termination of Certain Rights." The
Exchange Offer shall be deemed consummated upon the occurrence of the delivery
by the Company to the Registrar under the Indenture of the New Notes in the same
aggregate principal amount as the aggregate principal amount of Old Notes that
are tendered by holders thereof pursuant to the Exchange Offer. See "The
Exchange Offer--Termination of Certain Rights," "-- Procedures for Tendering Old
Notes" and "Description of Notes."
Securities Offered. . . . . $125.0 million aggregate principal amount of 10%
Senior Subordinated Notes due 2006.
Maturity Date . . . . . . . November 15, 2006.
Interest Payment Dates. . . May 15 and November 15, commencing May 15, 1997.
Optional Redemption . . . . On or after November 15, 1997, the Company may
redeem the Notes, in whole or in part, at the
redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of
redemption.
Mandatory Redemption. . . . None.
Ranking . . . . . . . . . . The Notes will be general unsecured obligations of
the Company, subordinated in right of payment to
all existing and future Senior Indebtedness, which
will include borrowings under the Credit
Agreement. As of September 28, 1996, on a pro
forma basis after giving effect to the Prior
Offering and application of the net proceeds
therefrom, the Company would have had
approximately $96.5 million of outstanding Senior
Indebtedness, which would rank senior in right of
payment to the Notes. The Notes also will be
effectively subordinated to all indebtedness and
other liabilities of the Company's Subsidiaries.
The Indenture, pursuant to which the New Notes
will be issued, permits the Company and its
Subsidiaries to incur additional indebtedness,
including additional Senior Indebtedness, subject
to certain limitations. See "Description of
Notes--Subordination."
Guarantees. . . . . . . . . The New Notes will be, and the Old Notes are,
unconditionally guaranteed (the "Guarantees") on a
senior subordinated basis by each of the existing
and future domestic subsidiaries of the Company
and each other subsidiary of the Company that
guarantees the Company's obligations under the
Credit Agreement (each a "Guarantor" and,
collectively, the "Guarantors"). The Guarantees
will be subordinated in right of payment to all
existing and future Guarantor Senior Indebtedness
(as defined herein) of the relevant Guarantor.
See "Description of Notes--Subsidiary Guarantees."
Change of Control . . . . . Upon a Change of Control, the Company will be
required to make an offer to repurchase all
outstanding Notes at 101% of the principal amount
thereof plus accrued and unpaid interest to the
date of repurchase.
Covenants . . . . . . . . . The Indenture restricts, among other things, the
Company's ability to incur additional indebtedness
and issue preferred stock, incur liens to secure
PARI PASSU or subordinated indebtedness, pay
dividends or make certain other restricted
payments, apply net proceeds from certain asset
sales, enter into certain transactions with
affiliates, incur indebtedness that is subordinate
in right of payment to any Senior Indebtedness and
5
<PAGE>
senior in right of payment to the Notes, merge or
consolidate with any other person, sell stock of
Subsidiaries or sell, assign, transfer, lease,
convey or otherwise dispose of substantially all
of the Company. See "Description of
Notes--Certain Covenants."
Absence of a Public Market
for the New Notes . . . . The New Notes are a new issue of securities with
no established market. Accordingly, there can be
no assurance as to the development or liquidity of
any market for the New Notes. The Initial
Purchasers have advised the Company that it
currently intends to make a market in the New
Notes. However, the Initial Purchasers are not
obligated to do so, and any market making with
respect to the New Notes may be discontinued at
any time without notice. The Company does not
intend to apply for listing of the New Notes on a
securities exchange.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating the Exchange Offer.
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR (1) NINE MONTHS ENDED
------------------------------------------------ ---------------------------
SEPTEMBER 30, SEPTEMBER28,
1991 1992 1993 1994 1995 1995 1996
------------------------------------------------ ------------- ------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF EARNINGS DATA:
Net sales. . . . . . . . . . . . . . . . . . $258,966 $273,462 $291,624 $349,520 $474,899 $332,352 $335,770
Cost of goods sold . . . . . . . . . . . . . 206,626 222,611 238,155 294,714 395,922 275,407 280,272
-------- -------- -------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . 52,340 50,851 53,469 54,806 78,977 56,945 55,498
Selling, general and administrative
expenses. . . . . . . . . . . . . . . . . 33,227 33,376 29,227 36,399 42,508 32,315 31,170
-------- -------- -------- -------- -------- -------- --------
Earnings from operations . . . . . . . . . . 19,113 17,475 24,242 18,407 36,469 24,630 24,328
Interest expense . . . . . . . . . . . . . . 5,283 4,997 3,042 6,361 17,491 12,964 10,279
Other expense (income), net. . . . . . . . . -- 1,049 -- (379) -- -- --
-------- -------- -------- -------- -------- -------- --------
Earnings before income taxes . . . . . . . . 13,830 11,429 21,200 12,425 18,978 11,666 14,049
Income taxes . . . . . . . . . . . . . . . . 626 529 8,420 4,736 7,509 4,678 5,495
-------- -------- -------- -------- -------- -------- --------
Net earnings . . . . . . . . . . . . . . . . $13,204 $10,900 $12,780 $7,689 $11,469 $6,988 $8,554
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
OTHER DATA:
Depreciation and amortization. . . . . . . . $2,888 $3,104 $3,868 $6,365 $11,994 $8,767 $9,440
Capital expenditures . . . . . . . . . . . . 3,742 5,869 7,135 10,538 12,448 8,630 2,981
SG&A margin (2). . . . . . . . . . . . . . . 12.8% 12.2% 10.0% 10.4% 9.0% 9.7% 9.3%
EBITDA (3) . . . . . . . . . . . . . . . . . $22,001 $19,530 $28,110 $25,151 $48,463 $33,397 $33,768
EBITDA margin (3)(4) . . . . . . . . . . . . 8.5% 7.1% 9.6% 7.2% 10.2% 10.0% 10.1%
Ratio of EBITDA to interest expense (3). . . 4.2x 3.9x 9.2x 4.0x 2.8x 2.6x 3.3x
Ratio of earnings to fixed charges (5) . . . 3.4x 3.0x 6.8x 2.8x 2.0x 1.8x 2.2x
PRO FORMA FINANCIAL DATA (6):
Interest expense . . . . . . . . . . . . . . $19,936 $15,110 $13,879
EBITDA (3) . . . . . . . . . . . . . . . . . 48,758 33,605 33,960
Ratio of EBITDA to interest expense (3). . . 2.4x 2.2x 2.4x
Ratio of earnings to fixed charges (5) . . . 1.8x 1.6x 1.6x
</TABLE>
<TABLE>
<CAPTION>
PRO
AT FORMA (7)
------------------------------------------ -------------
DECEMBER 30, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 28,
1995 1995 1996 1996
------------ ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital. . . . . . . . . . . . . . . . . $110,128 $149,933 $152,787 $178,287
Total assets . . . . . . . . . . . . . . . . . . 324,710 373,528 370,670 400,470
Total debt . . . . . . . . . . . . . . . . . . . 165,388 212,231 191,676 221,476
Shareholders' equity . . . . . . . . . . . . . . 87,990 84,438 95,042 95,042
</TABLE>
- ----------------------------------
(1) Amounts set forth for the year ended December 31, 1993 reflect the
inclusion of Manetta Home Fashions, Inc. ("Manetta") from August 30,
1993, Tennessee Woolen Mills, Inc. ("TWM") from September 7, 1993 and
Torfeaco Industries Limited ("Torfeaco") from December 1, 1993.
Amounts set forth for the year ended December 31, 1994 reflect the
inclusion of Imperial Feather Company ("Imperial") from August 19,
1994 and Beacon Manufacturing Company ("Beacon") from December 1,
1994. The financial information for years 1993 and 1994 has been
reclassified for certain advertising and royalty fees so as to be
comparable with the 1995 presentation. Advertising fees are now
reported as a reduction of gross sales rather than selling, general
and administrative ("SG&A") expenses and the royalty fees have been
reclassified from SG&A expenses to cost of goods sold.
(2) Represents SG&A expenses as a percentage of net sales.
(3) EBITDA consists of earnings before interest, income taxes,
extraordinary items and depreciation and amortization expense. While
EBITDA should not be construed as an alternative to operating income
or net income, or as an indicator of operating performance or
liquidity, it is a measure that the Company believes is used commonly
to evaluate a company's ability to service debt.
(4) Represents EBITDA as a percentage of net sales.
7
<PAGE>
(5) For purposes of calculating these ratios, earnings represents earnings
before income taxes plus fixed charges, as defined. Fixed charges
consists of interest expense, amortization of debt issuance costs, and
the portion (approximately one-third) of rental and lease expense,
which Management believes is representative of the interest component
of rental and lease expense.
(6) The pro forma financial data has been calculated giving effect to the
Prior Offering and the application of the net proceeds therefrom, the
amendment of the Company's existing Credit Agreement as described in
"Description of Credit Agreement" and certain cost savings associated
with the License Agreement entered into in connection with the
Acquisition as if each such transaction occurred on January 1, 1995.
However, no other pro forma adjustments have been made with respect to
the Acquisition, including any revenue and attributable EBITDA
effects. Fieldcrest generated approximately $37.0 million of revenues
from the sale of Blanket Products under the Licensed Marks during the
year ended December 31, 1995. However, the Acquisition did not
involve the purchase of Fieldcrest's Blanket Products business,
including but not limited to its sales and marketing personnel, its
product distribution channels or its customer service department.
While the Company believes that its existing sales, distribution and
customer service capabilities will support the Company's sales of
Blanket Products under the Licensed Marks, there can be no assurance
that the Company will be able to generate revenues from such assets at
the levels previously achieved by Fieldcrest. Moreover, the pro forma
financial data does not purport to represent what the Company's
results actually would have been if such events had occurred at the
dates indicated, nor does such information purport to project the
results of the Company for any future period. See "-- Recent
Development" and "Use of Proceeds."
(7) The pro forma balance sheet data has been calculated giving effect to
the Prior Offering and the application of the net proceeds therefrom
as if each occurred on September 28, 1996.
8
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE SPECIFIC FACTORS SET
FORTH BELOW, AS WELL AS THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, IN
EVALUATING THE EXCHANGE OFFER.
SIGNIFICANT LEVERAGE AND DEBT SERVICE
Upon consummation of the Prior Offering, the Company became highly
leveraged. At September 28, 1996, on a pro forma basis, after giving effect to
the Prior Offering and the application of the net proceeds therefrom, the
Company would have had total consolidated outstanding debt of approximately
$221.5 million. In addition, subject to the restrictions in the Credit Agreement
and the Indenture, the Company and its subsidiaries may incur additional
indebtedness (including additional Senior Indebtedness) from time-to-time to
finance acquisitions or capital expenditures or for general corporate purposes.
Upon the closing of the Prior Offering, the Company had unused borrowing
capacity of up to approximately $89.0 million under a $175.0 million revolving
credit facility (the "Revolver") provided for in the Credit Agreement.
The level of the Company's indebtedness could have important consequences
to holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to debt service and will not be
available for other purposes; (ii) the Company's ability to obtain additional
debt financing in the future for other acquisitions, working capital, capital
expenditures or research and development may be limited; and (iii) the Company's
level of indebtedness could limit its flexibility in reacting to changes in its
industry or economic conditions generally.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control, as well as the availability of
borrowing under the Credit Agreement or any successor credit agreement. The
Company will require substantial amounts of cash to fund scheduled payments of
principal and interest on its outstanding indebtedness as well as future capital
expenditures and any increased working capital requirements. If the Company is
unable to meet its cash requirements out of cash flow from operations and its
available borrowings, there can be no assurance that it will be able to obtain
alternative financing or that it will be permitted to do so under the terms of
the Credit Agreement or other debt instruments. In the absence of such
financing, the Company's ability to respond to changing business and economic
conditions, to make future acquisitions, to absorb adverse operating results or
to fund capital expenditures or research and development may be adversely
affected. If the Company does not generate sufficient increases in cash flow
from operations to repay the Notes at maturity, it could attempt to refinance
the Notes; however, no assurance can be given that such a refinancing would be
available on terms acceptable to the Company, if at all. Any failure by the
Company to satisfy its obligations with respect to the Notes at maturity (with
respect to payments of principal) or prior thereto (with respect to payments of
interest or required repurchases) would constitute a default under the Indenture
and could cause a default under agreements governing other indebtedness, if any,
of the Company. In addition, there can be no assurance that the Company will
have available the financial resources necessary to repurchase any or all Notes
tendered upon a Change of Control.
SUBORDINATION OF NOTES AND GUARANTEES
The Old Notes are, and the New Notes will be, subordinated in right of
payment to all existing and future Senior Indebtedness of the Company, including
borrowings under the Credit Agreement. In the event of bankruptcy, liquidation
or reorganization of the Company, the assets of the Company will be available to
pay obligations on the Notes only after all Senior Indebtedness has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the Notes then outstanding. Each Guarantee will be similarly
subordinated in right of payment to all existing and future Guarantor Senior
Indebtedness of the relevant Guarantor, including such Guarantor's guaranty of
the Company's indebtedness under the Credit Agreement. In addition, under
certain circumstances the Company will not be permitted to pay its obligations
under the Notes in the event of a default under certain Senior Indebtedness.
The aggregate principal amount of Senior Indebtedness of the Company, as of
September 28, 1996 would have been approximately $96.5 million on a pro forma
basis after giving effect to the Acquisition, the Prior Offering and the
application of the net proceeds therefrom. Additional Senior Indebtedness may be
incurred by the Company from time-to-time, subject to certain restrictions. See
"Description of Notes--Subordination."
9
<PAGE>
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture restricts, among other things, the ability of the Company and
its subsidiaries to incur additional indebtedness, pay dividends or make certain
other restricted payments, incur liens to secure PARI PASSU or subordinated
indebtedness, sell stock of subsidiaries, apply net proceeds from certain asset
sales, merge or consolidate with any other person, sell, assign, transfer,
lease, convey or otherwise dispose of substantially all of the assets of the
Company, enter into certain transactions with affiliates, or incur substantially
all of the assets of the Company, enter into certain transactions with
affiliates, or incur indebtedness that is subordinate in right of payment to any
Senior Indebtedness and senior in right of payment to the Notes.
The Credit Agreement contains more extensive and restrictive covenants and
restrictions than the Indenture and requires the Company to maintain specified
financial ratios and satisfy certain financial condition tests. The Company's
ability to meet those financial ratios and tests can be affected by events
beyond its control, and there can be no assurance that the Company will meet
those tests. In addition, the Company's operating and financial flexibility will
be limited by covenants that limit the ability of the Company and its
subsidiaries to incur additional indebtedness, pay dividends or make
distributions to its stockholders or make certain other restricted payments,
create certain liens upon assets, apply the proceeds from the dispositions of
certain assets or enter into certain transactions with affiliates. There can be
no assurance that such covenants will not adversely affect the Company's ability
to finance its future operations or capital needs or to engage in other business
activities which may be in the interests of the Company. The Credit Agreement
also prohibits the Company from prepaying other indebtedness (including the
Notes) before indebtedness under the Credit Agreement. A breach of any of these
covenants could result in a default under the Credit Agreement. Upon the
occurrence of an event of default under the Credit Agreement, the lenders
thereunder could elect to declare all amounts outstanding under the Credit
Agreement, including accrued interest or other obligations, to be immediately
due and payable or proceed against the collateral granted to them to secure that
indebtedness. If any Senior Indebtedness were to be accelerated, there can be
no assurance that the assets of the Company would be sufficient to repay in full
that indebtedness and the other indebtedness of the Company, including the
Notes.
As a result of these covenants, the ability of the Company to respond to
changing business and economic conditions and to secure additional financing, if
needed, may be significantly restricted, and the Company may be prevented from
engaging in transactions that might otherwise be considered beneficial to the
Company. See "Description of Notes--Certain Covenants" and "Description of
Credit Agreement."
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the Company
or any Guarantors, at the time it incurred the indebtedness evidenced by the
Notes or its Guarantee, as the case may be, (i)(a) was or is insolvent or
rendered insolvent by reason of such occurrence or (b) was or is engaged in a
business or transaction for which the assets remaining with the Company or such
Guarantor constituted unreasonably small capital or (c) intended or intends to
incur, or believed or believes that it would incur, debts beyond its ability to
pay such debts as they mature, and (ii) the Company or such Guarantor received
or receives less than reasonably equivalent value or fair consideration for the
incurrence of such indebtedness, the Notes and the Guarantee could be voided, or
claims in respect of the Notes or the Guarantees could be subordinated to all
other debts of the Company or such Guarantor, as the case may be. The voiding
or subordination of any of such pledges or other security interests or of any of
such indebtedness could result in an Event of Default (as defined in the
Indenture) with respect to such indebtedness, which could result in acceleration
thereof. In addition, the payment of interest and principal by the Company
pursuant to the Notes or the payment of amounts by a Guarantor pursuant to a
Guarantee could be voided and required to be returned to the person making such
payment, or to a fund for the benefit of the creditors of the Company or such
Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or a Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities were
greater than the fair saleable value of all of its assets at a fair valuation or
if the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or (ii) it could not
pay its debts as they become due.
10
<PAGE>
To the extent any Guarantees were voided as a fraudulent conveyance or held
unenforceable for any other reason, holders of Notes would cease to have any
claim in respect of such Guarantor and would-be creditors solely of the Company
and any Guarantor whose Guarantee was not avoided or held unenforceable. In
such event, the claims of the holders of Notes against the issuer of an invalid
Guarantee would be subject to the prior payment of all liabilities and preferred
stock claims of such Guarantor. There can be no assurance that, after providing
for all prior claims and preferred stock interests, if any, there would be
sufficient assets to satisfy the claims of the holders of Notes relating to any
voided portions of any of the Guarantees.
The Company is a holding company whose material assets consist primarily of
the capital stock of the Guarantors and the Company's intellectual property
assets. Consequently, the Company is dependent upon dividends paid by the
Guarantors to pay its operating expenses, service its debt obligations,
including the Notes, and satisfy any mandatory repurchase obligations relating
to the Notes, as a result of Change of Control or a sale or other disposition of
certain assets. See "Description of Notes" and "Description of Credit
Agreement."
FUTURE ACQUISITIONS
The Company expects to continue a strategy of identifying and acquiring
companies with complementary products or services that may be expected to
enhance the Company's operations and profitability. There can be no assurances
that the Company will be able to integrate acquisitions successfully into the
Company's operations or that any of such acquisitions will prove profitable.
DEPENDENCE ON SUPPLY SOURCES IN CHINA
CONCENTRATION OF SUPPLY SOURCES. In 1995 and the nine months ended
September 28, 1996, approximately 80% of the raw feather and down that Pillowtex
uses to produce natural fill pillows and down comforters was imported from the
People's Republic of China ("China"). In 1995, the Company opened an office in
Hong Kong to source purchases from China and other far eastern countries of raw
feather and down (some of which is also obtained through an independent supplier
in the United States), comforter shells and comforter covers.
POSSIBLE DISRUPTION OF SUPPLY SOURCES. The Company's relationships with
its suppliers in China could be disrupted or adversely affected due to a number
of factors, including governmental regulation, fluctuation in exchange rates,
and changes in economic and political conditions in China. If the Company's
supply sources in China were disrupted for any reason, the Company believes,
based on existing market conditions, that it could establish alternative supply
relationships. However, because establishing these relationships involves
numerous uncertainties relating to delivery requirements, price, payment terms,
quality control, and other matters, the Company is unable to predict whether
such relationships would be on terms satisfactory to the Company. Accordingly,
any significant disruption in the Company's relationships with its suppliers in
China could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Manufacturing, Raw
Materials, and Imports."
IMPORT REGULATIONS. The Company's relationships with its suppliers in
China are also subject to risks associated with changes in United States
legislation and regulations relating to imports, including quotas, duties and
taxes, and other charges or restrictions on imports. Products that the Company
imports from China currently receive preferential tariff treatment accorded
goods from countries granted "most favored nation" status. Under the Trade Act
of 1974, the President of the United States is authorized, upon making specified
findings, to waive certain restrictions that would otherwise render China
ineligible for most favored nation treatment. The President has waived these
provisions each year since 1979. Most favored nation status was accordingly
renewed in June 1996 despite legislation pursued by Congress that demanded that
China desist from certain trade and military activities. Congress will continue
to monitor these activities and may encourage the President to reconsider the
renewal of most favored nation status for China in June 1997 and no assurance
can be given that China will continue to enjoy this status in the future. Raw
materials and finished products entering the United States from China without
the benefit of most favored nation treatment would be subject to significantly
higher duty rates. See "Business--Manufacturing, Raw Materials and Imports."
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ADVERSE RETAIL INDUSTRY CONDITIONS
The Company sells its products to a number of department stores and other
major retailers who have experienced financial difficulties during the past
several years. Some of the retailers to which the Company sells its products
are currently operating under the protection of federal bankruptcy laws or state
insolvency laws or may file for relief under such laws in the future. As a
result of these financial difficulties and bankruptcy and insolvency
proceedings, the Company may be unable to collect some or all amounts owed by
these retailers. Additionally, all or part of the operations of a retailer that
seeks bankruptcy or other debtor protection may be discontinued or sales of the
Company's products to such a retailer may be curtailed or terminated as a result
of bankruptcy or insolvency proceedings. During 1995 and the nine months ended
September 28, 1996, sales to retailers currently operating under the protection
of such laws accounted for approximately 1.6% and 1.3% of Pillowtex's net sales,
respectively.
DEPENDENCE ON KEY LICENSES
The Company holds licenses with organizations such as Ralph Lauren, Disney,
Fieldcrest, DuPont, the U.S. Postal Service, WestPoint Stevens, Inc., and
others, using such well-known trademarks and trade names as the Ralph Lauren
Home Collection, Mickey & Co.-Registered Trademark-, Cannon-Registered
Trademark-, Royal Velvet-Registered Trademark-, Charisma-Registered Trademark-,
Touch of Class-Registered Trademark-, Martex-Registered Trademark- and
Dacron-Registered Trademark-. Although the significance of specific licenses
varies from year-to-year, a substantial portion of Pillowtex's net sales for
1995 and the nine months ended September 28, 1996, were attributable to products
sold under licensed trademarks and trade names. These licenses generally
require the payment of royalties based on net sales, including the payment of
minimum annual royalties, and expire at various dates from 1996 to 1999. No
assurance can be given that Pillowtex will be able to renew these licenses on
terms acceptable to Pillowtex upon their expiration or will be able to acquire
new licenses to use other popular trademarks. In addition, if Mr. Charles M.
Hansen, Jr., the Company's Chairman of the Board, President and Chief Executive
Officer, ceases to be actively involved in the management of the Company or if
Mr. Hansen and/or John H. Silverthorne, or their immediate families, in the
aggregate, cease to beneficially own at least 40% of the Company's common stock
(the "Common Stock"), the Company's license to market products under the Ralph
Lauren Home Collection will become subject to termination at the option of the
licensor. The loss of a significant license could have a material adverse
effect on the financial condition or results of operations of the Company.
RISK OF LOSS OF MATERIAL CUSTOMERS
In 1995, sales to Wal-Mart and Dayton Hudson accounted for 13.7% and 12.7%
of the Company's total sales, respectively. For the nine months ended
September 28, 1996, sales to Wal-Mart and Dayton Hudson accounted for 14.7% and
12.5% of total sales, respectively. Consistent with industry practice,
Pillowtex does not operate under a long-term written supply contract with
Wal-Mart, Dayton Hudson or any other of its customers. The Company's business
could be materially adversely affected by the loss of Dayton Hudson or Wal-Mart
as continuing major customers.
POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control as defined in the Indenture, the Company will be
required to offer to repurchase all outstanding Notes at 101% of the principal
amount thereof plus accrued and unpaid interest to the date of repurchase and
Liquidated Damages. However, there can be no assurance that sufficient funds
will be available at the time of any Change of Control to make any required
repurchases of Notes tendered. Moreover, restrictions in the Credit Agreement
prohibit the Company from making such required repurchases; consequently, any
such repurchases would constitute an event of default under the Credit
Agreement. There can be no assurance that the Company will be able to obtain
appropriate consents under the Credit Agreement to enable it to fulfill such
repurchase obligations. Notwithstanding these provisions, the Company could
enter into certain transactions, including certain recapitalizations, that would
not constitute a Change of Control but would increase the amount of debt
outstanding at such time. See "Description of Notes--Repurchase at the Option
of Holders."
INDUSTRY COMPETITION AND COMPETITIVE FACTORS
The Company participates in a highly competitive industry. The Company
competes with a number of established manufacturers, importers and distributors
of home textile furnishings, some of which have greater financial
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distribution and marketing resources. The Company's current competitors consist
primarily of domestic suppliers of bed pillows, blankets, mattress pads, down
comforters and other bedroom textile furnishings. The home fashion products
industry also includes companies that produce bed sheets, towels and other
commodity-type items. A number of these companies do not currently offer the
Company's principal products. There can be no assurance, however, that these
companies will not compete with the Company in the future.
The Company competes on the basis of price, quality, brand names and
service. The Company believes that the principal competitive factors affecting
its business include its sales and marketing expertise, its ability to create
and develop products offering superior performance characteristics, its
relationships with customers and its manufacturing and distribution
capabilities.
CONTROL BY PRINCIPAL SHAREHOLDERS
Charles M. Hansen, Jr., Mary R. Silverthorne and the John H. Silverthorne
Marital Trust B (collectively, the "Principal Shareholders"), own an aggregate
of 5,884,808 shares of the Common Stock, representing approximately 55.4% of the
outstanding shares of Common Stock as of September 28, 1996. As a result, the
Principal Shareholders are in a position to control the Company through their
ability to determine the outcome of elections of the Company's directors. See
"Principal Shareholders."
DEPENDENCE ON KEY PERSONNEL
The Company's business is managed by or under the direction of Charles M.
Hansen, Jr., who serves as Chairman of the Board, President and Chief Executive
Officer. The Company believes that its future success will be highly dependent
upon its ability to attract and retain skilled managers and other personnel,
including Mr. Hansen. The loss of Mr. Hansen's services could have a material
adverse effect on the Company. See "--Dependence on Key Licenses."
SEASONALITY OF BUSINESS
Pillowtex's business is subject to a pattern of seasonal fluctuation.
During the past three years, sales and earnings from operations generated during
the second half of the year averaged approximately 62% and 69%, respectively, of
the Company's total sales and earnings from operations. The Company's needs for
working capital accelerate in the second half of the year and, accordingly,
total debt levels tend to peak in the third and fourth quarters, falling off
again in the first quarter of the following year. The amount of the Company's
sales generated during the second half of the year generally depends upon a
number of factors, including the level of retail sales for home textile
furnishings during the fall and winter, weather conditions affecting the level
of sales of down comforters and blankets (which are sold in greater quantities
in cold weather), general economic conditions, and other factors beyond the
Company's control. The Company's results of operations would be adversely and
disproportionately affected if the Company's sales were substantially lower than
those normally expected during the second half of the year.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The New Notes are a new issue of securities, have no established trading
market and may not be widely distributed. The Company does not intend to list
the New Notes on any national securities exchange or to seek the admission
thereof to trading in the National Association of Securities Dealers Automation
Quotation System. The Company has been advised by the Initial Purchasers that
they presently intend to make a market in the New Notes. However, the Initial
Purchasers are not obligated to do so and any market making activities with
respect to the New Notes may be discontinued at any time without notice. In
addition, such market making activity will be subject to the limitations imposed
by the Exchange Act and may be limited during the Exchange Offer and at certain
other times. No assurance can be given that an active public or other market
will develop for the New Notes or as to the liquidity of or the trading market
for the New Notes. If a trading market does not develop or is not maintained,
holders of the New Notes may experience difficulty in reselling the New Notes or
may be unable to sell them at all. If a market for the New Notes develops, any
such market may be discontinued at any time. If a public trading market
develops for the New Notes, future trading prices of the New Notes will depend
on many factors, including, among other things, prevailing interest rates, the
Company's results of operations and the market for similar securities.
Depending on prevailing interest rates,
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the market for similar securities and other facts, including the financial
condition of the Company, the New Notes may trade at a discount from their
principal amount.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company to the Initial Purchasers on
November 12, 1996, pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes in reliance on Rule 144A under the Securities
Act. The Company, each domestic Subsidiary of the Company and the Initial
Purchasers also entered into the Registration Rights Agreement, pursuant to
which the Company agreed, with respect to the Old Notes and subject to the
Company's determination that the Exchange Offer is permitted under applicable
law, to (i) cause to be filed, on or prior to December 12, 1996, a registration
statement with the Commission under the Securities Act concerning the Exchange
Offer, (ii) use its best efforts (a) to cause such registration statement to be
declared effective by the Commission on or prior to February 13, 1997 and (b) to
cause the Exchange Offer to be consummated on or prior to 30 days after the date
such registration statement is declared effective by the Commission. The
Company will keep the Exchange Offer open for a period of not less than 30 days
and not more than 45 days. This Exchange Offer is intended to satisfy the
Company's exchange offer obligations under the Registration Rights Agreement.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Following the expiration of the Exchange Offer, holders of Old Notes not
tendered, or not properly tendered will not have any further registration rights
and such Old Notes will continue to be subject to the existing restrictions on
transfer thereof. Accordingly, the liquidity of the market for a holder's Old
Notes could be adversely affected upon expiration of the Exchange Offer if such
holder elects to not participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal, to exchange $1,000
in principal amount of the New Notes for each $1,000 in principal amount of the
outstanding Old Notes. The Company will accept for exchange any and all Old
Notes that are validly tendered on or prior to 5:00 p.m., New York City time, on
the Expiration Date. Tenders of the Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange
Offer is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer is subject to the terms and
provisions of the Registration Rights Agreement. See "--Conditions of the
Exchange Offer."
Old Notes may be tendered only in multiples of $1,000. Subject to the
foregoing, holders of Old Notes may tender less than the aggregate principal
amount represented by the Old Notes held by them, provided that they
appropriately indicate this fact on the Letter of Transmittal accompanying the
tendered Old Notes (or so indicate pursuant to the procedures for book-entry
transfer).
As of the date of this Prospectus, $125.0 million in aggregate principal
amount of the Old Notes is outstanding, the maximum amount authorized by the
Indenture for all Notes. As of November 30, 1996, there was one registered
holder of the Old Notes, Cede, which held the Old Notes for 58 of its
participants. Solely for reasons of administration, the Company has fixed the
close of business on ________ ___, 1997, as the record date (the "Record Date")
for purposes of determining the persons to whom this Prospectus and the Letter
of Transmittal will be mailed initially. Only a holder of the Old Notes (or
such holder's legal representative or attorney-in-fact) may participate in the
Exchange Offer. There will be no fixed record date for determining holders of
the Old Notes entitled to participate in the Exchange Offer. The Company
believes that, as of the date of this Prospectus, no such holder is an affiliate
(as defined in Rule 405 under the Securities Act) of the Company.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes and for the purposes of receiving the New Notes from the Company.
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<PAGE>
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Expiration Date shall be ________ ___, 1997 at 5:00 p.m., New York City
time, unless the Company, in its sole discretion, extends the Exchange Offer, in
which case the Expiration Date shall be the latest date and time to which the
Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, (ii) to extend the Exchange Offer, (iii) if any of the
conditions set forth below under "--Conditions of the Exchange Offer" shall not
have been satisfied, to terminate the Exchange Offer, by giving oral or written
notice of such delay, extension, or termination to the Exchange Agent, and (iv)
to amend the terms of the Exchange Offer in any manner. If the Exchange Offer
is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendments by means of a
prospectus supplement that will be distributed to the registered holders of the
Old Notes. Modification of the Exchange Offer, including, but not limited to,
(i) extension of the period during which the Exchange Offer is open and (ii)
satisfaction of the conditions set forth below under "--Conditions of the
Exchange Offer" may require that at least five business days remain in the
Exchange Offer.
CONDITIONS OF THE EXCHANGE OFFER
The Exchange Offer is not conditioned upon any minimum principal amount of
the Old Notes being tendered for exchange. However, the Exchange Offer is
conditioned upon the declaration by the Commission of the effectiveness of the
Exchange Offer Registration Statement of which this Prospectus constitutes a
part.
TERMINATION OF CERTAIN RIGHTS
The Registration Rights Agreement provides that, subject to certain
exceptions, in the event of a Registration Default, holders of Old Notes are
entitled to receive Liquidated Damages of $0.05 per week per $1,000 principal
amount of Old Notes held by such holders (up to a maximum of $0.30 per week per
$1,000 principal amount of Old Notes). A "Registration Default" with respect to
the Exchange Offer shall occur if: (i) the Exchange Offer Registration
Statement has not been filed with the Commission on or prior to December 12,
1996; (ii) the Exchange Offer Registration Statement is not declared effective
on or prior to February 13, 1997 (the "Effectiveness Target Date"), (iii) the
Company fails to consummate the Exchange Offer within 30 days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective during the period specified in
the Registration Rights Agreement. Holders of New Notes will not be and, upon
consummation of the Exchange Offer, holders of Old Notes will no longer be,
entitled to (i) the right to receive the Liquidated Damages or (ii) certain
other rights under the Registration Rights Agreement intended for holders of Old
Notes. The Exchange Offer shall be deemed consummated upon the occurrence of
the delivery by the Company to the Registrar under the Indenture of New Notes in
the same aggregate principal amount as the aggregate principal amount of Old
Notes that are tendered by holders thereof pursuant to the Exchange Offer.
ACCRUED INTEREST
The New Notes will bear interest at a rate equal to 10% per annum, which
interest shall accrue from November 12, 1996 or from the most recent Interest
Payment Date with respect to the Old Notes to which interest was paid or duly
provided for. See "Description of Notes--Principal, Maturity and Interest."
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PROCEDURES FOR TENDERING OLD NOTES
The tender of a holder's Old Notes as set forth below and the acceptance
thereof by the Company will constitute a binding agreement between the tendering
holder and the Company upon the terms and subject to the conditions set forth in
this Prospectus and in the accompanying Letter of Transmittal. Except as set
forth below, a holder who wishes to tender Old Notes for exchange pursuant to
the Exchange Offer must transmit such Old Notes, together with a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to the Exchange Agent at the address set
forth on the back cover page of this Prospectus prior to 5:00 p.m., New York
City time, on the Expiration Date. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS
OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedures for such transfer. In connection with a
book-entry transfer, a Letter of Transmittal need not be transmitted to the
Exchange Agent, provided that the book-entry transfer procedure must be complied
with prior to 5:00 p.m., New York City time, on the Expiration Date.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant hereto are tendered (i) by a registered holder of the Old Notes who has
not completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of Transmittal, or (ii)
by an Eligible Institution (as defined herein). In the event that a signature
on a Letter of Transmittal or a notice of withdrawal, as the case may be, is
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or otherwise be an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(collectively, "Eligible Institutions"). If the Letter of Transmittal is signed
by a person other than the registered holder of the Old Notes, the Old Notes
surrendered for exchange must either (i) be endorsed by the registered holder,
with the signature thereon guaranteed by an Eligible Institution, or (ii) be
accompanied by a bond power, in satisfactory form as determined by the Company
in its sole discretion, duly executed by the registered holder, with the
signature thereon guaranteed by an Eligible Institution. The term "registered
holder" as used herein with respect to the Old Notes means any person in whose
name the Old Notes are registered on the books of the Registrar.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered and to reject any Old Notes the Company's
acceptance of which might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as the Company shall determine. The Company
will use reasonable efforts to give notification of defects or irregularities
with respect to tenders of Old Notes for exchange but shall not incur any
liability for failure to give such notification. Tenders of the Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company, in its sole discretion, of
such person's authority to so act must be submitted.
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Any beneficial owner of the Old Notes (a "Beneficial Owner") whose Old
Notes are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender Old Notes in the Exchange
Offer should contact such registered holder promptly and instruct such
registered holder to tender on such Beneficial Owner's behalf. If such
Beneficial Owner wishes to tender directly, such Beneficial Owner must, prior to
completing and executing the Letter of Transmittal and tendering Old Notes, make
appropriate arrangements to register ownership of the Old Notes in such
Beneficial Owner's name. Beneficial Owners should be aware that the transfer of
registered ownership may take considerable time.
By tendering, each registered holder will represent to the Company that,
among other things (i) the New Notes to be acquired in connection with the
Exchange Offer by the holder and each Beneficial Owner of the Old Notes are
being acquired by the holder and each Beneficial Owner in the ordinary course of
business of the holder and each Beneficial Owner, (ii) the holder and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, (iii) the holder and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer for
the purpose of distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes acquired by such person and cannot
rely on the position of the staff of the Commission set forth in "no-action"
letters that are discussed herein under "--Resales of the New Notes," (iv) that
if the holder is a broker-dealer that acquired Old Notes as a result of market
making or other trading activities, it will deliver a prospectus in connection
with any resale of New Notes acquired in the Exchange Offer, (v) the holder and
each Beneficial Owner understand that a secondary resale transaction described
in clause (iii) above should be covered by an effective registration statement
containing the selling security holder information required by Item 507 of
Regulation S-K of the Securities Act, and (vi) neither the holder nor any
Beneficial Owner is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company except as otherwise disclosed to the Company in writing. In
connection with a book-entry transfer, each participant will confirm that it
makes the representations and warranties contained in the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date (or complete the procedure for book-entry transfer on a
timely basis), may tender their Old Notes according to the guaranteed delivery
procedures set forth in the Letter of Transmittal. Pursuant to such procedures:
(i) such tender must be made by or through an Eligible Institution and a Notice
of Guaranteed Delivery (as defined in the Letter of Transmittal) must be signed
by such holder, (ii) on or prior to the Expiration Date, the Exchange Agent must
have received from the holder and the Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail
or hand delivery) setting forth the name and address of the holder, the
certificate number or numbers of the tendered Old Notes, and the principal
amount of tendered Old Notes, stating that the tender is being made thereby and
guaranteeing that, within four (4) business days after the date of delivery of
the Notice of Guaranteed Delivery, the tendered Old Notes, a duly executed
Letter of Transmittal and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) such properly completed
and executed documents required by the Letter of Transmittal and the tendered
Old Notes in proper form for transfer (or confirmation of a book-entry transfer
of such Old Notes into the Exchange Agent's account at DTC) must be received by
the Exchange Agent within four (4) business days after the Expiration Date. Any
Holder who wishes to tender Old Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery and Letter of Transmittal relating to such Old
Notes prior to 5:00 p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all the conditions to the Exchange Offer,
the Company will accept any and all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange Offer will be delivered promptly
after acceptance of the Old Notes. For purposes of the Exchange Offer, the
Company shall be deemed to have accepted validly tendered Old Notes, when, as,
and if the Company has given oral or written notice thereof to the Exchange
Agent.
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In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents (or of confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC);
provided, however, that the Company reserves the absolute right to waive any
defects or irregularities in the tender or conditions of the Exchange Offer. If
any tendered Old Notes are not accepted for any reason, such unaccepted Old
Notes will be returned without expense to the tendering holder thereof as
promptly as practicable after the expiration or termination of the Exchange
Offer.
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn by delivery of a written notice
to the Exchange Agent, at its address set forth on the back cover page of this
Prospectus, at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes, as applicable), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by a bond power in the name of the
person withdrawing the tender, in satisfactory form as determined by the Company
in its sole discretion, duly executed by the registered holder, with the
signature thereon guaranteed by an Eligible Institution together with the other
documents required upon transfer by the Indenture, and (iv) specify the name in
which such Old Notes are to be re-registered, if different from the Depositor,
pursuant to such documents of transfer. Any questions as to the validity, form
and eligibility (including time of receipt) of such notices will be determined
by the Company, in its sole discretion. The Old Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Notes which have been tendered for exchange but which
are withdrawn will be returned to the holder thereof without cost to such holder
as soon as practicable after withdrawal. Properly withdrawn Old Notes may be
rendered by following one of the procedures described under "The Exchange
Offer--Procedures for Tendering Old Notes" at any time on or prior to the
Expiration Date.
THE EXCHANGE AGENT; ASSISTANCE
Bank One, Columbus, N.A. is the Exchange Agent. All tendered Old Notes,
executed Letters of Transmittal and other related documents should be directed
to the Exchange Agent. Questions and requests for assistance and requests for
additional copies of this Prospectus, the Letter of Transmittal and other
related documents should be addressed to the Exchange Agent as follows:
BY REGISTERED OR CERTIFIED MAIL:
Bank One, Columbus, N.A.
235 West Schrock Road
Columbus, Ohio 43271-0184
or
Bank One, Columbus, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor, Window 2
New York, New York 10005
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BY HAND OR OVERNIGHT COURIER:
Bank One, Columbus, N.A.
235 West Schrock Road
Westerville, Ohio 43081
or
Bank One, Columbus, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor Window 2
New York, New York 10005
BY FACSIMILE:
(614) 248-5088 (OH)
or
(212) 240-8988 (NY)
Confirm by Telephone: (212) 240-8862 (NY)
1-800-346-5152
FEES AND EXPENSES
All expenses incident to the Company's consummation of the Exchange Offer
and compliance with the Registration Rights Agreement will be borne by the
Company, including, without limitation: (i) all registration and filing fees
(including fees and expenses of compliance with state securities or Blue Sky
laws), (ii) printing expenses (including expenses of printing certificates for
the New Notes in a form eligible for deposit with DTC and of printing
Prospectuses), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, (v) fees and disbursements of
independent certified public accountants, (vi) rating agency fees, (vii)
internal expenses of the Company (including all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
and (ix) fees and expenses incurred in connection with the listing of the New
Notes on a securities exchange.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss will be recognized by the Company for accounting
purposes. The expenses of the Exchange Offer will be amortized over the term of
the New Notes.
20
<PAGE>
RESALES OF THE NEW NOTES
Based on an interpretation by the staff of the Commission set forth in "no-
action" letters issued to third parties, the Company believes that the New Notes
issued pursuant to the Exchange Offer to a holder in exchange for Old Notes may
be offered for resale, resold and otherwise transferred by such holder (other
than (i) a broker-dealer who purchased Old Notes directly from the Company for
resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act, or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such holder is acquiring the New Notes in the
ordinary course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes. The Company has not requested or obtained an interpretive letter from
the Commission staff with respect to this Exchange Offer, and the Company and
the holders are not entitled to rely on interpretive advice provided by the
staff to other persons, which advice was based on the facts and conditions
represented in such letters. However, the Exchange Offer is being conducted in
a manner intended to be consistent with the facts and conditions represented in
such letters. If any holder acquires New Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the New Notes,
such holder cannot rely on the position of the staff of the Commission
enunciated in Morgan Stanley & Co., Incorporated (available June 5, 1991) and
Exxon Capital Holdings Corporation (available April 13, 1989), or interpreted in
the Commission's letter to Shearman & Sterling (available July 2, 1993), or
similar "no-action" or interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, unless an exemption from
registration is otherwise available. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market making or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
It is expected that the New Notes will be freely transferable by the
holders thereof, subject to the limitations described in the immediately
preceding paragraph. Sales of New Notes acquired in the Exchange Offer by
holders who are "affiliates" of the Company within the meaning of the Securities
Act will be subject to certain limitations on resale under Rule 144 of the
Securities Act. Such persons will only be entitled to sell New Notes in
compliance with the volume limitations set forth in Rule 144, and sales of New
Notes by affiliates will be subject to certain Rule 144 requirements as to the
manner of sale, notice and the availability of current public information
regarding the Company. The foregoing is a summary only of Rule 144 as it may
apply to affiliates of the Company. Any such persons must consult their own
legal counsel for advice as to any restrictions that might apply to the resale
of their Notes.
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company on a
historical basis as of September 28, 1996, and on a pro forma basis after giving
effect to the Prior Offering and the application of the net proceeds therefrom.
This table should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included elsewhere in this Prospectus.
SEPTEMBER 28, 1996
-----------------------
ACTUAL PRO FORMA
-------- ---------
(IN THOUSANDS)
Total debt(1):
Term Loan. . . . . . . . . . . . . . . . . . . $70,400 $ -
Revolver . . . . . . . . . . . . . . . . . . . 110,800 86,000
10% Senior Subordinated Notes. . . . . . . . . - 125,000
Other. . . . . . . . . . . . . . . . . . . . . 10,476 10,476
-------- --------
Total debt. . . . . . . . . . . . . . . . . 191,676 221,476
-------- --------
Shareholders' equity:
Preferred stock, par value $0.01 per share;
20,000,000 shares authorized; no shares
issued and outstanding . . . . . . . . . . . - -
Common Stock, par value $0.01 per share;
30,000,000 shares authorized; 10,617,722
shares issued and outstanding(2) . . . . . . 106 106
Additional paid-in capital . . . . . . . . . . 58,427 58,427
Retained earnings. . . . . . . . . . . . . . . 36,628 36,628
Currency translation adjustment. . . . . . . . (119) (119)
-------- --------
Total shareholders' equity. . . . . . . . . 95,042 95,042
-------- --------
Total capitalization. . . . . . . . . . $286,718 $316,518
-------- --------
-------- --------
- ---------------
(1) For information concerning the Company's long-term debt, see Note 6 to
Consolidated Financial Statements. Total debt as of September 28, 1996
includes the current portion of long-term debt of $10.0 million under the
Term Loan and $1.5 million under Other.
(2) Excludes 1,200,000 shares of Common Stock reserved for issuance pursuant to
the Company's Stock Option Plan (the "Stock Option Plan"), of which 510,865
shares were issuable upon exercise of stock options outstanding as of
September 28, 1996. See "Management--Stock Option Plan."
22
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents selected historical consolidated and unaudited
pro forma consolidated data for the Company. The historical consolidated
financial information under the captions "Statements of Earnings Data" for each
of the years in the five-year period ended December 30, 1995 and under the
caption "Balance Sheet Data" as of December 30, 1995 has been derived from the
Company's consolidated financial statements, which financial statements have
been audited by KPMG Peat Marwick LLP, independent certified public accountants.
The consolidated financial statements as of December 31, 1994 and December 30,
1995 and for each of the years in the three-year period ended December 30, 1995,
and the auditors' report thereon, are included elsewhere herein. The historical
consolidated financial information under the captions "Statements of Earnings
Data" and "Balance Sheet Data" as of September 30, 1995 and September 28, 1996
and for the nine months then ended has been derived from the unaudited
consolidated financial statements which, except for the consolidated balance
sheet as of September 30, 1995, are included elsewhere herein. The selected
financial information should be read in conjunction with "Prospectus
Summary--Recent Development," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Description of Credit Agreement" and the
Company's Consolidated Financial Statements (including related notes thereto)
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR (1) NINE MONTHS ENDED
------------------------------------------------ ----------------------------
SEPTEMBER 30, SEPTEMBER 28,
1991 1992 1993 1994 1995 1995 1996
------------------------------------------------ ------------- -------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF EARNINGS DATA:
Net sales. . . . . . . . . . . . . . . . . . . . $258,966 $273,462 $291,624 $349,520 $474,899 $332,352 $335,770
Cost of goods sold . . . . . . . . . . . . . . . 206,626 222,611 238,155 294,714 395,922 275,407 280,272
------- ------- ------- ------- ------- ------- -------
Gross profit . . . . . . . . . . . . . . . . . . 52,340 50,851 53,469 54,806 78,977 56,945 55,498
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . 33,227 33,376 29,227 36,399 42,508 32,315 31,170
------- ------- ------- ------- ------- ------- -------
Earnings from operations . . . . . . . . . . . . 19,113 17,475 24,242 18,407 36,469 24,630 24,328
Interest expense . . . . . . . . . . . . . . . . 5,283 4,997 3,042 6,361 17,491 12,964 10,279
Other expense (income), net. . . . . . . . . . . -- 1,049 -- (379) -- -- --
------- ------- ------- ------- ------- ------- -------
Earnings before income taxes . . . . . . . . . . 13,830 11,429 21,200 12,425 18,978 11,666 14,049
Income taxes . . . . . . . . . . . . . . . . . . 626 529 8,420 4,736 7,509 4,678 5,495
------- ------- ------- ------- ------- ------- -------
Net earnings . . . . . . . . . . . . . . . . . . $13,204 $10,900 $12,780 $ 7,689 $11,469 $ 6,988 $ 8,554
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
OTHER DATA:
Depreciation and amortization. . . . . . . . . . $2,888 $3,104 $3,868 $6,365 $11,994 $8,767 $9,440
Capital expenditures . . . . . . . . . . . . . . 3,742 5,869 7,135 10,538 12,448 8,630 2,981
SG&A margin (2). . . . . . . . . . . . . . . . . 12.8% 12.2% 10.0% 10.4% 9.0% 9.7% 9.3%
EBITDA (3) . . . . . . . . . . . . . . . . . . . $22,001 $19,530 $28,110 $25,151 $48,463 $33,397 $33,768
EBITDA margin (3)(4) . . . . . . . . . . . . . . 8.5% 7.1% 9.6% 7.2% 10.2% 10.0% 10.1%
Ratio of EBITDA to interest expense (3). . . . . 4.2x 3.9x 9.2x 4.0x 2.8x 2.6x 3.3x
Ratio of earnings to fixed charges (5) . . . . . 3.4x 3.0x 6.8x 2.8x 2.0x 1.8x 2.2x
PRO FORMA FINANCIAL DATA (6):
Interest expense . . . . . . . . . . . . . . . . $19,936 $15,110 $13,879
EBITDA (3) . . . . . . . . . . . . . . . . . . . 48,758 33,605 33,960
Ratio of EBITDA to interest expense (3). . . . . 2.4x 2.2x 2.4x
Ratio of earnings to fixed charges (5) . . . . . 1.8x 1.6x 1.6x
</TABLE>
<TABLE>
<CAPTION>
PRO
AT FORMA (7)
------------------------------------------ -------------
DECEMBER 30, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 28,
1995 1995 1996 1996
------------ ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital. . . . . . . . . . . . . . . . . $110,128 $149,933 $152,787 $178,287
Total assets . . . . . . . . . . . . . . . . . . 324,710 373,528 370,670 400,470
Total debt . . . . . . . . . . . . . . . . . . . 165,388 212,231 191,676 221,476
Shareholders' equity . . . . . . . . . . . . . . 87,990 84,438 95,042 95,042
</TABLE>
23
<PAGE>
- --------------------------------------
(1) Amounts set forth in the year ended December 31, 1993 reflect the
inclusion of Manetta from August 30, 1993, TWM from September 7, 1993
and Torfeaco from December 1, 1993. Amounts set forth in the year
ended December 31, 1994 reflect the inclusion of Imperial from
August 19, 1994 and Beacon from December 1, 1994. The financial
information for years 1993 and 1994 has been reclassified for certain
advertising and royalty fees so as to be comparable with the 1995
presentation. Advertising fees are now reported as a reduction of
gross sales rather than SG&A expenses and the royalty fees have been
reclassified from SG&A expenses to cost of goods sold.
(2) Represents SG&A expenses as a percentage of net sales.
(3) EBITDA consists of earnings before interest, income taxes,
extraordinary items and depreciation and amortization expense. While
EBITDA should not be construed as an alternative to operating income
or net income or as an indicator of operating performance or
liquidity, it is a measure that the Company believes is used commonly
to evaluate a company's ability to service debt.
(4) Represents EBITDA as a percentage of net sales.
(5) For purposes of calculating these ratios, earnings represents earnings
before income taxes plus fixed charges, as defined. Fixed charges
consists of interest expense, amortization of debt issuance costs, and
the portion (approximately one-third) of rental and lease expense,
which management believes is representative of the interest component
of rental and lease expense.
(6) The pro forma financial data has been calculated giving effect to the
Prior Offering and the application of the net proceeds therefrom, the
amendment of the Company's existing Credit Agreement as described in
"Description of Credit Agreement" and certain cost savings associated
with the License Agreement entered into in connection with the
Acquisition. However, no other pro forma adjustments have been made
with respect to the Acquisition, including any revenue and
attributable EBITDA effects. Fieldcrest generated approximately
$37.0 million of revenues from the sale of Blanket Products under the
Licensed Marks during the year ended December 31, 1995. However, the
Acquisition did not involve the purchase of Fieldcrest's Blanket
Products business, including but not limited to its sales and
marketing personnel, its product distribution channels or its customer
service department. While the Company believes that its existing
sales, distribution and customer service capabilities will support the
Company's sale of Blanket Products under the Licensed Marks, there can
be no assurance that the Company will be able to generate revenues
from such assets at the levels previously achieved by Fieldcrest.
Moreover, the pro forma financial data does not purport to represent
what the Company's results actually would have been if such events had
occurred at the dates indicated, nor does such information purport to
project the results of the Company for any future period. See "Recent
Development."
(7) The pro forma balance sheet data has been calculated giving effect to
the Prior Offering and the application of the net proceeds therefrom
as if each occurred on September 28, 1996.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF THE COMPANY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND
FINANCIAL DATA, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED
NOTES THERETO, APPEARING ELSEWHERE HEREIN.
GENERAL
On March 17, 1993, the Company completed an initial public offering of its
Common Stock with the issuance of 4,085,000 shares at $14.00 per share. The
Company received net proceeds of $52.1 million after deducting offering costs.
The Company, originally founded as a pillow manufacturer in 1954, has
historically expanded its product lines through acquisitions into other
categories of top of the bed products including mattress pads, comforters and
blankets. The Company has been successful in integrating these acquisitions into
its existing operations, resulting in increased sales, more efficient
distribution and a broader product line. The Company expanded its product line
to include blankets through the acquisition of Manetta Mills, Inc. ("Manetta")
in August 1993 and Tennessee Woolen Mills, Inc. ("TWM") in September 1993. In
addition, in December 1994, the Company acquired substantially all of the assets
of Beacon Manufacturing Company ("Beacon"), a 92-year old manufacturer of cotton
and synthetic blankets and throws, jacquard throws and woven corded bedspreads.
The Company expanded its manufacturing operations into Canada through the
acquisition of Torfeaco Industries, Ltd. ("Torfeaco"), a manufacturer of fashion
and synthetic bedding products in December 1993 and Imperial Feather Company
("Imperial"), a manufacturer of bedding products, including natural fill and
synthetic bed pillows, down comforters and comforter covers in August 1994.
Each of these acquisitions was accounted for under the purchase method of
accounting, and, accordingly, the results of operations of each acquired company
have been included in the Consolidated Statements of Earnings since its
respective acquisition date.
Due to the number, magnitude and timing of the Company's acquisitions, the
Company's operating results, as reflected in the Consolidated Financial
Statements, are not directly comparable on a year-to-year basis or
quarter-to-quarter basis.
OVERVIEW OF RESULTS OF OPERATIONS
The following table presents certain statements of earnings data as a
percentage of sales for the periods indicated and should be read in conjunction
with the foregoing section entitled "Selected Historical and Pro Forma Financial
Data."
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
-------------------------------------------- ------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 30, SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold . . . . 81.7 84.3 83.4 82.9 83.5
Gross profit . . . . . . . 18.3 15.7 16.6 17.1 16.5
Selling, general and
administrative expenses. 10.0 10.4 9.0 9.7 9.3
Earnings from operations . 8.3 5.3 7.6 7.4 7.2
Interest expense . . . . . 1.0 1.8 3.7 3.9 3.1
Other income . . . . . . . - 0.1 - - -
Earnings before income taxes 7.3 3.6 3.9 3.5 4.1
Net earnings . . . . . . . 4.4% 2.2% 2.4% 2.1% 2.5%
</TABLE>
25
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996
VERSUS THE NINE MONTHS ENDED SEPTEMBER 30, 1995
NET SALES. Net sales were $335.8 million for the nine months ended
September 28, 1996, representing an increase of $3.4 million or 1.0% as compared
to $332.4 million for the same period in 1995. The year to date increase
reflected strong bed pillow, mattress pad and fashion bedding sales, partially
offset by lower blanket sales, in the third quarter and first half of 1996.
Management believes the shortfall in blanket sales was due primarily to
retailers' decisions to place orders for blankets closer to the normal late fall
selling season.
GROSS PROFIT. Gross profit margins decreased to 16.5% in the nine months
ended September 28, 1996, from 17.1% in the nine months ended September 30,
1995. The decline was due to several factors including (i) a shift in blanket
sales mix towards lower average margin products, which Management believes
occurred primarily due to the decision of retailers of higher margin products to
defer orders as described above, as well as an increase in sales of lower margin
products and (ii) one-time costs incurred on the start-up of the Company's new
cotton spinning facility, most of which occurred in the first six months of
1996. Management believes that the process of upgrading the yarn spinning
facility is largely complete.
SG&A. Selling, general and administrative ("SG&A") expenses fell by $1.1
million to $31.2 million in the nine months ended September 28, 1996, from
$32.3 million in the nine months ended September 30, 1995, while, as a
percentage of sales, SG&A expenses decreased to 9.3% from 9.7% in the respective
periods. These decreases reflected the continuing focus of the Company on
containing these expenses.
INTEREST. Interest expense decreased to $10.3 million in the nine months
ended September 28, 1996, from $13.0 million in the nine months ended
September 30, 1995. Interest expense fell due to lower borrowings and decreased
average interest rates.
TAXES. The effective tax rate for the nine months ended September 28, 1996
decreased to 39.1% compared to 40.1% for the nine months ended September 30,
1995, primarily due to lower state taxes.
NET EARNINGS. Net earnings increased to $8.6 million in the nine months
ended September 28, 1996, from $7.0 million in the nine months ended
September 30, 1995. As a percentage of sales, net earnings increased to 2.5% in
the nine months ended September 28, 1996 from 2.1% in 1995.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 30, 1995
VERSUS THE YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales were $474.9 million in 1995, representing an increase
of $125.4 million or 35.9% as compared to sales of $349.5 million in 1994. This
increase resulted primarily from the inclusion of 12 months of sales from Beacon
during 1995. Despite generally weak retail buying conditions, sales of the
Company's core product lines were largely flat.
GROSS PROFIT. Gross profit margins increased to 16.6% in 1995 from 15.7%
in 1994. Margins were supported by product price increases implemented in 1995
and increased operating productivity at the Company's manufacturing facilities,
the latter of which resulted from efficiencies achieved through the further
successful integration of the blanket plants acquired in 1993 and 1994. Margin
increases were offset in part by a sales mix change that included a greater
percentage of blanket sales in 1995, which generally carry lower margins than
the Company's other products, increases in raw materials prices and by a higher
percentage of closeout goods in the sales mix.
SG&A. SG&A expenses grew by $6.1 million to $42.5 million in 1995 from
$36.4 million in 1994, due primarily to the acquisition in December 1994 of
Beacon. As a percentage of sales, however, SG&A expenses fell significantly, to
9.0% in 1995 from 10.4% in 1994. This decrease was the result of comprehensive
cost cutting throughout the Company, including expenses related to the
integration of the blanket plants acquired in 1993 and 1994, as well as
reductions in salaries, travel, advertising, professional fees and other general
administrative expenses.
26
<PAGE>
INTEREST. Interest expense increased to $17.5 million in 1995 from
$6.4 million in 1994 due to increased debt levels and interest rates. Higher
borrowings related to the acquisition of Beacon in 1994 and the inventory
carrying costs resulting from earlier purchases of certain imported products in
expectation of closure of quota categories applicable to certain goods imported
from China.
TAXES. The effective tax rate in 1995 grew to 39.6%, compared to 38.1% in
1994, due to the expiration of certain tax credits and to a reduction in
tax-exempt earnings.
NET EARNINGS. Net earnings increased to $11.5 million in 1995 from
$7.7 million in 1994, as a result of improved gross margins and marked decreases
in SG&A expenses, partially offset by increased interest expense.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
VERSUS THE YEAR ENDED DECEMBER 31, 1993
NET SALES. Net sales were $349.5 million in 1994, representing an increase
of $57.9 million or 19.9%, as compared to sales of $291.6 million in 1993. This
increase resulted largely from the acquisitions made in late 1993 and 1994.
Sales of some of the Company's core product lines, including mattress pads and
Ralph Lauren bedding textiles, increased as well. Especially in the fourth
quarter of 1994, however, sales of core products were negatively impacted by
unseasonably warm winter weather, retailers' overstocked inventory and the
Company's inability to meet demand in certain product lines traditionally
imported from China, which were subject to new quota restrictions. See "Risk
Factors--Dependence on Supply Sources in China."
GROSS PROFIT. Gross profit margins decreased to 15.7% in 1994 from 18.3%
in 1993, principally as a result of production inefficiencies experienced at the
blanket-producing facilities acquired in late 1993, as well as production
inefficiencies at one of the Company's existing plants. Margin decreases were
also due to integration costs related to the Canadian facilities, and increases
in the prices of cotton, polyester and other raw materials.
SG&A. SG&A expenses grew by $7.2 million to $36.4 million in 1994 from
$29.2 million in 1993, and as a percentage of sales, to 10.4% in 1994 from 10.0%
in 1993. This increase resulted from expenses related to the integration of the
blanket operations acquired in 1993, and the acquisition of the two Canadian
facilities.
INTEREST. Interest expense increased to $6.4 million in 1994 from
$3.0 million in 1993, due to higher average interest rates and debt levels. The
increased borrowings related to certain acquisitions in 1993, as well as higher
working capital requirements associated with the earlier purchases of certain
imported products in expectation of closure of quota categories applicable to
certain goods imported from China, and higher than expected fourth quarter
inventory levels. See "Business--Manufacturing, Raw Materials and Imports."
TAXES. The effective tax rate in 1994 was 38.1% as compared to an
effective tax rate of 39.7% in 1993. The decreased effective tax rate in 1994
was principally due to lower net earnings, higher tax-exempt income and
increased state tax credits.
NET EARNINGS. Net earnings in 1994 decreased to $7.7 million from pro
forma net earnings of $12.8 million in 1993, principally as a result of
decreased gross profit margins, increased SG&A expenses and increased interest
expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's historical capital resources have included funds from
operations, the initial public offering of Common Stock and the Prior Offering,
bank lines of credit, industrial revenue bonds and other borrowings. The
primary uses of cash by the Company have been to provide funds for operations,
make expenditures for capital improvements, equipment and facilities, repay
indebtedness, pay cash dividends to shareholders, repurchase shares of Common
Stock and make acquisitions.
The Company's working capital needs have generally been met through cash
flow generated by operations and borrowings under the Credit Agreement.
27
<PAGE>
The Company consummated the Prior Offering in November 1996, resulting in
net proceeds to the Company of approximately $121.7 million. The Company used
these net proceeds (i) to retire the indebtedness outstanding under the
Company's previously existing term loan facility under the Credit Agreement (the
"Term Loan") with a syndicate of banks led by NationsBank of Texas, N.A.
("NationsBank") (approximately $70.4 million), (ii) to finance the Acquisition
(approximately $31.5 million, which the Company expects to be adjusted to
approximately $26.5 million upon final verification of inventory levels as of
the closing date of the Acquisition; however, there can be no assurance to
that effect), and (iii) to temporarily reduce indebtedness under the Revolver
(approximately $19.8 million).
Concurrently with the Prior Offering, the Company amended and restated the
Revolver under its Credit Agreement. The Credit Agreement provides for
borrowings in an aggregate principal amount of up to $175.0 million.
Indebtedness under the Credit Agreement is guaranteed by each domestic
Subsidiary of the Company and is secured by the Company's accounts receivable
and inventory and by (i) 100% of the capital stock of the Company's domestic
Subsidiaries and (ii) 65% of the capital stock of the Company's foreign
Subsidiaries. Loans made pursuant to the Credit Agreement may be borrowed,
repaid and reborrowed from time to time until the fifth anniversary of the
establishment of the Credit Agreement, subject to satisfaction of certain
conditions on the date of any such borrowing.
Amounts outstanding under the Credit Agreement bear interest at a rate
based, at the Company's option, upon (i) either NationsBank's base rate or LIBOR
(the London Interbank Offered Rate) plus 0.875% or (ii) NationsBank's
reserve-adjusted CD rate plus 1.000%. These rates are subject to decrease based
upon the Company's achievement of (i) certain senior unsecured debt ratings or
(ii) certain ratios of funded debt to EBITDA. On a pro forma basis as of
September 28, 1996, the interest rate on outstanding borrowings under the Credit
Agreement would have been 6.305%.
The Company from time to time enters into interest rate swap agreements in
order to minimize the risk to the Company of fluctuations in interest rates.
Pillowtex currently has interest rate swap agreements in place covering
approximately $90.0 million of indebtedness that extend through August 1997,
with an average interest rate of 5.565%.
The Company expects to incur approximately $6.2 million in capital
expenditures for 1996, including approximately $4.0 million at the blanket
facilities in North Carolina, South Carolina and Tennessee, in order to upgrade
the physical plants and purchase machinery and equipment. For the nine months
ended September 28, 1996, the Company's capital expenditures were $3.0 million.
The balance of the capital expenditures for 1996 will be used for regular
maintenance and improvements at the Company's other manufacturing facilities and
to upgrade the Company's computer system. In addition, the Company in November
1996 purchased a warehouse in South Carolina for approximately $8.4 million to
replace certain warehouse facilities leased by Beacon. For 1995, the Company's
capital expenditures were $12.4 million, including a total of $8.7 million for
improvements and equipment purchases related to the blanket production
facilities and approximately $0.3 million related to Torfeaco. In 1994, the
Company's capital expenditures were $10.5 million, including a total of
$5.4 million attributable to the blanket production facilities, and
approximately $0.7 million related to Torfeaco.
On each of December 20, 1995, March 27, 1996, June 26, 1996 and
September 26, 1996, the Company paid a cash dividend to shareholders of record
on December 1, 1995, March 13, 1996, June 12, 1996 and September 11, 1996,
respectively, of $.05 per share.
Historically, a significant portion of the Company's net sales have been
generated during the second half of the year. During each of the past
three years, sales and earnings from operations during the second half of the
year averaged 62% and 69%, respectively, of the Company's total sales and
earnings from operations. Consequently, working capital requirements and
therefore, total debt levels, reach their highest levels as net sales peak in
the third and fourth quarters of the year.
The Company believes that the net proceeds received from the Prior
Offering, in combination with cash flow generated from operations and funds
available under the Revolver, are adequate to meet its working capital and
related financing needs for the foreseeable future. See "Risk Factors -
Significant Leverage and Debt Service."
28
<PAGE>
BUSINESS
GENERAL
Pillowtex, founded in 1954, is a leading North American designer,
manufacturer and marketer of bed pillows, blankets, mattress pads and down
comforters. Other complementary bedroom textile furnishings offered by the
Company include comforter covers, featherbeds, pillow protectors, decorative
pillows, bedspreads, synthetic comforters, pillow shams, dust ruffles and window
treatments. Pillowtex has positioned itself as a single-source supplier to
retailers for bedroom textile furnishings (other than sheets), offering a broad
assortment of products across multiple price points.
The Company markets its products primarily to department stores, mass
merchants, wholesale clubs, specialty retail stores, catalogs and institutional
suppliers. The Company believes that it is one of the principal suppliers of
bedroom textile furnishings to virtually all of the largest department stores in
the United States.
BUSINESS STRATEGY
Pillowtex's business strategy is to capitalize on the strengths that have
distinguished the Company as a preferred supplier of high quality bedroom
textile products in North America.
OFFER EXTENSIVE PRODUCT LINES EMPHASIZING HIGHER MARGIN GOODS. The Company
offers more top-of-the-bed product lines than any other major North American
competitor. With the exception of sheets, the Company's strategy is to provide
a "one-stop shop" for top-of-the-bed products, customized to each retailer's
specific consumer profile. Therefore, the Company offers broad product
assortments of high quality products at multiple price points. The Company
emphasizes higher end, premium lines to encourage the consumer to trade up to
better products with generally higher margins for the retailer and the Company.
MAINTAIN STRONG CUSTOMER RELATIONSHIPS THROUGH COMPREHENSIVE MERCHANDISING
PROGRAMS. The Company offers extensive merchandising programs to retailers in
order to maximize product line sales and profitability. Merchandising programs,
developed in meetings between the Company and the retailer, address product line
assortments, branding strategies and point-of-sale displays, as well as
promotional and advertising plans and layouts. In many cases, the Company
oversees the creation of promotional and advertising supplements for its
customers. Merchandising programs focus on motivating the retail consumer to
"trade up" to better goods that offer higher margins.
Pillowtex manufactures and markets goods utilizing established and well
recognized licensed trademarks, Company-owned trademarks and trade names,
customer-owned private labels and manufacturers' brand names including the Ralph
Lauren Home Collection, Mickey & Co.-Registered Trademark-, Royal
Velvet-Registered Trademark-, Touch of Class-Registered Trademark-,
Cannon-Registered Trademark-, Nettle Creek-Registered Trademark-,
Martex-Registered Trademark-, Regency by Globe-Registered Trademark-, Blue
Heaven-TM-, Comforel-Registered Trademark- and Dacron-Registered Trademark-.
These names provide the Company with the ability to differentiate its product
offerings from its competitors for different channels of retail distribution and
between different price points. The Company also provides extensive private
label production for major retailers such as JCPenney Company, Inc., May
Merchandising Corporation and Sears Roebuck and Co.
CAPITALIZE ON NATIONWIDE PRODUCTION AND DISTRIBUTION CAPABILITIES.
Capitalizing on its initial reputation as a key supplier to department stores,
the Company has become a nationwide supplier for virtually all channels of
retail and institutional distribution. The Company is a supplier to 47 of the
top 50 retailers in the United States and the top five retailers in Canada. In
order to most cost effectively ship bed pillows, mattress pads and down
comforters and minimize delivery times, the Company developed regional
production facilities. Pillowtex is the only supplier of these products with
the capability to produce and ship from coast-to-coast regional production
facilities. The Company was one of the industry pioneers in the development of
extensive "quick response" capability, including an EDI system for nationwide,
24-hour acceptance of electronically transmitted customer orders. Through a
single transmission, customers may place orders for multiple product lines for
distribution from the Company's production facilities. These systems, in
combination with the Company's manufacturing capabilities, enable the Company to
produce and ship products to retailers with lead times as short as three to
five days from receipt of order.
ENHANCE THE COMPANY'S POSITION AS A LOW COST PRODUCER. The Company
continually focuses on increasing automation, process improvements and system
controls within the plants and throughout the business that result in
29
<PAGE>
improved operational efficiencies. These efforts have enabled the Company to
achieve what it believes are the highest sales per employee of any major textile
firm in the United States. The Company also believes that significant
opportunities still exist to improve production efficiency within the blanket
facilities. During the past 12 months, the Company added a new cotton yarn
spinning plant which enabled it to consolidate two smaller facilities and
resulted in the elimination of significant outside yarn purchases. The Company
pursues worldwide procurement of both finished products and raw materials to
reduce costs and locate new sources of production. The Company further
emphasizes continual cost monitoring and the ongoing containment of SG&A
expenses, through consolidation of these functions at acquired companies, better
systems, the retention and training of well qualified staff. As a result, the
Company was able to record one of the lowest SG&A percentages in the industry
during 1995.
MAKE SELECTIVE STRATEGIC ACQUISITIONS. Pillowtex continues to selectively
acquire companies that offer products it believes will complement its existing
lines and will provide product, marketing, channel of distribution or
operational synergies. Since the early 1980s, Pillowtex has made a number of
acquisitions in order to enter new product lines and markets. The Company
follows a strategy of consolidating plant and SG&A functions and leveraging its
strong retail relationships to expand sales and profitability. Through this
strategy, Pillowtex has achieved a compound annual growth rate for net sales of
15.7% and EBITDA of 22.6% over the past five years.
PRODUCTS
The Company has built its core business around four utility bedding product
lines that have a low risk of obsolescence. These include bed pillows
(including natural fill, synthetic fiber fill and latex), blankets (including
cotton, wool blends, acrylic and polyester blankets and throws), down comforters
and mattress pads (including thread quilt, sonic quilt and convoluted foam).
The Company also sells other bedroom textile furnishings, including comforter
covers, featherbeds, pillow protectors, decorative pillows, bedspreads,
synthetic comforters, pillow shams, dust ruffles and window treatments.
BED PILLOWS. Management believes that the Company is currently a leading
manufacturer and marketer of bed pillows in the United States and Canada. The
Company produces and markets a broad line of traditional bed pillows, as well as
specially designed bed pillows such as the BodyMate-Registered Trademark- body
pillow and Great Shapes-Registered Trademark- pillows, including Euro Square,
U-Neck and Neck Roll. The Company offers products at various levels of quality
and price, from synthetic pillows sold at retail prices as low as $5 to fine
white goose down pillows sold at a retail price of up to approximately $185.
The Company believes that it is a leading feather and down pillow
manufacturer in North America, offering products filled with quality goose and
duck down, or blends of feather and down, in a range of grades. These
materials, known as "natural fill," are noted for their loft and resiliency.
The Company also manufactures and markets a full line of bed pillows
featuring staple (cut and crimped), tow (continuous filament) and cluster
(individual ball) synthetic fiber fills. The Company believes that it is a
leading supplier of premium synthetic and latex bed pillows in the United States
and Canada.
BLANKETS. Management believes that the Company is a leading producer of
blankets in the United States, as well as a leading marketer of blankets in
Canada. The Company manufactures woven and nonwoven conventional and thermal
weave blankets and throws in a wide assortment of fibers, including cotton, wool
blend, acrylic and polyester. The Company is the exclusive supplier in North
America of blankets for the Ralph Lauren Home Collection. The Company has a
strong presence in the infant blanket market with products ranging from nonwoven
receiving blankets, to jacquard throws, to the finest Supima-Registered
Trademark- cotton crib blanket. The Company also designs and manufactures a
full line of decorative cotton and acrylic jacquard throws.
DOWN COMFORTERS. The Company was a pioneer in marketing down comforters in
the United States and management believes that the Company is a leading
manufacturer and marketer of down comforters in the United States and Canada.
Down comforters have become increasingly popular for both their insulation and
fashion qualities, selling well in both warm and cool climates. They sell at
department stores at prices ranging from $70 to approximately $400. Increasingly
popular higher end comforters may offer more down fill, sport higher thread
count shells and feature more appealing "surface interest," such as damask dots,
stripes and checks.
30
<PAGE>
MATTRESS PADS. Management believes that the Company is a leading
manufacturer and marketer of mattress pads in the United States and Canada. The
Company produces and markets a complete line of mattress pads, including sizes
for adults and children, natural and synthetic filled, flat, fitted, and
skirted, as well as its Adjust-A-Fit-Registered Trademark- mattress pad, an
adjustable fit mattress pad made with Lycra-Registered Trademark-, a
multidirectional stretch material produced by E.I. DuPont de Nemours & Company
("DuPont"). The Adjust-A-Fit-Registered Trademark- mattress pad correctly fits
a broad range of mattress thicknesses, including pillow top mattresses. The
DuPont Comforel Ultra pillow top mattress pad is a new high end product
introduced in 1995 and exclusively marketed by Pillowtex.
OTHER BEDROOM TEXTILES. The Company offers a variety of other
complementary bedroom textile products including comforter covers, featherbeds,
pillow protectors, synthetic fill comforters, decorative pillows, pillow shams,
dust ruffles and window treatments. These products represent a source of
additional profitability as "add-on" sales for retailers.
MARKETING, SALES AND DISTRIBUTION
The Company markets its products to virtually all major retailers through
channels of distribution that include department and specialty stores, mass
merchants, discounters and catalogs, as well as institutional suppliers. The
Company believes that it is one of the principal suppliers of bedroom textile
products to several of the largest retailers in the United States. The
Company's top 10 customers accounted for approximately 62.0% of total sales in
1995. Wal-Mart and Dayton Hudson accounted for 13.7% and 12.7% of the Company's
total sales in 1995, respectively. No other customer accounted for more than
10% of total sales in 1995. For the nine months ended September 28, 1996, sales
to Wal-Mart and Dayton Hudson accounted for 14.7% and 12.5% of the Company's
total sales, respectively. Consistent with industry practice, the Company does
not generally operate under long-term written supply contracts with its
customers. See "Risk Factors--Risk of Loss of Material Customers."
The Company's current international business is concentrated in Canada,
although it also sells in Mexico, Latin America and overseas. The Company's
acquisition of Torfeaco in 1993, and of Imperial and Beacon in 1994, greatly
enhanced the Company's market position in Canada and its relationships with
important Canadian retailers.
The Company markets its products under numerous Company-owned trademarks
and trade names and customer-owned private labels, as well as certain licensed
trademarks and trade names. The Company uses trademarks, trade names and
private labels as merchandising tools to assist its customers in coordinating
their product offerings and differentiating their products from those of their
competitors.
The Company's relationship with Ralph Lauren began in 1987 and the Ralph
Lauren Home Collection is among its most important licensed trademarks. The
Company holds an exclusive license for pillows, down comforters, mattress pads
and blankets, and a non-exclusive license for fashion bedding to manufacture,
and in certain cases to sell, a variety of home textile products sold in North
America. The Ralph Lauren Home Collection products are sold worldwide to fine
department and specialty stores.
In an effort to maximize the Company's product exposure and increase sales,
Pillowtex works closely with its major customers to assist them in merchandising
and promoting the Company's products to the consumer. In addition to frequent
personal consultation with the employees of these customers, the Company meets
with its customers' senior management periodically to jointly develop
merchandise assortments and plan promotional events specifically tailored to
that customer. The Company provides merchandising assistance with store
layouts, fixture designs, advertising and point of sale displays. The Company
also provides customers with preprinted, customized advertising materials
designed to increase sales.
The Company's EDI system allows customers to place, and allows the Company
to fill, track and bill, orders by computer. This system enables the Company to
ship products on a "quick response" basis.
The Company generally employs salespeople who have many years of industry
experience. Most sales people are compensated with a combination of salary and
discretionary bonus. Certain Ralph Lauren Home Collection products are sold by
the Ralph Lauren sales force.
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<PAGE>
PATENTS, TRADEMARKS AND LICENSE AGREEMENTS
The Company holds a patent that utilizes a fabric with multi-directional
stretch for the production of the skirting material for its
Adjust-a-Fit-Registered Trademark- mattress pads. Beacon also holds both
process and article patents for completely reversible woven printed blankets.
These patents each expire in 2011, subject to timely payment of all future
maintenance fees. In the opinion of management, the loss of these patents would
not have a material adverse effect on the Company's overall business.
The Company owns various trademarks and trade names, including Blue
Heaven-TM-, Softie-Registered Trademark-, Regency by Globe-Registered
Trademark-, and BodyMate-Registered Trademark-. The Company regards its
trademarks and trade names as valuable assets and vigorously protects them
against infringement.
Pillowtex holds the exclusive license for the highly regarded Ralph Lauren
Home Collection for pillows, down comforters, mattress pads and blankets, and a
non-exclusive license for fashion bedding to manufacture, and in certain cases
sell, a variety of home textile products in North America. The Company also has
entered into exclusive license agreements with Fieldcrest for the manufacture
and sale of various goods, including bed pillows, mattress pads and down
comforters under the Cannon-Registered Trademark-, Royal Velvet-Registered
Trademark-, Charisma-Registered Trademark-, and Touch of Class-Registered
Trademark- trademarks. In addition, the Company manufactures and sells various
goods, including pillows, blankets and throws under non-exclusive license
agreements with Disney for the Disney standard characters including Mickey
Mouse, Minnie Mouse and Donald Duck, as well as other characters and film
properties such as Winnie the Pooh and Lion King. The Company also markets
products under trademark license agreements with various other organizations
including DuPont, WestPoint Stevens, Inc. and the U.S. Postal Service. These
license agreements generally require royalty payments based upon product sales,
including payments of minimum annual royalties, and expire at various future
dates from 1996 to 1999. See "Risk Factors--Dependence on Key Licenses."
Upon consummation of the Acquisition, the Company will enter into the
License Agreement, which will provide for a 25-year worldwide exclusive right to
market Blanket Products and Pillow Products under the Licensed Marks. The
royalty rate applicable to the sale of Pillow Products under the License
Agreement is lower than the average royalty rate on the sale of such products
under the Company's existing license agreement with Fieldcrest. However, there
can be no assurance that the Acquisition will be consummated. See "Risk
Factors--Risk of Failure to Consummate the Acquisition."
PRODUCT DEVELOPMENT
The Company's product development staff creates and develops products with
new or superior performance characteristics in cooperation with various outside
sources, including its suppliers and customers. The Company believes that this
ability is an important competitive advantage. As a result, the Company commits
time and resources to identifying new materials, designs and products from a
variety of domestic and international vendors.
In addition to internal product development, the Company's acquisitions
have expanded its product lines and enhanced its manufacturing and other
resources available for developing existing and new product lines.
MANUFACTURING, RAW MATERIALS AND IMPORTS
Pillowtex operates an extensive network of manufacturing and distribution
facilities in Texas, California, Illinois, Mississippi, Pennsylvania, North
Carolina, South Carolina, Tennessee and Toronto, Canada. The Company's
nationwide manufacturing and distribution network enables Pillowtex to ship
pillows, mattress pads and comforters cost effectively to all major cities in
the United States and Canada. The hub of the network for pillows and comforters
is located in Dallas, Texas, where the Company operates what it believes to be
the largest feather and down processing facility in North America, as well as an
automated, high speed pillow shell manufacturing facility. Raw materials for
bed pillows and down comforters undergo initial processing at the Dallas
locations, which yields significant economies of scale, and are shipped along
with imported products to the Company's regional facilities for final assembly
and distribution to customers.
Feather and down are processed by state-of-the-art computerized washing and
sorting equipment. Through this process, washed feathers and down are sorted
into a variety of mixtures and grades used in manufacturing natural fill
32
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pillows and comforters. The Company also operates an automated sewing facility
in Dallas, Texas, where high speed, computerized machines cut and sew fabric
into pillow shells.
Many of the Company's regional manufacturing facilities produce natural
fill and synthetic fill pillows. Natural fill pillows are assembled by blowing
processed feather and down into the pillow shell and sewing the open seam
closed. Synthetic fill pillows are produced on machines known as garnets that
pull, comb and expand compressed polyester fibers. Once expanded, the fibers are
inserted into a pillow shell and the open seam is sewn shut.
Mattress pads are manufactured at the California, Mississippi, Pennsylvania
and Toronto, Canada facilities by two automated methods. The traditional quilt
sewing method uses high speed equipment that sews the top, bottom and fill
material together. The sonic method fuses the top, bottom and fill material
together.
The Company's line of natural fill comforters in 1995 consisted of some
finished products imported from China and products manufactured by the Company
at its California, Illinois, Pennsylvania, Mississippi and Toronto, Canada
locations using processed down from the Dallas facility. In 1996, the Company
began manufacturing virtually all its down comforters. The Company imports the
majority of its comforter shells from China, Hong Kong and India.
The Company produces blankets at manufacturing facilities in North
Carolina, South Carolina and Tennessee. These plants provide full vertical
production capability, including spinning, weaving, dying and finishing. During
1995, the Company acquired a facility in Newton, North Carolina, for the
spinning of cotton yarn. The acquisition of this facility enabled the Company
to consolidate two smaller spinning operations and replace the Company's
external cotton yarn purchases, which represented nearly one-third of the
Company's requirements, with internal production.
As with its other lines of business, the Company plans the continuation of
equipment and plant upgrades over the next several years in order to facilitate
full integration of these Subsidiaries, increase production efficiency and add
capacity.
The Company's quality control program is designed to assure that its
products meet predetermined quality standards established both internally and by
its customers. The Company has devoted significant resources to support its
quality improvement efforts. Each manufacturing facility is staffed with a
quality control team that identifies and resolves quality issues. The Company
attempts to maintain close contact with customer quality control or other
appropriate personnel to assure the Company understands the customer's
requirements.
The Company analyzes feather and down and other raw materials, as well as
finished products of both the Company and its competitors, at its facilities in
Dallas, Texas. The Company maintains a computerized tracking system to monitor
feather and down processing from the receipt of raw materials through the
delivery of finished products. At the blanket production plants, numerous
distinct quality check points are monitored throughout the manufacturing
process. The Company also has a program with its major suppliers to assure the
consistency of purchased raw materials by imposing strict standards and
materials inspection, and requiring rapid response to the Company's complaints.
The principal raw materials that the Company uses in manufacturing its
products are: feather and down; synthetic (polyester and acrylic), cotton and
wool fibers; and cotton and poly/cotton blend fabrics. The Company imports
feather and down from several sources outside the United States. A majority of
such purchases are from China, where feather and down are by-products of ducks
and geese raised for food. The Company believes that it is currently the
largest United States importer of feather and down from China, the world's
largest producing country. The Company is generally able to purchase feather
and down from its suppliers in China on open credit terms without letters of
credit.
In 1994, certain goods imported from China, including down-filled
comforters, comforter shells and comforter covers, were assigned to a new import
group. The 1994 quota for that group closed in July and, in 1995, the quota
closed in March. As a consequence, the Company made the strategic decision to
markedly accelerate its import schedule in both years in order to purchase the
required goods prior to the closing of the quota. In 1995, the Company
diminished its reliance on imported finished goods from China by manufacturing
more of these products in the United States and Canada and by continuing to
develop relationships with suppliers in other countries, including India. The
Company also opened an office in Hong Kong to facilitate more direct purchases
in China and alternative sources of supply. In 1996, virtually all down
comforters sold by the Company will be manufactured in the United States and
Canada. A majority
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of the comforter shells and comforter covers will be purchased directly, as well
as a significant percentage of raw feather and down, some of which is also
obtained through an independent supplier in the United States. In addition, in
1995 the Company was successful in achieving a change in the import regulations
regarding down comforter shells, which are not generally manufactured in the
United States. Since July 1, 1996, no import quota restrictions for shells
remain, which has allowed the Company to import shells as needed and thereby
reduce inventory carrying costs.
The Company purchases the Lycra-Registered Trademark- used in its
Adjust-A-Fit-Registered Trademark- mattress pads from DuPont. Because of
DuPont's patent on Lycra-Registered Trademark-, it is the exclusive supplier for
this material. The Company believes that the risk that DuPont will cease to
manufacture and sell Lycra-Registered Trademark- to the Company is minimal. The
Company purchases synthetic fiber from, among others, DuPont, Wellman, Inc.,
Monsanto Company, Cytec Industries Inc., Hoechst Celanese Corporation and
Kanematsu U.S.A. Inc. To reduce the effect of potential price fluctuations, the
Company makes commitments from time to time for future purchases of synthetic
and natural fibers. In recent years, these suppliers experienced significant
increases in costs due to a worldwide shortage of cotton and synthetic raw
materials and a simultaneous increase in demand. Consequently, the Company
continued to experience higher than expected price increases in all its raw
materials, including cotton, polyester and wool fiber. The Company was able to
pass on to its customers only a portion of these increases.
The Company uses fabric purchased from third parties in the production of
pillow shells, comforter covers and various other products. Although the
Company believes that fabric is a commodity-type product that is available from
numerous sources, the Company currently purchases large quantities of pillow
ticking fabric from a single supplier to control costs and quality.
Management of the Company believes that its relationships with its
suppliers are good.
COMPETITION
The Company participates in a highly competitive industry. The Company
competes with a number of established manufacturers, importers and distributors
of home textile furnishings, some of which have greater financial, distribution
and marketing resources. The Company's current competitors consist primarily of
domestic suppliers of bed pillows, blankets, mattress pads, down comforters and
other bedroom textile furnishings. The home fashion products industry also
includes companies that produce bed sheets, towels and other commodity-type
items. A number of these companies do not currently offer the Company's
principal products. There can be no assurance, however, that these companies
will not compete with Pillowtex in the future.
The Company competes on the basis of price, quality, brand names and
service. The Company believes that the principal competitive factors affecting
its business include its sales and marketing expertise, its ability to create
and develop products offering superior performance characteristics, its
relationships with customers and its manufacturing and distribution
capabilities.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local environmental
laws and regulations governing the discharge, storage, handling and disposal of
various substances, including provisions of the California Health and Safety
Code pertaining to air quality management. The Company is also subject to
federal and state laws and regulations that require products such as bed pillows
and comforters to bear product content labels containing specified information,
including their place of origin and fiber content. In addition, the Company's
operations are governed by a variety of federal, state, local and foreign laws
and regulations relating to worker safety and health, advertising, importing and
exporting, and other matters applicable to businesses in general. In 1995, the
Company achieved a change in the import regulations regarding down comforter
shells which are not generally manufactured in the United States. As a result
of this regulatory change, the Company has been able to import comforter shells
on an unlimited and as-needed basis since July 1, 1996. All laws and
regulations are subject to change and the Company cannot predict what effect, if
any, changes in laws and regulations might have on its business.
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BACKLOG
The amount of the Company's backlog orders at any particular time is
affected by a number of factors, including seasonality and scheduling of the
manufacturing and shipment of products. In general, the Company's EDI and
"quick response" capabilities have resulted in shortened lead times between
submission of purchase orders and delivery and lowered the level of backlog
orders. Consequently, the Company believes that the amount of its backlog is
not an appropriate indicator of levels of future production.
EMPLOYEES
As of September 28, 1996, the Company had approximately 3,890 employees.
The Company is subject to the following collective bargaining agreements:
<TABLE>
<CAPTION>
NUMBER OF
UNION LOCATION COVERED EXPIRATION EMPLOYEES
- ----- --------------------- ---------- ---------
<S> <C> <C> <C>
United Auto Workers Tunica, Mississippi 08/01/99 225
Warehouse, Mail Order, Office, Technical and Professional
Employees (Teamsters) Chicago, Illinois 01/31/97 124
Amalgamated Clothing and Textile Workers Union Lebanon, Tennessee 03/28/97 141
Amalgamated Clothing and Textile Workers Union (1) Toronto, Canada 02/28/97 230
</TABLE>
- ---------------
(1) The two previously separate union locals in the Company's Canadian
facilities merged contracts in 1995.
To date, none of these unions have engaged in strikes or work stoppages
against the Company. The Company believes that its relationships with both its
union and nonunion employees are good.
FACILITIES
The following table summarizes certain information concerning certain of
the Company's facilities:
<TABLE>
<CAPTION>
APPROX. OWNED/
LOCATION PRINCIPAL USE SQUARE FEET LEASED (1)
- -------- ------------------------------------------------------ ----------- ----------
<S> <C> <C> <C>
Dallas, Texas Headquarters and feather and down processing 104,000 Owned
Dallas, Texas General administration, manufacturing and distribution 150,000 Owned
Dallas, Texas Warehouse 163,000 Leased
Los Angeles, California Manufacturing and distribution 320,000 Leased
Tunica, Mississippi Manufacturing and distribution 288,000 Owned
Hanover, Pennsylvania Manufacturing and distribution 227,000 Owned
Rocky Mount, North Carolina Manufacturing and distribution 139,000 Owned
Rocky Mount, North Carolina Manufacturing and distribution 78,000 Leased
Chicago, Illinois Manufacturing and distribution 121,000 Owned
New York, New York Principal sales office and showroom 12,500 Leased
Monroe, North Carolina Manufacturing and distribution 288,000 Leased
Goodlettsville, Tennessee Warehouse and distribution 158,000 Leased
Lebanon, Tennessee Warehouse and distribution 53,000 Leased
Lebanon, Tennessee Manufacturing 175,000 Owned
Toronto, Ontario, Canada Manufacturing and distribution 99,000 Leased
Toronto, Ontario, Canada Manufacturing and distribution 60,000 Leased
Swannanoa, North Carolina Manufacturing and distribution 822,000 Owned
Swannanoa, North Carolina Office 30,000 Owned
Swannanoa, North Carolina Outlet Store 5,000 Owned
Swannanoa, North Carolina Warehouse and distribution 573,000 Owned
Asheville, North Carolina Warehouse 177,000 Leased
Asheville, North Carolina Warehouse 254,000 Leased
Asheville, North Carolina Warehouse 185,000 Leased
Westminster, South Carolina Manufacturing and distribution 308,000 Owned
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<PAGE>
Westminster, South Carolina Office 6,000 Owned
Westminster, South Carolina Warehouse and distribution 284,000 Owned
Westminster, South Carolina Warehouse 29,000 Leased
Westminster, South Carolina Warehouse 54,000 Owned
Newton, North Carolina Manufacturing and distribution 297,000 Leased
Wanchai, Hong Kong Office 218 Leased
</TABLE>
- ---------------
(1) For additional information concerning the Company's leases, see note 13 of
Notes to Consolidated Financial Statements.
Pillowtex also maintains small sales offices for its sales staff in
Massachusetts, Washington, North Carolina, Minnesota, California and Arkansas.
On September 18, 1995, the Company entered into a five-year operating lease
for the use of a cotton yarn production facility in Newton, North Carolina. The
yarn mill, which is fully staffed and operational, is being utilized to
consolidate the Company's cotton yarn spinning and significantly reduce the need
for outside purchases. This transaction was financed through the use of an $8.5
million lease agreement between Sanwa General Equipment Leasing and the Company.
The Company believes that its facilities are generally well maintained, in
good operating condition and adequate for its current needs. The Company will
continue to emphasize improvements at its blanket facilities in North Carolina,
South Carolina and Tennessee, upgrading the physical plant and purchasing
additional and newer machinery and equipment.
LEGAL PROCEEDINGS
Neither the Company nor any of its Subsidiaries is a party to any pending
legal proceedings, other than ordinary, routine litigation incidental to its
business, none of which is material to the results of operations or financial
condition of the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company as of December 12, 1996:
<TABLE>
<CAPTION>
DIRECTOR'S
NAME AGE POSITION WITH THE COMPANY TERM EXPIRES
- ---- --- ------------------------- ------------
<S> <C> <C> <C>
Charles M. Hansen, Jr. . . . . . . 56 Chairman of the Board, President and 1997
Chief Executive Officer
Christopher N. Baker . . . . . . . 36 President--Pillowtex Division and a 1998
Director
Jeffrey D. Cordes. . . . . . . . . 38 Executive Vice President, Chief 1998
Financial Officer, Assistant Secretary
and a Director
Scott E. Shimizu . . . . . . . . . 43 Executive Vice President-Sales and 1999
Marketing and a Director
Ronald M. Wehtje . . . . . . . . . 34 Vice President-Corporate Controller -
Paul G. Gillease . . . . . . . . . 64 Director 1999
William B. Madden. . . . . . . . . 57 Director 1997
M. Joseph McHugh . . . . . . . . . 59 Director 1997
Mary R. Silverthorne . . . . . . . 61 Director 1998
</TABLE>
CHARLES M. HANSEN, JR. has been a director of the Company since September
1970 and President since 1973. He has been Chief Executive Officer and Chairman
of the Board of Directors since December 1992. He is also a director of
Triangle Pacific Corp. and the Southern Methodist University Cox School of
Business.
CHRISTOPHER N. BAKER has been a director of the Company since May 1995 and
has been President--Pillowtex Division since February 1995. From January 1993
until February 1995, he served as Senior Vice President--Sales and Marketing of
the Company. From 1991 through January 1993, Mr. Baker served as Vice President
of Operations of The Company Store, Inc., an apparel and home furnishings
catalog merchandiser. From 1985 to 1991, Mr. Baker held various accounting and
manufacturing positions with the Company, including Executive Vice
President--Manufacturing from 1988 to 1991.
JEFFREY D. CORDES has been a director of the Company since May 1995 and has
been Executive Vice President, Chief Financial Officer and Assistant Secretary
of the Company since May 1994. From 1985 until May 1994 he served as Vice
President--Administration and Planning of the Company.
SCOTT E. SHIMIZU served as a member of the Board of Directors from May 1994
to May 1995, and was appointed in February 1996 to fill a vacancy thereon. He
has been Executive Vice President--Sales and Marketing since December 1992, and
has served as Executive Vice President since 1988.
RONALD M. WEHTJE has been Vice President--Corporate Controller since March
1996 and has served as Division Controller since December 1994. Prior to that
time, he served in various positions of increasing responsibility since joining
the Company in 1986 as an internal auditor.
PAUL G. GILLEASE became a director of the Company in October 1993. From
1989 until retiring in late 1993, Mr. Gillease was Vice President and General
Manager of DuPont Textiles, a division of E.I. DuPont de Nemours & Company.
Previously, he served in a variety of marketing and business management
positions within DuPont. Mr. Gillease is also a director of Galey & Lord, Inc.
and Guilford Mills, Inc.
WILLIAM B. MADDEN became a director of the Company in February 1993.
Mr. Madden has been the President of Madden Securities Corporation, a general
securities and investment banking firm located in Dallas, Texas, since 1986. He
is also Chairman of the Board of Mercantile Bank and Trust, and is a director of
E. W. Blanch Holdings Inc.
37
<PAGE>
M. JOSEPH MCHUGH became a director of the Company in February 1993.
Mr. McHugh has served as President and Chief Operating Officer of Triangle
Pacific Corp., a manufacturer and distributor of wood flooring and kitchen and
bathroom cabinets, since November 1994 and is a director of such company. From
1981 until November 1994, he served as Senior Executive Vice President and Chief
Financial Officer of Triangle Pacific Corp.
MARY R. SILVERTHORNE has been a director of the Company since December
1992. Mrs. Silverthorne has for many years been actively involved in charitable
and civic activities and is a director of the Retina Foundation of the Southwest
(Dallas), the Foundation Fighting Blindness, the North Texas Taping for the
Blind and the Assistance League of Dallas. She has not been engaged in business
activities during the past five years.
The Board of Directors currently consists of eight members and is
classified into three classes. Directors serve for three-year terms or until
their successors are duly elected and qualified. Subject to applicable
employment agreements, all officers of the Company are appointed by and serve at
the discretion of the Board of Directors.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Hansen, effective
January 1, 1993, pursuant to which the Company agreed to employ Mr. Hansen as
its Chairman of the Board, President and Chief Executive Officer until
December 31, 1999. Mr. Hansen receives a base salary of $750,000 per year,
subject to such increases as the Compensation Committee of the Board of
Directors may determine. In addition, Mr. Hansen is entitled to bonuses at the
discretion of the Compensation Committee, life insurance benefiting his
designees in the amount of $3.0 million and disability payments equal to 60% of
his base salary at the time of disability for the longer of five years or the
remaining term of his employment agreement. If Mr. Hansen is terminated other
than as permitted by the employment agreement, he will be entitled to an
immediate payment equal to his compensation for the remainder of the term on a
"grossed up" basis to reimburse him for the income taxes on such payment.
Mr. Hansen is also entitled to an annual "gross up" payment to reimburse him for
income taxes due arising out of certain fringe benefits received from the
Company.
The employment agreement permits the Company to terminate Mr. Hansen
without further compensation for, among other things, courses of conduct that
demonstrably affect the Company's reputation in a materially adverse manner,
provided Mr. Hansen first has the opportunity to terminate the conduct after
receiving notice. Mr. Hansen may also voluntarily terminate his employment with
the Company at any time. The employment agreement, nevertheless, contains a
provision prohibiting Mr. Hansen from competing with the Company during the term
of his employment and for a period of one year after termination.
Pursuant to an amendment to Mr. Hansen's employment agreement, dated
July 26, 1993, the $3.0 million term life insurance coverage provided to
Mr. Hansen was changed to an equal amount of split dollar life insurance. Under
the terms of a split dollar life insurance agreement between the Company and
Mr. Hansen, dated July 26, 1993, the Company agreed to maintain the premium
payments that would have been payable by the Company had the term life insurance
remained in effect, and to loan to Mr. Hansen the balance of the premiums as
they become due. Amounts loaned to Mr. Hansen in connection with these premium
payments are evidenced by a promissory note to the Company, and bear interest
quarterly, at a floating annual interest rate equal to the greater of the
federal mid-term interest rate as published by the Internal Revenue Service or
the lowest rate at which the Company could borrow funds under its bank loan
agreements. As of September 28, 1996, the amount outstanding under the
promissory note was $158,620. The promissory note is due August 5, 2003, or
such earlier date as may be required pursuant to the terms of the split dollar
life insurance agreement. Mr. Hansen has executed an assignment of the split
dollar life insurance policy in favor of the Company as security for payment of
amounts loaned to Mr. Hansen in connection therewith.
The Company also entered into employment agreements with three executive
officers. The Company agreed, effective September 1, 1995 to employ: Scott E.
Shimizu as Executive Vice President--Sales; Jeffrey D. Cordes as Executive Vice
President and Chief Financial Officer; and Christopher N. Baker as
President--Pillowtex Division. Each agreement extends through September 1,
1998, and thereafter automatically extends for consecutive one-year periods.
Under each agreement, the officer receives a base salary of $275,000 per year,
and is entitled to bonuses of not more than 50% of his annual base salary as
determined solely at the discretion of the Compensation Committee. Each of
these agreements permits the Company to terminate the officer without further
compensation for, among other things, willful and continued failure to perform
his duties or the willful engagement in conduct which is demonstrably and
materially
38
<PAGE>
injurious to the Company, provided he first has the opportunity to terminate the
conduct after receiving notice. In addition, each agreement also contains
provisions prohibiting the executive officer from competing with the Company
during the term of his agreement and for an additional period of up to
18 months. In connection with each such employment agreement, the Company has
granted each of these executive officers stock appreciation rights relating to
all options granted under the Stock Option Plan that are held by such officers
in the event of a change of control.
COMPENSATION OF DIRECTORS
The Company pays each non-employee director an annual fee of $30,000 and
$1,000 for each committee meeting attended. The Company also reimburses each
director for ordinary and necessary travel expenses related to such director's
attendance at Board of Directors and committee meetings. For a discussion of
the Stock Option Plan and the grant of certain nonqualified stock options to the
nonemployee directors of the Company under the Stock Option Plan, see "--Stock
Option Plan."
39
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the
compensation paid or accrued for services rendered to the Company for the last
three fiscal years to the Company's Chief Executive Officer and the highest
compensated executive officers who served as executive officers during 1995 and
whose individual total cash compensation exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION (1) OPTIONS/SARS COMPENSATION (2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ------ ------- ------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Charles M. Hansen, Jr. 1995 750,000 - 71,331 - 450
Chairman of the Board of 1994 750,000 - 97,254 - 288
Directors, President and 1993 750,000 - 74,689 - -
Chief Executive Officer
Christopher N. Baker 1995 265,000 - - 5,000 66
President-- 1994 180,417 - - 5,000 54
Pillowtex Division 1993 140,384 - 62,658 23,572 54
Jeffrey D. Cordes 1995 265,000 - - 5,000 66
Executive Vice President, 1994 203,208 - - 5,000 66
Chief Financial Officer and 1993 136,750 - 5,000 23,572 75
Assistant Secretary
Scott E. Shimizu 1995 245,000 - - 5,000 102
Executive Vice President-- 1994 209,750 - - -- 102
Sales and Marketing 1993 202,167 5,000 - 28,572 138
John G. Pierce (3) 1995 108,752 47,126 - 23,000 87,500
President-- 1994 - - - - -
Beacon Division 1993 - - - - -
</TABLE>
(1) Certain of the Company's executive officers receive personal benefits in
addition to salary and cash bonuses. Amounts that do not exceed the lesser
of $50,000 or 10% of the total of the annual salary and bonus reported for
the named executive officer have been omitted. Detail regarding individual
amounts paid that do not exceed 25% of the total of all Other Annual
Compensation has not been provided. In 1995, the amount paid to Mr. Hansen
included $20,972 for reimbursement of estimated income taxes that will be
paid by Mr. Hansen due as a result of certain benefits received in 1995.
In 1994, the amount paid to Mr. Hansen included $28,794 for reimbursement
of income taxes paid by Mr. Hansen due as a result of certain benefits paid
in 1993. In 1993, no individual amount paid to Mr. Hansen exceeded 25% of
the total of all Other Annual Compensation and, therefore, no detail has
been provided. The amount paid to Mr. Baker in 1993 constituted $49,609 of
relocation expenses paid by the Company and reimbursement of $13,049 of
income taxes due as a result thereof.
(2) For Messrs. Hansen, Shimizu, Cordes and Baker, these amounts were paid for
the years indicated for group term life insurance. The amount paid to
Mr. Pierce constituted a severance payment of $87,500 upon his resignation.
(3) Mr. Pierce became an executive officer in February 1995 and resigned
effective August 1, 1995.
40
<PAGE>
GRANTS OF STOCK OPTIONS. The following table sets forth certain
information with respect to individual grants of stock options and freestanding
SARs to each person named in the Summary Compensation Table during the year
ended December 30, 1995:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
--------------------------------------------------------- ------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- -------------- ------------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Charles M. Hansen, Jr. - - - - - -
Christopher N. Baker 5,000 2.7 8.88 04/02/05 27,907 70,722
Jeffrey D. Cordes 5,000 2.7 8.88 04/02/05 27,907 70,722
Scott E. Shimizu 5,000 2.7 8.88 04/02/05 27,907 70,722
John G. Pierce(2) 23,000 12.3 14.00 04/02/05 10,498 207,448
</TABLE>
- ---------------
(1) Options become exercisable in four 25% increments beginning on the first
anniversary date of the grant.
(2) All options held by Mr. Pierce expired 85 days after his resignation on
August 1, 1995.
STOCK OPTION EXERCISES AND FISCAL YEAR END STOCK OPTION VALUES. Set forth
in the table below is information concerning the exercise of stock options and
freestanding SARs during 1995 and the amount held and the value thereof as of
December 30, 1995 by each person named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT DECEMBER 30, 1995
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised in-the-
Options/SARs at Money Options/SARs at
December 30, 1995 (#) December 30, 1995 ($)
--------------------------- -----------------------------
Shares
Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles M. Hansen, Jr. - - - - - -
Christopher N. Baker - - 13,036 20,536 - 13,750
Jeffrey D. Cordes - - 13,036 20,536 - 13,750
Scott E. Shimizu - - 14,286 19,286 - 13,750
John G. Pierce(1) - - - - - -
</TABLE>
- ---------------
(1) John G. Pierce resigned from the Company effective August 1, 1995.
41
<PAGE>
PENSION PLAN. The Company maintains a defined benefit pension plan (the
"Pension Plan") covering substantially all of its employees, other than
employees of the Company's Canadian subsidiary, Torfeaco, and other employees
subject to collective bargaining agreements. The Company funds the Pension Plan
through annual contributions in an amount between the minimum required and the
maximum amount that can be deducted for federal income taxes.
The following table presents certain information concerning annual benefits
provided under the Pension Plan:
PENSION PLAN TABLE
Years of Service (1)
-----------------------------------------------
REMUNERATION (2) 15 20 25 30 35
---------------- ------- ------- ------- ------- -------
$125,000 $16,682 $22,243 $27,804 $33,365 $38,926
150,000 20,432 27,243 34,054 40,865 47,676
175,000 20,432 27,243 34,054 40,865 47,676
200,000 20,432 27,243 34,054 40,865 47,676
225,000 20,432 27,243 34,054 40,865 47,676
250,000 20,432 27,243 34,054 40,865 47,676
300,000 20,432 27,243 34,054 40,865 47,676
- ---------------
(1) Estimated credited years of service as of December 30, 1995 for the
executive officers named in the Summary Compensation Table (excluding
Mr. Pierce) are as follows: Charles M. Hansen, Jr.--31 years; Scott E.
Shimizu--14 years; Jeffrey D. Cordes--12 years; and Christopher N.
Baker--9 years.
(2) An employee's compensation for purposes of determining pension benefits is
calculated on substantially the same basis as the employee's cash
compensation set forth in the Summary Compensation Table, excluding
commissions, overtime, bonuses and other compensation disclosed therein.
The final average compensation (equal to the highest consecutive five-year
average of the participant's compensation in the ten-year period before
retirement or termination) of any participant may not exceed $250,000. In
addition, the Internal Revenue Service maximum compensation allowed for
benefits for the 1995 plan year is $150,000. Therefore, 1995 covered
compensation for all employees would be limited to $150,000.
Benefits under the Pension Plan are integrated with Social Security and are
computed as straight life annuities. The benefits shown are not offset by any
other Company benefits or by Social Security.
STOCK OPTION PLAN
Pursuant to the Stock Option Plan, options may be granted to eligible
employees and non-employee Directors for the purchase of an aggregate of up to
1,200,000 shares of Common Stock. Employees eligible under the Stock Option
Plan are those whose performance and responsibilities are determined to be
influential to the Company's success. The Stock Option Plan is currently
administered by the Compensation Committee of the Board of Directors, which
determines, in its discretion, the number of shares subject to each option
granted and the related purchase price and option period. Both nonqualified
stock options and incentive stock options, as defined by the Internal Revenue
Code, may be granted under the Stock Option Plan.
The Stock Option Plan requires that the exercise price for each stock
option must be not less than 100% of the fair market value of the Common Stock
at the time the option is granted. No incentive stock option, however, may be
granted to an employee who owns more than 10% of the total combined voting power
of all classes of outstanding stock of Pillowtex unless the option price is at
least 110% of the fair market value of the Common Stock at the date of grant.
The fair market value of stock options that may be granted to an employee in any
calendar year is not limited, but no employee may be granted incentive stock
options that first come exercisable during a calendar year to purchase Common
Stock with an aggregate fair market value (determined as of the date of grant of
each option) in excess of $100,000. An incentive stock option counts against
the annual limitation only in the year it first becomes exercisable. Incentive
stock options may not be granted to non-employee directors.
The option period may not be more than 10 years from the date the options
granted. Options may be exercised in annual installments as specified by the
Board of Directors. All installments that become exercisable are cumulative and
may be exercised at any time after they become exercisable until the option
expires. Options are not assignable.
42
<PAGE>
Full payment for shares purchased upon exercise of an option must be made
at the time of exercise. No shares may be issued until full payment is made.
The Stock Option Plan provides that an option agreement may permit an optionee
to tender previously owned shares of Common Stock in partial or full payment for
shares to be purchased on exercising an option. Unless sooner terminated by
action of the Board, the Stock Option Plan will terminate in February 2003.
Subject to certain exceptions, the Stock Option Plan may be amended, altered, or
discontinued by the Board of Directors without shareholder approval.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists entirely of non-employee directors.
The members of the Board of Directors who served on the Compensation Committee
during 1995 were Messrs. Gillease and Madden, Mrs. Silverthorne, and a former
director of the Company, Mr. John D. Miller. Mr. Miller served on the
Compensation Committee until his resignation from the Board of Directors in
January 1996.
Charles M. Hansen, Jr. has served on the board of directors of Triangle
Pacific Corp. since 1992 and currently serves on its compensation committee. M.
Joseph McHugh is a director and executive officer of Triangle Pacific Corp. and
was elected as a director of the Company in February 1993. Except as described
above, no executive officer of the Company serves as a member of the
compensation committee or other board committee performing similar functions of
any other entity.
In February 1996, the Company entered into an agreement with Paul G.
Gillease, a director of the Company, to provide management consulting services
to the Company. The agreement provides for a monthly consulting fee of $9,000
and reimbursement of travel expenses, and is cancellable by the Company or
Mr. Gillease upon 90 days' notice.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In February 1996, the Company entered into an agreement with Paul G.
Gillease, a director of the Company, to provide management consulting services
to the Company. The agreement provides for a monthly consulting fee of $9,000
and reimbursement of travel expenses, and is cancellable by the Company or
Mr. Gillease upon 90 days' notice.
43
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the
beneficial ownership of the Company's Common Stock, as of December 12, 1996, by
each person known by the Company to own beneficially more than 5% of the
outstanding Common Stock, certain executive officers and each director of the
Company, and all executive officers and directors as a group. Except as
otherwise indicated, the Company believes that the owners named below have sole
voting and investment power with respect to all shares of Common Stock
indicated.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT OF
------------ ----------
NAME BENEFICIALLY OWNED CLASS
- ---- ------------------ -----
<S> <C> <C>
Charles M. Hansen, Jr. (1) . . . . . . . . . . . . . . . . . 2,853,104 26.9%
John H. Silverthorne Marital Trust B (2) . . . . . . . . . . 2,368,893 22.3
Mary R. Silverthorne (2) . . . . . . . . . . . . . . . . . . 662,811 6.2
Paul G. Gillease (3) . . . . . . . . . . . . . . . . . . . . 4,786 *
William B. Madden (3). . . . . . . . . . . . . . . . . . . . 4,679 *
M. Joseph McHugh (3) . . . . . . . . . . . . . . . . . . . . 7,679 *
Scott E. Shimizu (3) . . . . . . . . . . . . . . . . . . . . 24,649 *
Jeffrey D. Cordes (3). . . . . . . . . . . . . . . . . . . . 24,624 *
Christopher N. Baker (3) . . . . . . . . . . . . . . . . . . 25,609 *
Pioneering Management Corporation (4). . . . . . . . . . . . 535,500 5.0
All executive officers and directors as a group
(10 persons) (3) . . . . . . . . . . . . . . . . . . . . . 5,976,864 56.3%
</TABLE>
- ---------------
* Less than 1%
(1) Mr. Hansen's address is 4111 Mint Way, Dallas, Texas 75237.
(2) The address of the John H. Silverthorne Marital Trust B and
Mrs. Silverthorne is 4111 Mint Way, Dallas, Texas, 75237. Under the rules
and regulations of the Commission, Mrs. Silverthorne may be deemed the
beneficial owner of the shares held by the John H. Silverthorne Marital
Trust B because she is its independent trustee. In addition,
Mrs. Silverthorne, in her capacity as trustee, may be deemed the beneficial
owner of 42,857 shares held by the John H. Silverthorne Family Trust A,
14,285 shares held by the Bridget Russell Silverthorne Trust A and
14,285 shares held by the John H. Silverthorne, Jr. Trust A.
Mrs. Silverthorne disclaims beneficial ownership of any shares other than
the 591,384 shares that she holds of record.
(3) Includes options which are currently exercisable, or become exercisable
within 60 days of the date hereof, to purchase the number of shares of
Common Stock indicated for the following persons: Mr. Gillease (1,786),
Mr. Madden (2,679), Mr. McHugh (2,679), Mr. Shimizu (22,679), Mr. Cordes
(20,179) and Mr. Baker (20,179).
(4) The address of Pioneering Management Corporation, a Delaware corporation,
is 60 State Street, Boston, Massachusetts, 02109. According to the
Schedule 13G filed by Pioneering Management Corporation with the
Commission on January 26, 1996 and which reflects ownership as of
December 31, 1995, Pioneering Management Corporation owns all of such
shares with sole dispositive power and sole voting power.
44
<PAGE>
DESCRIPTION OF NOTES
EXCEPT AS OTHERWISE INDICATED BELOW, THE FOLLOWING SUMMARY APPLIES TO BOTH
THE OLD NOTES AND THE NEW NOTES. AS USED HEREIN, THE TERM "NOTES" SHALL MEAN
THE OLD NOTES AND THE NEW NOTES, UNLESS OTHERWISE INDICATED.
The form and terms of the New Notes are substantially identical to the form
and terms of the Old Notes, except that (i) the exchange of the New Notes
pursuant to the Exchange Offer will be registered under the Securities Act, (ii)
the New Notes will not provide for payment of penalty interest as Liquidated
Damages, which terminate upon consummation of the Exchange Offer, and (iii) the
New Notes will not bear any legends restricting transfer thereof. The New Notes
will be issued solely in exchange for an equal principal amount of Old Notes.
As of the date hereof, $125.0 million aggregate principal amount of Old Notes is
outstanding. See "The Exchange Offer."
GENERAL
The Old Notes are, and the New Notes will be, issued pursuant to the
Indenture among the Company, the Guarantors and Bank One, Columbus, N.A., as
trustee (the "Trustee"). The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are subject to all
such terms, and holders of Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. A copy of the Indenture is filed as an exhibit to the
Exchange Offer Registration Statement and is available as set forth under
"--Available Information." The definitions of certain terms used in the
following summary are set forth below under "-- Certain Definitions."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $125.0 million
and will mature on November 15, 2006. Interest on the Notes will accrue at the
rate of 10% per annum and will be payable semiannually in arrears on May 15 and
November 15, commencing on May 15, 1997, to holders of record on the immediately
preceding May 1 and November 1. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. Principal, premium, if any, and
interest and Liquidated Damages on the Notes will be payable at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the holders of Notes at their respective
addresses set forth in the register of holders of Notes; provided that all
payments with respect to Notes that the holders of which have given wire
transfer instructions to the Company will be required to be made by wire
transfer of immediately available funds to the accounts specified by the holders
thereof. Until otherwise designated by the Company, the Company's office or
agency in New York will be the office of the Trustee maintained for such
purpose. The Notes will be issued in denominations of $1,000 and integral
multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed by the Guarantors. The Guarantee of each Guarantor is subordinated to
the prior payment in full of all Guarantor Senior Indebtedness of such
Guarantor, which would include the guarantees of the Company's obligations under
the Credit Agreement issued by the Guarantors. The obligations of each
Guarantor under its Guarantee is limited so as not to constitute a fraudulent
conveyance under applicable law. See "Risk Factors--Fraudulent Conveyance
Statutes."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor under the Notes and the
Indenture pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, and (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists.
45
<PAGE>
The Indenture provides that (i) upon the release by all holders of Senior
Indebtedness and Guarantor Senior Indebtedness of all Guarantees issued by a
Guarantor relating to such Senior Indebtedness and Guarantor Senior Indebtedness
and all Liens on the property and assets of such Guarantor relating to Senior
Indebtedness and Guarantor Senior Indebtedness or (ii) in the event of a sale or
other disposition of all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the capital
stock of any Guarantor, then such Guarantor (in the event of clause (i) above or
a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all of
the assets of such Guarantor) will be released and relieved of any obligations
under its Guarantee; provided that the Net Proceeds of any such sale or other
disposition described in clause (ii) above are applied in accordance with the
applicable provisions of the Indenture. See "--Repurchase at the Option of
Holders--Asset Sales."
SUBORDINATION
The payment of principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes is subordinated in right of payment, as set forth
in the Indenture, to the prior payment in full of all Senior Indebtedness,
whether outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full of all obligations due in respect of such Senior
Indebtedness (including, in the case of Senior Indebtedness under the Credit
Agreement, interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Indebtedness) before the holders of Notes
will be entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Indebtedness are paid in full, any
distribution to which the holders of Notes would be entitled shall be made to
the holders of Senior Indebtedness (except that holders of Notes may receive
common equity securities or debt securities that are subordinated at least to
the same extent as the Notes to Senior Indebtedness and any securities issued in
exchange for Senior Indebtedness (collectively, "Permitted Junior Securities")
and payments made from the trust described under "--Legal Defeasance and
Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under
"--Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of
the principal of, premium, if any, or interest on Designated Senior Indebtedness
occurs and is continuing beyond any applicable period of grace or (ii) any other
default occurs and is continuing with respect to Designated Senior Indebtedness
that permits holders of the Designated Senior Indebtedness as to which such
default relates to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or the holders of
any Designated Senior Indebtedness. Payments on the Notes may and shall be
resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived and (b) in case of a nonpayment default, the earlier
of the date on which such nonpayment default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Senior Indebtedness has been accelerated.
No new period of payment blockage may be commenced unless and until (i) 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice and (ii) all scheduled payments of principal, premium, if any, and
interest on the Notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been waived
for a period of not less than 90 days.
The Indenture further requires that the Company promptly notify holders of
Senior Indebtedness if payment of the Notes is accelerated because of an Event
of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. On a pro forma
basis, after giving effect to the Prior Offering and the application of the
proceeds therefrom, the principal amount of Senior Indebtedness outstanding at
September 28, 1996 would have been approximately $96.5 million. The Indenture
limits, subject to certain financial tests, the amount of additional
Indebtedness, including Senior Indebtedness, that the
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Company and its Subsidiaries may incur. See "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to November 15,
2001. Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon
to the applicable redemption date, if redeemed during the 12-month period
beginning on November 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2001 . . . . . . . . . . . . . . . . . . 105.000%
2002 . . . . . . . . . . . . . . . . . . 103.333%
2003 . . . . . . . . . . . . . . . . . . 101.667%
2004 . . . . . . . . . . . . . . . . . . 100.000%
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that Notes redeemed with the proceeds of an offering of Common Stock as
described below shall be made on a pro rata basis; provided further, that no
Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall
be mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon to the date of purchase (the "Change of
Control Payment"). Within ten days following any Change of Control, the Company
will mail a notice to each holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes pursuant
to the procedures required by the Indenture and described in such notice. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail
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to each holder of Notes so tendered the Change of Control Payment for such
Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any; provided that each
such new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Indenture provides that, prior to complying with the provisions of
this covenant, but in any event within 90 days following a Change of Control,
the Company will either repay all outstanding Senior Indebtedness or obtain the
requisite consents, if any, under all agreements governing outstanding Senior
Indebtedness to permit the repurchase of Notes required by this covenant. The
Company will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit holders of Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Credit Agreement provides that certain change of control events with
respect to the Company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Indebtedness to which the
Company becomes a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute as default under
the Credit Agreement. In such circumstances, the subordination provisions in
the Indenture would likely restrict payments to holders of Notes.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors or a committee of the Board of Directors, having at least one
Independent director, set forth in an Officers' Certificate delivered to the
Trustee, or by an independent appraisal by an accounting, appraisal or
investment banking firm of national standing) of the assets or Equity Interests
issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Subsidiary is in the form
of cash.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to permanently
reduce Senior Indebtedness (and correspondingly reduce commitments with respect
thereto in the case of any reduction of borrowings under the Credit Agreement,
(b) to the acquisition of a controlling interest in another business, the making
of a capital expenditure or the acquisition of other long-term assets
("Productive Assets"), in each case, in the same or a similar line of business
as the Company was engaged in on the date of the Indenture or (c) to reimburse
the Company or its Subsidiaries for expenditures made, and costs incurred, to
repair, rebuild, replace or restore property subject to loss, damage or taking
to the extent that the net proceeds consist of insurance proceeds received on
account of such loss, damage or taking. Pending the final application of any
such Net Proceeds, the Company may temporarily reduce Senior Indebtedness or
otherwise invest such Net Proceeds in any manner
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that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company will be required to make an
offer to all holders of Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon to the
date of purchase, in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate amount of Notes tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount of Notes surrendered by holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer.
Notwithstanding the foregoing, the Company and its Subsidiaries will be
permitted to consummate one or more Asset Sales with respect to assets or
properties with an aggregate fair market value not in excess of $5.0 million in
the aggregate since the date of the Indenture without complying with clause (ii)
of the first paragraph of this covenant; provided that (a) at least 75% of the
consideration for such Asset Sale constitutes either Productive Assets or cash,
and (b) any Net Proceeds received by the Company or any of its Subsidiaries in
connection with any Asset Sale permitted to be consummated under this paragraph
shall be subject to the provisions of the second paragraph of this covenant.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any other payment or distribution on account of the Equity Interests of
the Company or any of its Subsidiaries (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Subsidiaries) or to the direct or indirect holders of the Equity
Interests of the Company or any of its Subsidiaries in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company, dividends or distributions payable to the
Company or any Subsidiary of the Company or dividends or distributions made by a
Subsidiary of the Company to all holders of its Common Stock on a pro rata
basis); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company, any Subsidiary of the Company or any direct or
indirect parent of the Company, (other than any such Equity Interests owned by
the Company or any Subsidiary of the Company); (iii) make any payment on or in
respect of, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is pari passu with or subordinated to the Notes,
except at Stated Maturity or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date
of the Indenture (excluding Restricted Payments permitted by clauses (v)
and (w) of the next succeeding paragraph), is less than the sum of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) commencing September 29, 1996
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to the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale since the date of
the Indenture of Equity Interests of the Company or of debt securities of
the Company that have been converted into such Equity Interests (other than
Equity Interests (or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or debt securities that have
been converted into Disqualified Stock), plus (iii) to the extent that any
Restricted Investment that was made after the date of the Indenture is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted Investment (less the
cost of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) $7.5 million.
The foregoing provisions will not prohibit (u) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (v) the making of any Restricted Investment, or the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company, in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such Restricted
Investment, redemption, repurchase, retirement or other acquisition shall be
excluded from clause (c) (ii) of the preceding paragraph; (w) the defeasance,
redemption or repurchase of PARI PASSU or subordinated Indebtedness with the net
cash proceeds from an incurrence of Permitted Refinancing Indebtedness or the
substantially concurrent sale (other than to a Subsidiary of the Company) of
Equity Interests of the Company (other than Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (c) (ii) of the preceding paragraph; (x) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Company
or any Subsidiary of the Company held by any member of the Company's (or any of
its Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of the Indenture;
provided that (A) the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $250,000 in any 12-month
period plus the aggregate cash proceeds received by the Company during such
12-month period from any reissuance of Equity Interests by the Company to
members of management of the Company and its Subsidiaries, and (B) no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction; (y) so long as no Default or Event of Default shall have occurred
and be continuing, Investments in the same or similar lines of business as the
Company was engaged in on the date of the Indenture in an aggregate amount not
to exceed $7.5 million since the date of the Indenture (measured as of the date
made and without giving effect to subsequent changes in value); and (z) so long
as no Default or Event of Default shall have occurred and be continuing,
ordinary dividends paid by the Company in respect of its Common Stock in an
aggregate amount not to exceed $2.5 million since the date of the Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors or a committee
of the Board of Directors having at least one Independent director set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant "--Restricted Payments" were computed, which calculations may be
based upon the Company's latest available financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Indebtedness) and that the Company will not issue any Disqualified
Stock and will not permit any of its Subsidiaries to issue any shares of
preferred stock; provided, however, that (x) the Company may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock and (y)
a Guarantor may incur Acquired Indebtedness, in each case if the Fixed Charge
Coverage Ratio for the Company's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued
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would have been at least 2.0 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company of Indebtedness under the Credit
Agreement (and guarantees thereof by the Guarantors) in an aggregate principal
amount at any time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) not to exceed the greater of (x) $175.0 million and (y)
the sum of (A) 80% of Eligible Accounts Receivable and 65% of Eligible
Inventory, less, in the case of each of clause (x) and clause (y), the aggregate
amount of all Net Proceeds of Asset Sales applied to permanently reduce the
commitments with respect to such Indebtedness pursuant to the covenant described
above under the caption "--Repurchase at the Option of Holders--Asset Sales";
(ii) the incurrence by the Company of Indebtedness represented by the
Notes and the incurrence by the Guarantors of Indebtedness represented by the
Guarantees;
(iii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations (whether or not incurred
pursuant to sale and leaseback transactions), mortgage financing or purchase
money obligations, in each case incurred for the purpose of financing all or any
part of the purchase price or cost of construction or improvement of property,
plant or equipment used in the business of the Company or such Subsidiary, in an
aggregate principal amount not to exceed $5.0 million at any time outstanding;
(iv) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund, Existing
Indebtedness or Indebtedness that was permitted by the Indenture to be incurred
(other than any such Indebtedness incurred pursuant to clause (i), (ii), (iii),
(v), (vi), (vii) (viii) or (ix) of this paragraph);
(v) the incurrence by the Company or any of its Wholly Owned
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Wholly Owned Subsidiaries; provided, however, that (i) if the Company is
the obligor on such Indebtedness, such Indebtedness is expressly subordinate to
the payment in full of all Obligations with respect to the Notes and (ii)(A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Wholly Owned
Subsidiary and (B) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Wholly Owned Subsidiary shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by the
Company or such Subsidiary, as the case may be;
(vi) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate risk that is
permitted by the terms of the Indenture to be incurred;
(vii) the incurrence by the Company of Hedging Obligations under
commodity hedging and currency exchange agreements; provided that, such
agreements were entered into in the ordinary course of business for the purpose
of limiting risks that arise in the ordinary course of business;
(viii) the incurrence of Indebtedness of a Guarantor represented by
guarantees of Indebtedness of the Company that has been incurred in accordance
with the terms of the Indenture; and
(ix) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph) in an aggregate
principal amount (or accreted value, as applicable) at any time outstanding not
to exceed $10.0 million.
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien securing Indebtedness on any asset now owned or hereafter
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acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens unless all payments due under
the Indenture and the Notes are secured on an equal and ratable basis with the
Indebtedness so secured until such time as such is no longer secured by a Lien;
provided that if such Indebtedness is by its terms expressly subordinated to the
Notes or any Guarantee the Lien securing such Indebtedness shall be subordinate
and junior to the Lien securing the Notes and the Guarantees with the same
relative priority as such subordinate or junior Indebtedness shall have with
respect to the Notes and the Guarantees.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) applicable law, (b) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, (c) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (d) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, or (e)
Permitted Refinancing Indebtedness, provided that, the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than 95% of the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
above under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Subsidiary than those that would have been obtained
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in a comparable transaction by the Company or such Subsidiary with an unrelated
Person, (ii) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $2.0
million the Company delivers to the Trustee, (a) a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (iii) with respect to any Affiliate Transaction or series of
Related Affiliate transactions involving aggregate consideration in excess of
$5.0 million, (b) an opinion as to the fairness to the holders of Notes of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing; provided that (w) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors or the
payment of fees and indemnities to directors of the Company and its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Subsidiary, (x) loans or advances to employees
in the ordinary course of business, (y) transactions between or among the
Company and/or its Wholly Owned Subsidiaries and (z) Restricted Payments (other
than Investments) that are permitted by the provisions of the Indenture
described above under the caption "--Restricted Payments," in each case, shall
not be deemed Affiliate Transactions.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, enter into any sale and leaseback transaction; provided
that the Company may enter into a sale and leaseback transaction if (i) the
Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Indebtedness relating to such sale and leaseback transaction
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "--Incurrence of
Additional Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien
to secure such Indebtedness pursuant to the covenant described above under the
caption "--Liens," (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors or a committee of the Board of Directors having
at least one Independent director and set forth in an Officers' Certificate
delivered to the Trustee or an independent appraisal by an accounting, appraisal
or investment banking firm of national standing) of the property that is the
subject of such sale and leaseback transaction and (iii) the transfer of assets
in such sale and leaseback transaction is permitted by, and the Company applies
the proceeds of such transaction in compliance with, the covenant described
above under the caption "--Repurchase at the Option of Holders--Asset Sales."
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Subsidiary of the
Company to any Person (other than the Company or a Wholly Owned Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Subsidiary and (b)
the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above under
the caption "--Asset Sales," and (ii) will not permit any Wholly Owned
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary of
the Company.
GUARANTEES OF CERTAIN INDEBTEDNESS
The Indenture provides that (a) the Company will not permit any of its
Subsidiaries that is not a Guarantor to incur, guarantee or secure through the
granting of Liens the payment of any Senior Indebtedness and (b) the Company
will not and will not permit any of its Subsidiaries to pledge any intercompany
notes representing obligations of any of its Subsidiaries, to secure the payment
of any Senior Indebtedness, in each case unless such Subsidiary, the Company and
the Trustee execute and deliver a supplemental indenture evidencing such
Subsidiary's Guarantee (providing for the unconditional guarantee by such
Subsidiary, on a senior subordinated basis, of the Notes).
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LIMITATION ON LAYERING
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of the Company and
senior in any respect in right of payment to the Notes, and (ii) no Guarantor
will incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness of such Guarantor that is subordinate or junior in right of payment
to any Indebtedness of such Guarantor and senior in any respect in right of
payment to the Guarantee of such Guarantor.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company will
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Company and the Guarantors have agreed that, for so
long as any Notes remain outstanding, they will furnish to the holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company to
comply with the provisions described under the captions "Repurchase at the
Option of Holders--Change of Control," "Repurchase at the Option of
Holders--Asset Sales," "--Restricted Payments" or "--Incurrence of Indebtedness
and Issuance of Preferred Stock"; (iv) failure by the Company for 60 days after
notice to comply with any of its other agreements in the Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness
or guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness at its final stated maturity or (b) results in the
acceleration of such Indebtedness prior to its maturity and, in each case, the
principal amount of which Indebtedness, together with the principal amount of
any other such Indebtedness described in clauses (a) and (b) above, aggregates
$5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Subsidiaries;
or (ix) the Guarantee of any Guarantor is held in judicial proceedings to be
unenforceable or invalid or ceases for any reason to be in full force and effect
(other than in accordance with the terms of the Indenture) or any Guarantor or
any Person acting on behalf of any Guarantor denies or disaffirm such
Guarantor's obligations under its Guarantee (other than by reason of a release
of such Guarantor from its Guarantee in accordance with the terms of the
Indenture.
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If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately; provided, however, that
if any Senior Indebtedness is outstanding under the Credit Agreement, upon a
declaration of acceleration, the Notes shall be payable upon the earlier of (x)
the day which is five Business Days after the provision to the Company and the
agent under the Credit Agreement of written notice of such declaration and (y)
the date of acceleration of any Indebtedness under the Credit Agreement.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from holders of Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
November 15, 2001, by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to November 15, 2001, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or any Guarantor under the Notes, the Guarantees, the Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of the
obligations of the Company and the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance") except for (i) the rights of holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages on such Notes when such payments are
due from the trust referred to below, (ii) the Company's obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being deceased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the holders of Notes over the other creditors of the Company or
any Guarantor with the intent of defeating, hindering, delaying or defrauding
creditors, any Guarantor of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraphs, the Indenture, the
Guarantees or the Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture, the Guarantees or the Notes may
be waived with the consent of the holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
purchase of, or a tender offer or exchange offer for, Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder): (i) reduce the
principal amount of Notes whose holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption or repurchase of the
Notes (other than provisions relating to the covenant described above under
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the caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of
or change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the Notes (except a rescission of acceleration of the Notes by the holders of
at least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of holders of Notes to receive payments of principal of or premium, if
any, or interest on the Notes, (vii) waive a redemption payment with respect to
any Note (other than a payment required by one of the covenants described above
under the caption "--Repurchase at the Option of Holders") (viii) release any
Guarantor from any of its obligations under its Guarantee or the Indenture,
except in accordance with the terms of the Indenture, or (ix) make any change in
the foregoing amendment and waiver provisions. In addition, any amendment to
the provisions of Article 10 of the Indenture (which relate to subordination) or
the related definitions will require the consent of the holders of at least 75%
in aggregate principal amount of the Notes then outstanding if such amendment
would adversely affect the rights of holders of Notes.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture, the Guarantees or the Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's or a
Guarantor's obligations to holders of Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such holder, or to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Notes, unless such holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Pillowtex
Corporation, 4111 Mint Way, Dallas, Texas 75237, Attention: Katharine Kenny,
Assistant Vice President--Investor Relations.
BOOK-ENTRY, DELIVERY AND FORM
The New Notes will initially be issued in the form of one Global Note (the
"Global Note"). The Global Note will be deposited on the date of consummation
of the Exchange Offer (the "Closing Date") with, or on behalf of, the DTC (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
Notes that are issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
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The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only thorough the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants exchanging Old Notes for New Notes with portions of the
principal amount of the Global Note and (ii) ownership of the Notes evidenced by
the Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depositary (with respect to the
interests of the Depositary's Participants), the Depositary's Participants and
the Depositary's Indirect Participants. Holders are advised that the laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer Notes
evidenced by the Global Note will be limited to such extent. For certain other
restrictions on the transferability of the Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes. The Company believes, however, that it is currently the policy
of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). "In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days or (ii) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Notes in the form of Certificated Securities
under the Indenture, then, upon surrender by the Global Note Holder of its
Global Note, Notes in such form will be issued to each person that the Global
Note Holder and the Depositary identify as being the beneficial owner of the
related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
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SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Securities, the Company will make all payments of principal, premium, if any,
interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the holders thereof or, if no such
account is specified, by mailing a check to each such holder's registered
address.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person that was not
incurred in connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that,
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback) other
than sales of inventory in the ordinary course of business consistent with past
practices; provided that, the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company and its Subsidiaries taken
as a whole will be governed by the provisions of the Indenture described above
under the caption "--Repurchase at the Option of Holders--Change of Control"
and/or the provisions described above under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" and shall not be deemed to
be "Asset Sales", and (ii) the issue or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $500,000
or (b) for net proceeds in excess of $500,000. Notwithstanding the foregoing:
(i) a transfer of assets by the Company to a Wholly Owned Subsidiary or by a
Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary,
(ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to the Company
or to another Wholly Owned Subsidiary, and (iii) a Restricted Payment that is
permitted by the covenant described above under the caption "--Restricted
Payments" will not be deemed to be Asset Sales.
"ATTRIBUTABLE INDEBTEDNESS" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate
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stock, (iii) in the case of a partnership, partnership interests (whether
general or limited) and (iv) any other interest or participation that confers on
a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than 12
months from the date of acquisition, (iii) U.S. dollar or Canadian dollar
denominated (or foreign currency fully hedged) time deposits, certificates of
deposit, Eurodollar time deposits or Eurodollar certificates of deposit of (a)
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500 million or (b) any bank whose short term commercial paper
rating from Standard & Poor's is at least A-1 or the equivalent thereof or from
Moody's is at least P-1 or the equivalent thereof (any such bank being an
"Approved Lender"), in each case with maturities of not more than 12 months from
the date of acquisition; and (iv) commercial paper issued by any Approved Lender
(or by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-2 (or the equivalent thereof) or
better by Standard & Poor's or P-2 (or the equivalent thereof) or better by
Moody's and maturing within 12 months of the date of acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties, (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of more than 50% of the Voting Stock of the
Company or (iv) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Indebtedness, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
charges (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash charges were deducted in computing such Consolidated Net
Income minus (v) non-cash items of such Person and its Subsidiaries increasing
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary of the referent Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
to the extent (and in same proportion) that the Net Income of such Subsidiary
was included in calculating the Consolidated Net Income of such Person and only
if a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its shareholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP;
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provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof shall be
excluded, (ii) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its shareholders, shall be excluded
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common shareholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"CREDIT AGREEMENT" means that certain Restated Credit Agreement, dated as
of November 12, 1996, by and among the Company and NationsBank of Texas, N.A.,
as agent, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, extended, replaced or refinanced from time
to time.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) so long as Senior Indebtedness
is outstanding under the Credit Agreement, all Senior Indebtedness outstanding
under the Credit Agreement and (ii) thereafter, any other Senior Indebtedness
permitted under the Indenture the principal amount of which is $25.0 million or
more and that has been designated by the Company as "Designated Senior
Indebtedness."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"ELIGIBLE INVENTORY" means, as of any date, all inventory of the Company
and any of its Subsidiaries, wherever located, valued in accordance with GAAP
and shown on the balance sheet of the Company for the quarterly period most
recently ended prior to such date for which financial statements of the Company
are available.
"ELIGIBLE RECEIVABLES" means, as of any date, all accounts receivable of
the Company and any of its Subsidiaries arising out of the sale of inventory in
the ordinary course of business, valued in accordance with GAAP and shown on the
balance sheet of the Company for the quarterly period most recently ended prior
to such date for which financial statements of the Company are available.
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"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries in existence on the date of the Indenture.
"FIXED CHARGES" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Indebtedness, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is guaranteed by such Person or one of its Subsidiaries
or secured by a Lien on assets of such Person or one of its Subsidiaries
(whether or not such guarantee or Lien is called upon) and (iv) the product of
(a) all cash dividend payments (and non-cash dividend payments in the case of a
Person that is a Subsidiary) on any series of preferred stock of such Person,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession which are in effect on the date of the Indenture.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTOR SENIOR INDEBTEDNESS" means, with respect to any Guarantor, (i)
the guarantee of such Guarantor of the Company's Obligations under the Credit
Agreement and (ii) any other Indebtedness permitted to be incurred by such
Guarantor under the terms of the Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Guarantee of such Guarantor.
Notwithstanding anything to the contrary in the foregoing, Guarantor Senior
Indebtedness will not include (u) any Indebtedness of such Guarantor
representing a guarantee of Indebtedness of the Company or any other Guarantor
which
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is subordinate or junior to, or pari passu with, the Notes or the Guarantee of
such other Guarantor, as the case may be, (v) any Indebtedness that is expressly
subordinate or junior in right of payment to any other Indebtedness of such
Guarantor, (w) any liability for federal, state, local or other taxes owed or
owing by such Guarantor, (x) any Indebtedness of such Guarantor to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) that portion of
any Indebtedness that is incurred in violation of the Indenture.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates, the value of foreign currencies and the value of commodities purchased by
the Company or any of its Subsidiaries in the ordinary course of business.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any indebtedness of any other Person.
"INDEPENDENT" means, with respect to the Company and its Subsidiaries, any
person who (i) is in fact independent, (ii) does not have any direct financial
interest or any material indirect financial interest in the Company or any of
its Subsidiaries, or in any Affiliate of the Company or any of its Subsidiaries
(other than as a result of holding securities of the Company) and (iii) is not
an officer, employee, promoter, underwriter, trustee, partner or person
performing similar functions for the Company or any of its Subsidiaries.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions), any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any
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tax sharing arrangements), and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Subsidiary of the Company in a Person,
if as a result of such Investment (i) such Person becomes a Wholly Owned
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company, and (d) any Restricted Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase at
the Option of Holders--Asset Sales."
"PERMITTED LIENS" means (i) Liens on assets of the Company securing Senior
Indebtedness, Liens on assets of a Guarantor securing Guarantor Senior
Indebtedness of such Guarantor and Liens of a Subsidiary of the Company that is
not a Guarantor, which secure unsubordinated Indebtedness of such Subsidiary if
the Notes are secured by such assets on a subordinated basis to the Lien
securing such unsubordinated Indebtedness; provided that such Senior
Indebtedness, Guarantor Senior Indebtedness or Unsubordinated Indebtedness, as
the case may be was permitted by the terms of the Indenture to be incurred; (ii)
Liens in favor of the Company; (iii) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; and (vi) Liens existing on the date of the Indenture.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PRINCIPALS" means Charles M. Hansen, Jr., his spouse and any of his lineal
descendants.
"RELATED PARTY" means any controlled Affiliate of any Principal.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"SENIOR INDEBTEDNESS" means (i) Indebtedness under the Credit Agreement
(including interest in respect thereof accruing after the commencement of any
bankruptcy or similar proceeding to the extent that such interest is allowable
as a bankruptcy claim in such proceeding) and (ii) any other Indebtedness
permitted to be incurred by the Company under the terms of the Indenture, unless
the instrument under which such Indebtedness is incurred expressly provides that
it is on a parity with or subordinated in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (v) any Indebtedness that is expressly subordinate or junior in
right of
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payment to any other Indebtedness of the Company, (w) any liability for federal,
state, local or other taxes owed or owing by the Company (x) any Indebtedness of
the Company to any of its Subsidiaries or other Affiliates, (y) any trade
payables or (z) that portion of Indebtedness that is incurred in violation of
the Indenture.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation was in effect on the date of the
Indenture.
"STATED MATURITY" means, with respect to any payment of interest on or
principal of any Indebtedness, the date on which such payment was scheduled to
be made in the documentation governing such Indebtedness, without regard to the
occurrence of any subsequent event or contingency.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"VOTING STOCK" means, with respect to any Person as of any date, the
Capital Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
DESCRIPTION OF CREDIT AGREEMENT
Concurrently with the Prior Offering, the Company amended and restated the
Revolver under its Credit Agreement. The Credit Agreement provides for
borrowings in an aggregate principal amount of up to $175.0 million.
Indebtedness under the Credit Agreement is guaranteed by each domestic
Subsidiary of the Company and secured by the Company's accounts receivable and
inventory and by (i) 100% of the capital stock of the Company's domestic
Subsidiaries and (ii) 65% of the capital stock of the Company's foreign
Subsidiaries. Loans made pursuant to the Credit Agreement may be borrowed,
repaid and reborrowed from time to time until the fifth anniversary of the
establishment of the Credit Agreement, subject to satisfaction of certain
conditions on the date of any such borrowing.
Amounts outstanding under the Credit Agreement bear interest at a rate
based, at the Company's option, upon (i) either NationsBank's base rate or LIBOR
(the London Interbank Offered Rate) plus 0.875% or (ii) NationsBank's
reserve-adjusted CD rate plus 1.000%. These rates are subject to decrease based
upon the Company's achievement of (i) certain senior unsecured debt ratings or
(ii) certain ratios of funded debt to EBITDA. On a pro forma basis as of
September 28, 1996, the interest rate on outstanding borrowings under the Credit
Agreement would have been 6.305%.
The Credit Agreement contains a number of financial, affirmative and
negative covenants that regulate the Company's operations. Financial covenants
require maintenance of ratios of certain current assets to certain current
liabilities, funded debt to EBITDA, and minimum interest coverage, and require
the Company to maintain a minimum net worth. Negative covenants restrict, among
other things, the incurrence of debt, the existence of liens, transactions with
affiliates, loans, advances and investments by the Company, payment of dividends
and other distributions to
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shareholders, dispositions of assets, mergers, consolidations and dissolutions,
contingent liabilities, changes in business and acquisitions.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration
Date and ending on the close of business one year after the Expiration Date, it
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
____________, 1997, all dealers effecting transactions in the New Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sales of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit of any such resale of New Notes and any
commissions or concessions received by such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The legality of the New Notes will be passed upon for the Company by
Jenkens & Gilchrist, a Professional Corporation, Dallas, Texas.
EXPERTS
The consolidated financial statements and schedule of the Company as of
December 31,1994 and December 30, 1995, and for each of the years in the
three-year period ended December 30, 1995, have been included herein and in
the Exchange Offer Registration Statement in reliance upon the reports of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
66
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1994,
December 30, 1995 and September 28, 1996 (unaudited). . . . . . F-3
Consolidated Statements of Earnings for the years ended
December 31, 1993 and 1994, December 30, 1995 and the nine
months ended September 30, 1995 and September 28, 1996
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1993 and 1994 and December 30, 1995 and the nine
months ended September 28, 1996 (unaudited). . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1993 and 1994, December 30, 1995 and the nine months
ended September 30, 1995 and September 28, 1996
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Pillowtex Corporation:
We have audited the accompanying consolidated balance sheets of Pillowtex
Corporation and subsidiaries as of December 31, 1994 and December 30, 1995
and the related consolidated statements of earnings, shareholders' equity,
and cash flows for each of the years in the three-year period ended
December 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Pillowtex
Corporation and subsidiaries as of December 31, 1994 and December 30, 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 30, 1995, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
February 6, 1996
F-2
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, SEPTEMBER 28,
1994 1995 1996
------------ ------------- --------------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . $ 571 411 15
Receivables:
Trade, less allowance for doubtful accounts of $2,933 in
1994, $2,195 in 1995 and $2,055 in 1996 . . . . . . . . . . . . . 72,381 71,684 93,048
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,202 2,284 5,309
Inventories (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . 107,516 107,404 135,487
Deferred income taxes (note 9) . . . . . . . . . . . . . . . . . . . . 2,184 2,419 2,831
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,154 1,644 2,134
--------- ----------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . 185,008 185,846 238,824
Property, plant and equipment, net (notes 5 and 8) . . . . . . . . . . . 81,187 84,567 79,006
Intangible assets, at cost less accumulated amortization of
$1,129 in 1994, $2,500 in 1995 and $3,478 in 1996. . . . . . . . . . . 50,645 51,779 50,338
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,704 2,518 2,502
--------- ----------- ----------
$319,544 324,710 370,670
--------- ----------- ----------
--------- ----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable (note 6). . . . . . . . . . . . . . . . . . . . . . . $37,917 42,090 50,476
Accrued expenses (note 6). . . . . . . . . . . . . . . . . . . . . . . 16,768 21,137 21,067
Current portion of long-term debt (note 8) . . . . . . . . . . . . . . 6,907 11,916 11,476
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . 678 575 3,018
--------- ----------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 62,270 75,718 86,037
Long-term debt, net of current portion (note 8). . . . . . . . . . . . . 177,149 153,472 180,200
Deferred income taxes (note 9) . . . . . . . . . . . . . . . . . . . . . 3,647 7,530 9,391
Shareholders' equity (notes 8, 10 and 11):
Preferred stock, $0.01 par value; authorized 20,000,000 shares;
none issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - -
Common stock, $0.01 par value; authorized 30,000,000 shares;
10,617,722 shares issued and outstanding. . . . . . . . . . . . . . . 106 106 106
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 58,396 58,427 58,427
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . 18,728 29,666 36,628
Currency translation adjustment. . . . . . . . . . . . . . . . . . . . (752) (209) (119)
--------- ----------- ----------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . . 76,478 87,990 95,042
Commitments and contingencies (note 13) --------- ----------- ----------
$319,544 324,710 370,670
--------- ----------- ----------
--------- ----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
--------------------------------- ---------------------------
DECEMBER 31, DECEMBER 30, SEPTEMBER 30, SEPTEMBER 28,
-------------------
1993 1994 1995 1995 1996
--------- --------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $291,624 $349,520 $474,899 $332,352 $ 335,770
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . 238,155 294,714 395,922 275,407 280,272
--------- --------- --------- --------- ---------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . 53,469 54,806 78,977 56,945 55,498
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,227 36,399 42,508 32,315 31,170
--------- --------- --------- -------- ---------
Earnings from operations . . . . . . . . . . . . . . . . . . . . 24,242 18,407 36,469 24,630 24,328
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . 3,042 6,361 17,491 12,964 10,279
Other income, net. . . . . . . . . . . . . . . . . . . . . . . . . - (379) - - -
--------- --------- --------- --------- ---------
3,042 5,982 17,491 12,964 10,279
--------- --------- --------- --------- ---------
Earnings before income taxes. . . . . . . . . . . . . . . . . . 21,200 12,425 18,978 11,666 14,049
Income taxes (note 9). . . . . . . . . . . . . . . . . . . . . . . 8,420 4,736 7,509 4,678 5,495
--------- --------- --------- --------- ---------
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . $12,780 $ 7,689 $11,469 $ 6,988 $ 8,554
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per common share. . . . . . . . . . . . . . . . . . . . . .73 1.08 .66 .81
--------- --------- --------- ---------
--------- --------- --------- ---------
Pro forma income data (unaudited):
Net earnings as reported . . . . . . . . . . . . . . . . . . . . 12,780
Pro forma adjustment to provision for
income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . (97)
---------
Pro forma earnings . . . . . . . . . . . . . . . . . . . . . . . $12,877
---------
---------
Pro forma earnings available to common
stock shareholders. . . . . . . . . . . . . . . . . . . . . . . $12,877
---------
---------
Pro forma earnings per common
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.32
---------
---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993 AND 1994 AND DECEMBER 30, 1995, AND
NINE MONTHS ENDED SEPTEMBER 28, 1996 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------
ADDITIONAL CURRENCY TOTAL
NUMBER OF PAR PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
SHARES VALUE CAPITAL EARNINGS ADJUSTMENT EQUITY
---------- ------ ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992. . . . . . . . . . 6,505,224 $ 65 1,007 6,000 -- 7,072
Issuance of common stock (note 10) . . . . . . . 4,085,000 41 52,063 -- -- 52,104
Reclassification of S corporation's
retained earnings . . . . . . . . . . . . . . -- -- 4,974 (4,974) -- --
Repurchase of common stock . . . . . . . . . . . -- -- -- (17) -- (17)
Dividends declared (note 12) . . . . . . . . . . -- -- -- (2,610) -- (2,610)
Net earnings . . . . . . . . . . . . . . . . . . -- -- -- 12,780 -- 12,780
----------- ------- ---------- ------------ --------- ----------
Balances at December 31, 1993. . . . . . . . . . 10,590,224 106 58,044 11,179 -- 69,329
Exercise of stock options. . . . . . . . . . . . 27,498 -- 352 -- -- 352
Dividends declared (note 12) . . . . . . . . . . -- -- -- (140) -- (140)
Currency translation changes . . . . . . . . . . -- -- -- -- (752) (752)
Net earnings . . . . . . . . . . . . . . . . . . -- -- -- 7,689 -- 7,689
----------- ------- ---------- ------------ --------- ----------
Balances at December 31, 1994. . . . . . . . . . 10,617,722 106 58,396 18,728 (752) 76,478
Other. . . . . . . . . . . . . . . . . . . . . . -- -- 31 -- -- 31
Dividends declared ($.05 per share). . . . . . . -- -- -- (531) -- (531)
Currency translation changes . . . . . . . . . . -- -- -- -- 543 543
Net earnings . . . . . . . . . . . . . . . . . . -- -- -- 11,469 -- 11,469
----------- ------- ---------- ------------ --------- ----------
Balances at December 30, 1995. . . . . . . . . . 10,617,722 106 58,427 29,666 (209) 87,990
Currency translation changes . . . . . . . . . . -- -- -- -- 90 90
Dividends declared ($.15 per share). . . . . . . -- -- -- (1,592) -- (1,592)
Net earnings . . . . . . . . . . . . . . . . . . -- -- -- 8,554 -- 8,554
----------- ------- ---------- ------------ --------- ----------
Balances at September 28, 1996
(unaudited) . . . . . . . . . . . . . . . . . 10,617,722 $106 58,427 36,628 (119) 95,042
----------- ------- ---------- ------------ --------- ----------
----------- ------- ---------- ------------ --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
--------------------------------- ---------------------------
DECEMBER 31, DECEMBER 30, SEPTEMBER 30, SEPTEMBER 28,
-------------------
1993 1994 1995 1995 1996
--------- --------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . $12,780 7,689 11,469 6,988 8,554
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . 3,868 6,365 11,994 8,767 9,440
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 776 (174) 3,635 1,484 1,447
Loss (gain) on disposal of property, plant and equipment . . 143 (39) 74 15 5
Changes in assets and liabilities, net of effects of
businesses acquired:
Trade receivables . . . . . . . . . . . . . . . . . . . . (1,055) 11,362 714 (20,540) (21,382)
Inventories . . . . . . . . . . . . . . . . . . . . . . . 874 (13,526) (172) (28,390) (28,075)
Accounts payable. . . . . . . . . . . . . . . . . . . . . 3,138 4,585 (3,698) 2,011 2,666
Other assets and liabilities. . . . . . . . . . . . . . . (1,832) (198) 1,869 2,879 (1,088)
--------- ---------- ---------- ---------- -----------
Net cash provided by (used in) operating activities . . 18,692 16,064 25,885 (26,786) (28,433)
--------- ---------- ---------- ---------- -----------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment. . . . . . 416 156 119 48 17
Purchases of property, plant and equipment . . . . . . . . . . (7,135) (10,538) (12,448) (8,630) (2,981)
Purchase of other assets . . . . . . . . . . . . . . . . . . . (1,000) (951) -- -- --
Proceeds on payment of note by shareholder . . . . . . . . . . 2,250 -- -- -- --
Payments for businesses purchased, net of cash
acquired of $216 in 1993 . . . . . . . . . . . . . . . . . . (23,563) (116,253) -- (1,454) (112)
Decrease in restricted investments . . . . . . . . . . . . . . 2,421 -- -- -- --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (42) (2,235) -- --
--------- ---------- ---------- ---------- -----------
Net cash used in investing activities . . . . . . . . . . (26,611) (127,628) (14,564) (10,036) (3,076)
--------- ---------- ---------- ---------- -----------
Cash flows from financing activities:
Increase in checks not yet presented for payment . . . . . . . -- 853 8,155 8,763 6,068
Net borrowings (repayments) on revolving credit loans. . . . . (13,990) 53,840 (14,350) 29,150 45,200
Proceeds from long-term debt . . . . . . . . . . . . . . . . . 30,000 64,750 645 645 --
Principal payments on long-term debt . . . . . . . . . . . . . (28,873) (6,884) (5,056) (1,514) (18,566)
Debt issuance costs. . . . . . . . . . . . . . . . . . . . . . -- (3,107) (350) (319) --
Proceeds from sale of common stock . . . . . . . . . . . . . . 52,104 352 -- --
Repurchases of common stock. . . . . . . . . . . . . . . . . . (27,517) -- -- --
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (2,506) (244) (531) -- (1,592)
--------- ---------- ---------- ---------- -----------
Net cash provided by (used in) financing activities . . . 9,218 109,560 (11,487) 36,725 31,110
--------- ---------- ---------- ---------- -----------
Effect of exchange rates on cash and cash equivalents. . . . . . -- (11) 6 20 3
--------- ---------- ---------- ---------- -----------
Net change in cash and cash equivalents. . . . . . . . . . . . . 1,299 (2,015) (160) (77) (396)
Cash and cash equivalents at beginning of year . . . . . . . . . 1,287 2,586 571 571 411
--------- ---------- ---------- ---------- -----------
Cash and cash equivalents at end of year . . . . . . . . . . . . $2,586 571 411 494 15
--------- ---------- ---------- ---------- -----------
--------- ---------- ---------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(1) GENERAL
Pillowtex Corporation and Subsidiaries ("the Company") operates primarily
in one industry segment which includes the design, manufacture and marketing of
bed pillows, mattress pads, down comforters, blankets, throws and other bedroom
textile furnishings. Virtually all of the Company's assets are located in North
America. The Company supplies its products primarily to customers in the retail
sector, including department stores, mass merchants, wholesale clubs, specialty
retail stores, catalogs and institutional suppliers.
The preparation of the consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
Pillowtex Corporation and its Wholly Owned Subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
(b) CHANGE IN FISCAL YEAR
The Company has changed its fiscal year-end from December 31 for 1993 and
1994 to the Saturday closest to December 31 for 1995. The effect of the change
was not material to the Company's consolidated financial statements for 1995.
The fiscal year-ends for the consolidated financial statements presented are
December 31, 1993 and 1994 and December 30, 1995.
(c) STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, the Company considers all short-term
investments with original maturities of three months or less to be cash
equivalents.
Supplemental disclosures of cash flow information follow:
1993 1994 1995
---- ---- ----
Interest paid . . . . . . . . . . . . $2,880 $5,134 $15,632
-------- -------- --------
-------- -------- --------
Income taxes paid . . . . . . . . . . $7,563 $5,451 $3,793
-------- -------- --------
-------- -------- --------
(d) INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
(e) PROPERTY, PLANT AND EQUIPMENT
Depreciation is provided generally using the straight-line method in
amounts sufficient to amortize the cost of the assets over their estimated
useful lives as follows:
F-7
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ESTIMATED USEFUL LIFE
---------------------
Buildings and improvements . . . . . . . . . . . . 10-32 years
Machinery and equipment. . . . . . . . . . . . . . 5-12 years
Leasehold improvements are amortized over the lesser of the estimated useful
lives of the assets or the remaining term of the lease using the straight-line
method. All interest cost incurred has been expensed in the accompanying
consolidated financial statements. Renewals and betterments are capitalized and
depreciated over the remaining life of the specific property unit.
(f) INTANGIBLES
Intangible assets consist primarily of goodwill ($46,750,000 and
$48,079,000 as of December 31, 1994 and December 30, 1995, respectively)
recorded in connection with the Company's acquisitions (see note 3). Additions
to goodwill during 1995 were primarily related to the finalization of purchase
price allocations for previous acquisitions. Amortization is provided using the
straight-line method, the majority of which is over the estimated useful life of
40 years.
Other intangibles principally consists of deferred loan costs, trademarks
and noncompete agreements amortized over periods ranging from 2 to 20 years.
The Company assesses the recoverability of goodwill by determining whether
the amortization of the asset balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation. The
amount of impairment, if any, is measured based on projected discounted future
operating cash flows.
(g) INCOME TAXES
Effective March 1, 1987, the Company elected to be taxed under Subchapter S
of the Internal Revenue Code. Pursuant to such election, federal and certain
state income taxes were the responsibility of the Company's shareholders. On
March 24, 1993, upon the consummation of the initial public offering of the
Company's common stock, the S corporation election was terminated when the
Company's shareholders exceeded the maximum number allowed for an S corporation.
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred taxes of a change in tax rates
is recognized in income in the period that includes the enactment date.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement 109").
As of January 1, 1993, the Company was an S corporation and all federal and
certain state tax liabilities were at the shareholder level. Accordingly, the
cumulative effect of adopting Statement 109 was immaterial. As a result of the
change in tax status from S corporation to C corporation, a net deferred federal
income tax liability of $972,000, computed in accordance with Statement 109, was
reinstated and reflected as a charge to income tax expense in 1993 (see note 9).
(h) REVENUE RECOGNITION
F-8
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
SHARES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
Revenue is recognized upon shipment of products. Reserves for sales
returns and allowances are recorded in the same accounting period as the related
revenues.
(i) ADVERTISING EXPENSES
The Company expenses advertising costs as incurred. Advertising expense
was approximately $575,000, $3,899,000 and $3,004,000 during the years ended
December 31, 1993 and 1994 and December 30, 1995, respectively.
(j) EARNINGS PER SHARE
Earnings per share for 1994 and 1995 are based on 10,603,660 and 10,617,722
weighted average shares of common stock outstanding, respectively. Pro forma
net earnings per share for 1993 is based on 9,750,840 weighted average shares of
common stock outstanding, and does not include the 12,343,296 shares of common
stock subject to repurchase discussed in note 10. Common share equivalents in
the form of stock options are excluded from the earnings per share calculations
since they have no material dilutive effect.
(k) INTERIM FINANCIAL DATA (UNAUDITED)
The accompanying consolidated balance sheet as of September 28, 1996 and
the related consolidated statements of earnings, shareholders' equity and cash
flows for the nine months ended September 28, 1996 and the consolidated
statements of earnings and cash flows for the nine months ended September 30,
1995 have been prepared by the Company without audit. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation for such periods have been made.
Results for interim periods should not be considered as indicative of results
for a full year.
Footnote disclosures normally included in annual consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been omitted herein with respect to the interim consolidated financial
data. The interim information herein should be read in conjunction with the
annual consolidated financial statements and notes presented herein.
(l) RECLASSIFICATIONS
Certain amounts in the prior year's consolidated financial statements have
been reclassified to conform with the current year's presentation.
(m) FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The Company's foreign Subsidiaries use the local currency as the functional
currency. The assets and liabilities of the Company's foreign Subsidiaries are
translated into U.S. dollars using current exchange rates and revenues and
expenses are translated at average monthly exchange rates. The resulting
translation adjustments are recorded in a separate component of shareholders'
equity. Other foreign currency transaction gains and losses are included in net
income and were not material in any of the years presented.
F-9
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
SHARES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(3) ACQUISITIONS
On August 30, 1993, the Company completed its acquisition of substantially
all of the assets and assumption of certain liabilities of Manetta Mills, Inc.
("Manetta"), a blanket manufacturer, for approximately $7,700,000 through a
newly formed and wholly owned subsidiary, Manetta Home Fashions, Inc. The funds
for the acquisitions were provided by the Company's revolving credit facility.
Effective September 7, 1993, the Company acquired all of the issued and
outstanding capital stock of Tennessee Woolen Mills, Inc. ("TWM"), a blanket
manufacturer, for approximately $13,200,000. The funds for the acquisition were
provided by the Company's revolving credit facility as well as a $1,500,000 note
payable bearing interest at a prime rate (as defined) issued to the sellers of
TWM.
Effective December 1, 1993, the Company acquired all of the issued and
outstanding capital stock of Torfeaco Industries, Ltd. ("Torfeaco"), a Canadian
manufacturer of fashion and synthetic bedding products, through a newly formed
and wholly owned Canadian subsidiary for approximately $4,500,000. The funds
for the acquisition were provided by the Company's revolving credit facility.
Additionally, a $403,500 note payable bearing interest at 6% per annum and a
$346,500 noninterest bearing note payable were issued to the sellers of
Torfeaco.
On August 19, 1994, the Company, through its subsidiary Torfeaco, purchased
certain business assets including receivables, inventory and fixed assets of
Imperial Feather Company of Canada ("Imperial") for approximately $3,600,000.
Imperial was a family-owned and long-established producer of high quality
bedding products, including natural fill and synthetic bed pillows, down
comforters and comforter covers. The funds for the acquisition were provided by
the Company's revolving credit facility.
On December 1, 1994, the Company, through its newly formed and wholly-owned
Subsidiaries Be-Ac, Inc. and Realmac, Inc., purchased substantially, all of the
net assets of Beacon Manufacturing Company ("Beacon") for a purchase price of
$100,823,000 in cash, plus the assumption of approximately $11,028,000 in
liabilities which were repaid at the time of acquisition. Beacon is a 91-year
old manufacturer of cotton and synthetic blankets and throws, jacquard throws
and woven corded bedspreads headquartered in Swannanoa, North Carolina. The
funds for this acquisition were provided primarily from borrowings under a
$240,000,000 Credit Facility with NationsBank of Texas, N.A. ("NationsBank"), as
agent, which was modified in conjunction with the acquisition.
These acquisitions have been accounted for as purchases and, accordingly,
results of operations of the acquired companies have been included in the
consolidated statements of earnings since the acquisition dates.
A summary of the assets acquired and liabilities assumed follows:
1993 1994
---- ----
Current assets. . . . . . . . . . . . . . . . $26,609 $60,746
Property, plant and equipment . . . . . . . . 7,683 36,566
Intangible assets . . . . . . . . . . . . . . 13,229 32,372
Other assets. . . . . . . . . . . . . . . . . 214 28
Current liabilities . . . . . . . . . . . . . (8,504) (13,459)
Long-term debt. . . . . . . . . . . . . . . . (13,444) --
Deferred income taxes . . . . . . . . . . . . (387) --
--------- ---------
$25,400 $116,253
--------- ---------
--------- ---------
F-10
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(3) ACQUISITIONS (CONTINUED)
Unaudited consolidated condensed pro forma results of operations for the
years ended December 31, 1993 and 1994, as if the acquisitions of TWM and Beacon
occurred on January 1, 1993 follow:
PRO FORMA YEARS ENDED
DECEMBER 31
---------------------
1993 1994
---- ----
Net sales . . . . . . . . . . . . . . . . . . $417,939 $470,970
Net earnings. . . . . . . . . . . . . . . . . 13,602 8,238
Pro forma earnings per common share . . . . . 1.39 .78
The pro forma results of operations are presented pursuant to applicable
accounting rules relating to business combinations and are not necessarily
indicative of the actual results that would have been achieved had these
transactions occurred as of January 1, 1993, nor are they indicative of future
results of operations. The Manetta, Torfeaco and Imperial acquisitions were not
significant and, accordingly, pro forma results of operations are not presented.
(4) INVENTORIES
Inventories consist of the following at December 31, 1994 and December 30,
1995:
1994 1995
---- ----
Finished goods. . . . . . . . . . . . . . . . $26,762 $37,670
Work-in-process . . . . . . . . . . . . . . . 39,409 35,980
Raw materials . . . . . . . . . . . . . . . . 39,385 31,851
Supplies. . . . . . . . . . . . . . . . . . . 1,960 1,903
---------- ---------
$107,516 $107,404
---------- ---------
---------- ---------
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and consist of the
following at December 31, 1994 and December 30, 1995:
1994 1995
---- ----
Land. . . . . . . . . . . . . . . . . . . . . $1,233 $1,504
Buildings and improvements. . . . . . . . . . 34,668 35,676
Machinery and equipment . . . . . . . . . . . 61,792 76,712
Leasehold improvements. . . . . . . . . . . . 1,439 1,205
Projects in progress. . . . . . . . . . . . . 7,387 2,881
---------- ---------
106,519 117,978
Less accumulated depreciation and
amortization . . . . . . . . . . . . . . . . 25,332 33,411
---------- ---------
$81,187 $84,567
---------- ---------
---------- ---------
(6) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable includes $3.6 million at December 31, 1994 and $11.8
million at December 30, 1995 of checks not yet presented for payment on zero
balance disbursement accounts.
F-11
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(6) ACCOUNTS PAYABLE AND ACCRUED EXPENSES (CONTINUED)
Accrued expenses consist of the following at December 31, 1994 and December
30, 1995:
1994 1995
---- ----
Accrued customer rebates . . . . . . . . . . . . . . $3,512 $3,477
Employee-related compensation and benefits . . . . . 3,331 5,166
Accrued advertising. . . . . . . . . . . . . . . . . 2,625 2,875
Accrued royalties and commissions. . . . . . . . . . 2,751 3,560
Accrued insurance and worker's compensation reserves 2,014 1,095
Accrued interest and commitment fees . . . . . . . . 1,466 3,085
Other accrued expenses . . . . . . . . . . . . . . . 1,069 1,879
-------- ---------
$16,768 $21,137
-------- ---------
-------- ---------
(7) PENSION PLAN
The Company has a defined benefit pension plan covering substantially all
of its non-union employees. The Company's funding policy provides for annual
contributions of an amount between the minimum required and maximum amount that
can be deducted for federal income tax purposes. Pension plan assets consist
primarily of investments in publicly traded corporate common stocks and bonds,
as well as U.S. Government obligations.
Net pension expense includes the following components:
1993 1994 1995
---- ---- ----
Service cost . . . . . . . . . . . . . . . . . . . $343 $339 $585
Interest cost on projected benefit obligation. . . 378 381 402
Actual return (loss) on plan assets. . . . . . . . (467) 163 (1,041)
Net amortization and deferral. . . . . . . . . . . 216 (518) 684
------ ------- -------
Net pension expense. . . . . . . . . . . . . . $470 $365 $630
------ ------- -------
------ ------- -------
A reconciliation of the funded status of the pension plan at December 31,
1994 and December 30, 1995 follows:
1994 1995
---- ----
Actuarial present value of accumulated benefit
obligations:
Vested benefit obligation. . . . . . . . . . . . . . . $3,197 $5,032
Nonvested benefit obligation . . . . . . . . . . . . . 184 226
------- ---------
Accumulated benefit obligation . . . . . . . . . . . 3,381 5,258
------- ---------
------- ---------
Projected benefit obligation for services rendered
to date. . . . . . . . . . . . . . . . . . . . . . . . (4,384) (6,441)
Pension plan assets at fair value . . . . . . . . . . . . 4,401 5,338
------- ---------
Pension plan assets in excess of (less than)
projected benefit obligation . . . . . . . . . . . . . 17 (1,103)
Unrecognized net asset at March 1, 1987 being
recognized over 17 years . . . . . . . . . . . . . . . (76) (68)
Unrecognized prior service costs. . . . . . . . . . . . . 235 278
Amortization and deferral of net losses . . . . . . . . . (210) 293
------- ---------
Net pension liability included in accrued
expenses. . . . . . . . . . . . . . . . . . . . . $(34) $(600)
------- ---------
------- ---------
The following assumptions were used in determining the actuarial present
value of the projected benefit obligation and net pension expense:
F-12
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(7) PENSION PLAN (CONTINUED)
1993 1994 1995
---- ---- ----
Discount rate. . . . . . . . . . . . . . . . 7.5% 8.75% 7.25%
Rate of increase in future compensation. . . 5.0 5.0 4.0
Expected long-term rate of return on assets. 8.5 8.5 8.5
(8) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1994 and
December 30, 1995:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Revolver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $79,950 $65,600
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 87,500
Deed of trust note, collateralized by land and buildings, with interest at 10.5% per
annum, payable in monthly installments of approximately $49, maturing on July 1,
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,288 3,039
Industrial revenue bonds--Pennsylvania Economic Development Financing Authority
(PEDFA), collateralized by land and building with interest rates ranging from
7.35% to 7.85% per annum, maturing serially in amounts ranging from $355 to
$640 through April 1, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,025 3,645
Industrial revenue bonds--Mississippi Business Finance Corporation, collateralized by
land, building and equipment, with variable rate interest (2.75% to 4.5% per
annum) payable monthly and annual principal payments of $460 beginning July 1,
1995 and maturing on July 1, 2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600 4,140
Notes payable to insurance company, collateralized by certain equipment, with
variable rate interest (5.15% to 5.94% per annum) payable in 84 monthly
installments of $15 plus interest, maturing on June 1, 1999. . . . . . . . . . . . . . . . 836 635
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,357 829
---------- ----------
184,056 165,388
Less current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,907) (11,916)
---------- ----------
$177,149 $153,472
---------- ----------
---------- ----------
</TABLE>
On December 1, 1994, the Company entered into the Credit Agreement with
NationsBank. The Credit Agreement replaced a prior credit agreement with
NationsBank and a syndicate of banks. Subsequent to December 1, 1994, the
credit facilities available under the new Credit Agreement were also syndicated
among a group of banks for which NationsBank acts as Agent. The new Credit
Agreement provided for the Revolver and the Term Loan. The Company may also
obtain letters of credit under the Credit Agreement. Such letters of credit
reduce availability under the Revolver.
The Revolver has a term of five years expiring December 1, 1999.
Availability under the Revolver is regulated by a borrowing base determined by
reference to the Company's accounts receivable and inventory. As of December
30, 1995, the outstanding principal balance of the Revolver was $65.6 million.
Letters of credit were outstanding under the Revolver with an aggregate undrawn
face amount of $10.5 million and unused availability under the Revolver was
$73.9 million.
F-13
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(8) LONG-TERM DEBT (CONTINUED)
The Term Loan has a term of seven years and a final maturity date of
December 1, 2001. Graduated quarterly principal payments beginning with $2.5
million are required on the Term Loan on the last day of each calendar quarter
commencing September 30, 1995. As of December 30, 1995, the outstanding
principal balance of the Term Loan was $87.5 million.
The interest rates for borrowings under the Credit Agreement are, at the
Company's option, the administrative agent bank's prime rate or certain
alternate rates (as defined), plus an additional margin of between .50% and
2.625%, depending on the Company's funded debt to earnings before interest,
taxes, depreciation and amortization ("EBITDA") ratio (as defined).
Additionally, the Company pays a commitment fee for the unused portion of the
Revolver, according to each lender's commitment percentage. The weighted
average annual interest rate under the Company's primary bank credit facility
during 1995 was 8.36% and the aggregate rate in effect at December 30, 1995 was
8.37%.
The Credit Agreement is guaranteed by all of the Company's Subsidiaries
other than the Company's Canadian subsidiaries. All collateral for the Credit
Agreement, which includes all the assets of the Company other than the stock of
the Company's Canadian subsidiaries, is to be released when certain financial
ratios are achieved by the Company.
The Credit Agreement contains a number of financial, affirmative and
negative covenants which regulate the Company's operations. Financial covenants
require maintenance of certain ratios of current assets to current liabilities,
funded debt to EBITDA, and cash flow coverages, and require the Company to
maintain a minimum tangible net worth. Negative covenants restrict, among other
things, the incurrence of debt, the existence of liens, transactions with
affiliates, loans, advances and investments by the Company, payment of dividends
and other distributions to shareholders, dispositions of assets, mergers,
consolidations and dissolutions, capital expenditures, contingent liabilities,
changes in business and acquisitions. As of December 30, 1995, the Company was
in compliance with all covenants under the Credit Agreement.
The interest rates of the deed of trust note and industrial revenue bonds
differ from current market rates. The fair value of these financial
instruments, estimated by discounting the future cash flows using rates
currently available, is approximately $11,602,000 and $9,654,000 at December 31,
1994 and December 30, 1995, respectively. Other debt is at current market
rates; therefore, the fair value approximates book value.
F-14
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(8) LONG-TERM DEBT (CONTINUED)
Aggregate maturities of long-term debt for each of the five years following
December 30, 1995 and thereafter, assuming the unpaid principal balance at
December 30, 1995 under the Revolver remains unchanged, are as follows:
YEAR ENDING DECEMBER 30 AMOUNT
----------------------- ------
1996 . . . . . . . . . . . . . . . . . . . . $11,916
1997 . . . . . . . . . . . . . . . . . . . . 11,537
1998 . . . . . . . . . . . . . . . . . . . . 18,672
1999 . . . . . . . . . . . . . . . . . . . . 81,668
2000 . . . . . . . . . . . . . . . . . . . . 15,975
Thereafter . . . . . . . . . . . . . . . . . 25,620
(9) INCOME TAXES
In addition to the reinstatement of deferred tax described in note 2(g),
total 1993 income tax expense includes current federal tax expense and a
deferred tax benefit for the period from March 24, 1993 through December 31,
1993, as well as applicable foreign and state income taxes.
The components of income tax expense are as follows:
1993 1994 1995
---- ---- ----
U.S. federal--current. . . . . . . . . . . . $6,454 $4,159 $2,632
U.S. federal--deferred . . . . . . . . . . . 776 (40) 3,412
State and foreign taxes--current . . . . . . 1,190 751 1,242
State and foreign taxes--deferred. . . . . . -- (134) 223
------- -------- --------
$8,420 $4,736 $7,509
------- -------- --------
------- -------- --------
A reconciliation of income tax expense computed using the U.S. federal
statutory income tax rate of 35% to the actual provision for income taxes
follows:
1993 1994 1995
---- ---- ----
Expected tax at U.S. statutory rate . . . . . $7,420 $4,349 $6,642
Effect of S corporation status
(terminated on March 23, 1993) . . . . . . (875) -- --
Effect of reinstatement of deferred
taxes upon change in tax status as
of March 24, 1993. . . . . . . . . . . . . 972 -- --
State and foreign taxes, net of federal
benefit. . . . . . . . . . . . . . . . . . 830 414 652
Other . . . . . . . . . . . . . . . . . . . . 73 (27) 215
------- -------- --------
$8,420 $4,736 $7,509
------- -------- --------
------- -------- --------
F-15
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(9) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, 1994 and
December 30, 1995 are presented below:
1994 1995
---- ----
Net deferred tax assets (current):
Inventory costs and reserves . . . . . . . . . . . $1,064 $760
Accrued employee benefits. . . . . . . . . . . . . 241 287
Allowance for doubtful income accounts . . . . . . 209 266
State deferred taxes . . . . . . . . . . . . . . . 627 1,106
Other. . . . . . . . . . . . . . . . . . . . . . . 43 -
--------- ---------
Current deferred tax asset. . . . . . . . . . . 2,184 2,419
--------- ---------
Net deferred tax liabilities (noncurrent):
Package design costs . . . . . . . . . . . . . . . 125 141
Depreciable assets . . . . . . . . . . . . . . . . (3,355) (5,830)
State deferred income taxes. . . . . . . . . . . . (487) (1,008)
Goodwill . . . . . . . . . . . . . . . . . . . . . - (633)
Other. . . . . . . . . . . . . . . . . . . . . . . 70 (200)
--------- ---------
Noncurrent deferred tax liability . . . . . . . (3,647) (7,530)
--------- ---------
Net deferred tax liability. . . . . . . . . . . $(1,463) $(5,111)
--------- ---------
--------- ---------
(10) COMMON STOCK
The Company, under a 1990 stock repurchase agreement with its former
majority shareholder, now deceased, and subject to meeting certain conditions,
including the availability of funds and lender approval, was committed to
repurchase 12,343,296 shares of common stock from the former majority
shareholder on or before December 31, 1993 at a purchase price of $27,500,000 at
that date. On January 19, 1993, the Company repurchased the 12,343,296 shares
under the stock purchase agreement from the former majority shareholder's estate
for $27,500,000, consisting of $2,000,000 in cash and a subordinated note in the
amount of $25,500,000. The note bore no interest and was fully repaid in 1993
from the proceeds of the initial public offering.
On March 17, 1993, the Company completed an initial public offering of its
common stock with the issuance of 4,085,000 shares at $14.00 per share. The
Company received net proceeds of $52,104,000 after deducting offering costs.
The net proceeds were used to (i) retire the $25,500,000 outstanding balance of
a note payable issued in connection with the repurchase of 12,343,296 shares of
common stock as discussed above, and (ii) reduce the Company's bank
indebtedness.
(11) STOCK OPTIONS
Effective February 17, 1993, the Company established the Stock Option Plan,
under which options may be granted to eligible employees and nonemployee
directors of the Company. Under the Stock Option Plan, the Board of Directors
may grant either nonqualified stock options or incentive stock options.
Additionally, the plan provides for the reservation and issuance of up to
1,200,000 shares of the Company's common stock.
F-16
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(11) STOCK OPTIONS (CONTINUED)
All options are granted at an exercise price not less than the fair market
value of the common stock at the date of grant. The option period may not be
more than ten years from the date the option is granted and generally the
options may be exercised ratably over a four year period or as otherwise
specified by the Board of Directors.
A summary of option activity during 1993, 1994 and 1995 follows:
<TABLE>
<CAPTION>
NUMBER EXERCISE PRICE
-------- ------------------
<S> <C> <C>
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521,444 $14.00 -- 14.875
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73,573) $14.00
-------------
Outstanding at December 31, 1993 (no shares were
exercisable). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447,871 $14.00 -- 14.875
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,431 $15.125 -- 19.00
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (142,863) $14.00 -- 14.875
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,498) $14.00
-------------
Outstanding at December 31, 1994 (69,378 shares
exercisable). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363,941 $14.00 -- 19.00
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,000 $ 8.88 -- 14.00
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (114,002) $ 8.88 -- 19.00
-------------
Outstanding at December 30, 1995 (130,719 shares
exercisable). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436,939 $ 8.88 -- 19.00
-------------
-------------
</TABLE>
(12) RELATED PARTY TRANSACTIONS
Dividends payable to the former Subchapter S shareholders were declared and
paid in 1993 and 1994 to satisfy certain federal and state tax liabilities
attributable to their share of earnings during the period that the Company was a
Subchapter S corporation for tax purposes.
(13) COMMITMENTS AND CONTINGENT LIABILITIES
Manufacturing facilities at certain locations, a showroom and warehouse
space are leased under noncancelable operating lease agreements. These leases
generally require the Company to pay all executory costs such as maintenance and
taxes. Rental expense for operating leases was $1,872,000, $1,928,000 and
$3,061,000, during 1993, 1994 and 1995, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) which expire at various
dates through 2002 are as follows:
YEAR ENDING DECEMBER 30, AMOUNT
------------------------ ------
1996 . . . . . . . . . . . . . . . . . . . . . . $4,584
1997 . . . . . . . . . . . . . . . . . . . . . . 3,384
1998 . . . . . . . . . . . . . . . . . . . . . . 2,804
1999 . . . . . . . . . . . . . . . . . . . . . . 1,916
Thereafter . . . . . . . . . . . . . . . . . . . 3,119
Additionally, the Company has entered into a five year lease agreement for
computer equipment which commences in January 1996. The future minimum lease
payments are included in the table above.
F-17
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(13) COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
From time to time, the Company is a party to various legal proceedings
arising in the ordinary course of business. While any proceeding or litigation
has an element of uncertainty, management believes that the final outcome of all
matters currently pending will not have a materially adverse effect on the
Company's financial position.
(14) SEGMENT DATA AND CONCENTRATION OF CREDIT RISK
The Company's customers are located primarily throughout the United States
and Canada and concentration of credit risks with respect to the Company's
unsecured trade receivables is considered to be limited. Although the Company
closely monitors the creditworthiness of its customers, adjusting credit
policies and limits as needed, a customers' ability to pay is largely dependent
upon the retail industry's economic environment.
Sales to the Company's individual major customers, including their
affiliated entities, accounted for approximately 15% in 1993, 13% in 1994 and
14% and 13% of net sales in 1995. Sales to foreign customers were approximately
3% of net sales in 1993, 9% in 1994 and 8% in 1995.
The Company establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of specific customers, historical trends,
and other information. The Company has trade receivables which are due from
certain customers who are experiencing financial difficulties. However, in the
opinion of management of the Company, the allowance for doubtful accounts is
adequate and outstanding trade receivables are presented at net realizable
value.
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables present unaudited financial data of the Company for
each quarter of 1994 and 1995:
<TABLE>
<CAPTION>
1994 QUARTER ENDED
---------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . $71,316 $66,005 $101,415 $110,784
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
Gross profit. . . . . . . . . . . . . . . . . . . . 12,385 11,393 16,766 14,262
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
Net earnings. . . . . . . . . . . . . . . . . . . . 2,127 1,236 3,345 981
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
Earnings per common share . . . . . . . . . . . . . .20 .12 .32 .09
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
1995 QUARTER ENDED
---------------------------------------------------------
APRIL 1 JULY 1 SEPTEMBER 30 DECEMBER 30
------- ------ ------------ -----------
Net sales . . . . . . . . . . . . . . . . . . . . . $94,740 $90,788 $146,824 $142,547
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
Gross profit. . . . . . . . . . . . . . . . . . . . 16,454 16,126 24,365 22,032
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
Net earnings. . . . . . . . . . . . . . . . . . . . 1,162 1,088 4,738 4,481
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
Earnings per common share . . . . . . . . . . . . . .11 .10 .45 .42
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
</TABLE>
(16) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following is summarized condensed consolidating financial information
for the Company, segregating the Parent and guarantor subsidiaries from
nonguarantor subsidiaries. The guarantor subsidiaries are wholly owned
subsidiaries of the Company and guarantees are full, unconditional and joint and
several. Separate financial statements of the guarantor subsidiaries are not
presented because management believes that these financial statements would not
be material to investors. Statements of earnings and cash flows are not
presented for the year ended December 31, 1993,
F-18
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(16) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
as Torfeaco (the principal nonguarantor subsidiary) was acquired on December 1,
1993 (see note 3) and management believes that the difference between such
financial information for the Parent and guarantor subsidiaries and the related
consolidated information is inconsequential.
F-19
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(16) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 30, 1995
------------------------------------------ ------------------------------------------
PARENT AND NON- PARENT AND NON-
GUARANTOR GUARNTOR GUARANTOR GUARNTOR
FINANCIAL POSITION SUBSIDIARIES SUBSIDIARIES CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Receivables:
Trade. . . . . . . . . . . . . . $68,103 $4,278 $72,381 $66,854 $4,830 $71,684
Affiliates . . . . . . . . . . . 7,486 -- -- 8,795 -- --
Inventories. . . . . . . . . . . . 94,555 12,961 107,516 95,710 11,694 107,404
Other current assets . . . . . . . 4,686 425 5,111 5,699 1,059 6,758
-------- ------- -------- -------- ------- --------
Total current assets. . . . . 174,830 17,664 185,008 177,058 17,583 185,846
Property, plant and equipment,
net . . . . . . . . . . . . . . . 77,729 3,458 81,187 81,574 2,993 84,567
Intangible assets. . . . . . . . . 48,334 2,311 50,645 49,042 2,737 51,779
Other assets . . . . . . . . . . . 2,704 -- 2,704 2,518 -- 2,518
-------- ------- -------- -------- ------- --------
Total assets. . . . . . . . . $303,597 $23,433 $319,544 $310,192 $23,313 $324,710
-------- ------- -------- -------- ------- --------
-------- ------- -------- -------- ------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued
liabilities . . . . . . . . . . . $51,652 $3,033 $54,685 $59,305 $3,922 $63,227
Accounts payable--affiliates . . . -- 7,486 -- -- 8,795 --
Other current liabilities. . . . . 7,568 17 7,585 12,452 39 12,491
-------- ------- -------- -------- ------- --------
Total current liabilities . . 59,220 10,536 62,270 71,757 12,756 75,718
Noncurrent liabilities . . . . . . 180,084 712 180,796 160,370 632 161,002
-------- ------- -------- -------- ------- --------
Total liabilities . . . . . . 239,304 11,248 243,066 232,127 13,388 236,720
Shareholders' equity . . . . . . . 64,293 12,185 76,478 78,065 9,925 87,990
-------- ------- -------- -------- ------- --------
Total liabilities and
shareholders' equity . . . . $303,597 $23,433 $319,544 $310,192 $23,313 $324,710
-------- ------- -------- -------- ------- --------
-------- ------- -------- -------- ------- --------
<CAPTION>
SEPTEMBER 28, 1996 (UNAUDITED)
------------------------------------------
PARENT AND NON-
GUARANTOR GUARNTOR
FINANCIAL POSITION SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------------------ ------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Receivables:
Trade. . . . . . . . . . . . . . $88,158 $4,890 $93,048
Affiliates . . . . . . . . . . . 3,805 -- --
Inventories. . . . . . . . . . . . 126,721 8,766 135,487
Other current assets . . . . . . . 9,154 1,135 10,289
-------- ------- --------
Total current assets. . . . . 229,838 14,791 238,824
Property, plant and equipment,
net . . . . . . . . . . . . . . . 76,481 2,525 79,006
Intangible assets. . . . . . . . . 47,650 2,688 50,338
Other assets . . . . . . . . . . . 2,502 -- 2,502
-------- ------- --------
Total assets. . . . . . . . . $356,471 $20,004 $370,670
-------- ------- --------
-------- ------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued
liabilities . . . . . . . . . . . $68,402 $3,141 $71,543
Accounts payable--affiliates . . . -- 5,805 --
Other current liabilities. . . . . 14,493 1 14,494
-------- ------- --------
Total current liabilities . . 82,895 8,947 86,037
Noncurrent liabilities . . . . . . 188,766 825 189,591
-------- ------- --------
Total liabilities . . . . . . 271,661 9,772 275,628
Shareholders' equity . . . . . . . 84,810 10,232 95,042
-------- ------- --------
Total liabilities and
shareholders' equity . . . . $356,471 $20,004 $370,670
-------- ------- --------
-------- ------- --------
</TABLE>
F-20
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(16) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------------------------------------------------
DECEMBER 31, 1994 DECEMBER 30, 1995
------------------------------------------ ------------------------------------------
PARENT AND NON- PARENT AND NON-
GUARANTOR GUARANTOR GUARANTOR GUARANTOR
RESULTS OF OPERATIONS SUBSIDIARIES SUBSIDIARIES CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
--------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . $322,124 $27,396 $349,520 $437,658 $37,241 $474,899
Cost of goods sold . . . . . . . . 269,008 25,706 294,714 361,749 34,173 395,922
--------- ------- -------- --------- ------- ---------
Gross profit . . . . . . . . . . 53,116 1,690 54,806 75,909 3,068 78,977
Selling, general and
administrative. . . . . . . . . . 35,128 1,271 36,399 40,771 1,737 42,508
--------- ------- -------- --------- ------- ---------
Earnings from operations . . . . 17,988 419 18,407 35,138 1,331 36,469
Interest expense and other, net. . 6,369 (387) 5,982 17,482 9 17,491
--------- ------- -------- --------- ------- ---------
Earnings before income taxes . . 11,619 806 12,425 17,656 1,322 18,978
Income taxes . . . . . . . . . . . 4,694 42 4,736 7,101 408 7,509
--------- ------- -------- --------- ------- ---------
Net earnings . . . . . . . . . . $6,925 $764 $7,689 $10,555 $914 $11,469
--------- ------- -------- --------- ------- ---------
--------- ------- -------- --------- ------- ---------
<CAPTION>
NINE MONTHS ENDED
---------------------------------------------------------------------------------------
SEPTEMBER 30, 1995 SEPTEMBER 28, 1996
------------------------------------------ ------------------------------------------
PARENT AND NON- PARENT AND NON-
GUARANTOR GUARANTOR GUARANTOR GUARANTOR
RESULTS OF OPERATIONS SUBSIDIARIES SUBSIDIARIES CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
--------------------- ------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . $307,944 $24,408 $332,352 $312,639 $23,131 $335,770
Cost of goods sold . . . . . . . . 252,782 22,625 275,407 258,554 21,718 280,272
--------- ------- -------- --------- ------- ---------
Gross profit . . . . . . . . . . 55,162 1,783 56,945 54,085 1,413 55,498
Selling, general and
administrative. . . . . . . . . . 30,982 1,333 32,315 29,987 1,183 31,170
--------- ------- -------- --------- ------- ---------
Earnings from operations . . . . 24,180 450 24,630 24,098 230 24,328
Interest expense and other, net. . 12,959 5 12,964 10,296 (17) 10,279
--------- ------- -------- --------- ------- ---------
Earnings before income taxes . . 11,221 445 11,666 13,802 247 14,049
Income taxes . . . . . . . . . . . 4,680 (2) 4,678 5,538 (43) 5,495
--------- ------- -------- --------- ------- ---------
Net earnings . . . . . . . . . . $6,541 $447 $6,988 $8,264 $290 $8,554
--------- ------- -------- --------- ------- ---------
--------- ------- -------- --------- ------- ---------
</TABLE>
F-21
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
(16) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------------------------------------------------
DECEMBER 31, 1994 DECEMBER 30, 1995
------------------------------------------ ------------------------------------------
PARENT AND NON- PARENT AND NON-
GUARANTOR GUARANTOR GUARANTOR GUARANTOR
CASH FLOW SUBSIDIARIES SUBSIDIARIES CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities. . . . . . . $24,400 $(8,336) $16,064 $23,852 $2,033 $25,885
Cash used in investing
activities. . . . . . . . . . . . (125,414) (2,214) (127,628) (13,883) (681) (14,564)
Cash provided by (used in)
financing activities. . . . . . . 99,590 9,959 109,549 (10,132) (1,349) (11,481)
-------- ------- -------- ------- ------- -------
Increase in cash and cash
equivalents . . . . . . . . . . . (1,424) (591) (2,015) (163) 3 (160)
Cash and cash equivalents at
beginning of period . . . . . . . 1,993 593 2,586 569 2 571
-------- ------- -------- ------- ------- -------
Cash and cash equivalents at end
of period . . . . . . . . . . . . $569 $2 $571 $406 $5 $411
-------- ------- -------- ------- ------- -------
-------- ------- -------- ------- ------- -------
<CAPTION>
NINE MONTHS ENDED
---------------------------------------------------------------------------------------
SEPTEMBER 30, 1995 SEPTEMBER 28, 1996
------------------------------------------ ------------------------------------------
PARENT AND NON- PARENT AND NON-
GUARANTOR GUARANTOR GUARANTOR GUARANTOR
RESULTS OF OPERATIONS SUBSIDIARIES SUBSIDIARIES CONSOLIDATED SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
--------------------- ------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities. . . . . . . $(22,337) $(4,768) $(27,105) $(15,446) $3,513 $(11,933)
Cash used in investing
activities. . . . . . . . . . . . (9,262) (774) (10,036) (1,593) (19) (1,612)
Cash provided by (used in)
financing activities. . . . . . . 31,409 5,655 37,064 17,040 (3,491) 13,549
--------- ------- --------- -------- ------- --------
Increase in cash and cash
equivalents . . . . . . . . . . . (190) 113 (77) 1 3 4
Cash and cash equivalents at
beginning of period . . . . . . . 569 2 571 6 5 11
--------- ------- --------- -------- ------- --------
Cash and cash equivalents at end
of period . . . . . . . . . . . . $379 $115 $494 $7 $8 $15
--------- ------- --------- -------- ------- --------
--------- ------- --------- -------- ------- --------
</TABLE>
F-22
<PAGE>
ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THE PROSPECTUS, THE LETTER OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE
AGENT AS FOLLOWS:
BY REGISTERED OR CERTIFIED MAIL:
Bank One, Columbus, N.A.
235 West Schrock Road
Columbus, Ohio 43271-0184
or
Bank One, Columbus, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor, Window 2
New York, New York 10005
BY HAND OR OVERNIGHT COURIER:
Bank One, Columbus, N.A.
235 West Schrock Road
Westerville, Ohio 43081
or
Bank One, Columbus, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor Window 2
New York, New York 10005
BY FACSIMILE:
(614) 248-5088 (OH)
or
(212) 240-8988 (NY)
Confirm by Telephone: (212) 240-8862 (NY)
1-800-346-5152
(Originals of all documents submitted by facsimile should be sent promptly
by hand, overnight courier, or registered or certified mail)
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
OFFER TO EXCHANGE ALL OUTSTANDING 10%
SENIOR SUBORDINATED NOTES DUE 2006
($125,000,000 PRINCIPAL AMOUNT) FOR 10%
SENIOR SUBORDINATED NOTES DUE 2006
PILLOWTEX CORPORATION
----------------------
PROSPECTUS
----------------------
____________ ___, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS; LIMITATION OF LIABILITY FOR
MONETARY DAMAGES
(a) The Articles of Incorporation, as amended to date (the "Articles of
Incorporation"), of Pillowtex Corporation (the "Company"), together with its
Bylaws, provide that the Company shall indemnify officers and directors, and may
indemnify its other employees and agents, to the fullest extent permitted by
law. The laws of the State of Texas permit, and in some cases require,
corporations to indemnify officers, directors, agents and employees who are or
have been a party to or are threatened to be made a party to litigation against
judgements, fines, settlements and reasonable expenses under certain
circumstances.
(b) The Company has also adopted provisions in its Articles of
Incorporation that limit the liability of its directors to the fullest extent
permitted by the laws of the State of Texas. Under the Company's Articles of
Incorporation, and as permitted by the laws of the State of Texas, a director is
not liable to the Company or its shareholders for breach of fiduciary duty.
Such limitation does not affect liability for: (i) a breach of the director's
duty of loyalty to the Company or its shareholders or members; (ii) an act or
omission not in good faith that constitutes a breach of duty of the director to
the Company or an act or omission that involves intentional misconduct or a
knowing violation of the law; (iii) a transaction from which the director
received an improper benefit, whether or not the benefit resulted from an action
taken within the scope of the director's office; or (iv) an act or omission for
which the liability of a director is expressly provided by an applicable
statute.
II-1
<PAGE>
ITEM 21. EXHIBITS.
(a) Exhibits.
Exhibit No. Description
----------- -----------
3.1(1) Restated Articles of Incorporation of Pillowtex, as amended
3.2(5) Amendment to Bylaws and Amended and Restated Bylaws as
currently in effect for Pillowtex Corporation
4.1(8) Indenture, dated November 12, 1996
4.2(8) Form of Note (included in Exhibit 4.1)
5.1(8) Opinion of Jenkens & Gilchrist, a Professional Corporation,
as to the legality of the Notes
10.1(1) Employment Agreement dated as of January 1, 1993, between
Pillowtex and Charles M. Hansen, Jr. ("Hansen") Amendment to
Employment Agreement dated as of July 26, 1993, between
Pillowtex and Hansen
10.3(1) Mississippi Business Finance Corporation Industrial
Development Variable Rate Demand Notes (Pillowtex
Corporation Project) Series 1992 Loan Agreement, Indenture
of Trust, Promissory Note, Remarketing and Interest Services
Agreement, Placement Agreement, Deed of Trust and Security
Agreement, Bond Fund Trustee Agreement, Reimbursement
Agreement, and Lease Agreement (including First Amendment)
10.4(2) Second through Fourth Amendment to Mississippi Business
Finance Corporation Industrial Development Variable Rate
Demand Notes (Pillowtex Corporation Project) Loan Agreement
10.5(1) Deed of Trust (with Security Agreement and Assignment of
Rents and Leases), dated as of July 15, 1988, between
Pillowtex and Principal Mutual Life Insurance Company, as
amended, Deed of Trust Note, and Loan Modification and
Amendment Agreement
10.6(1) Second Loan Agreement Modification and Amendment Agreement
dated as of January 19, 1993, between Pillowtex and
Principal Mutual Life Insurance Company
10.7(1) Deed of Trust Note dated as of July 15, 1988, from Pillowtex
to Principal Mutual Life Insurance Company
10.8(1) Loan and Security Agreement dated April 6, 1992, between
MetLife Capital Corporation and Pillowtex, as amended, and
including Term Note dated June 5, 1992
10.9(1) Sublicense Agreement dated July 1, 1992, between The Ralph
Lauren Home Collection and Pillowtex (Confidential portions
of this exhibit have been omitted and filed separately with
the Commission)
10.10(1) Commercial Lease Agreement dated as of August 4, 1992,
between Estate of David Greenberg and Pillowtex
10.11(1) Industrial Lease dated as of November 23, 1992, between
Angel and Jean Echevarria and Pillowtex
10.12(1) Form of Lease dated as of October 12, 1988, between Jimmie
D. Smith, Jr. and Pillowtex
10.13(1) Agreement of Lease dated as of September 18, 1985, between
Ten Seventy One Joint Venture and Pillowtex
10.14(1) Pillowtex Corporation 1993 Stock Option Plan
10.15(1) Form of Confidentiality and Noncompetition Agreement
II-2
<PAGE>
Exhibit No. Description
----------- -----------
10.16(1) Guaranty dated as of April 1, 1990, made by Pillowtex in
favor of NCNB National Bank of North Carolina
10.17(1) Letter Agreement dated February 15, 1993, between Pillowtex
and Silversen-Hanover Corporation regarding the acquisition
by Pillowtex of the Hanover, Pennsylvania facility
10.18(1) Form of Director Indemnification Agreement
10.19(2) Split Dollar Life Agreement between Pillowtex Corporation
and Charles M. Hansen, Jr. dated July 26, 1993
10.20(3) Stock Purchase Agreement dated as of August 31, 1993, by and
among Pillowtex Corporation, Spencer Hays, Michael V. Black,
James R. Brubaker, Michael N. Cotten, Charles R. Wooden,
James W. Crawford, Joseph F. Tavares, Steven M. Davidson,
Texas Christian University, and General Trust Company,
Trustee Custodian
10.21(2) Sublicense Agreement dated June 29, 1988, between The Ralph
Lauren Home Collection and Tennessee Woolen Mills, Inc.
(Confidential portions of this exhibit have been omitted and
file separately with the Commission)
10.22(2) Lease Agreement dated September 26, 1991, between Tennessee
Woolen Mills, Inc. and Carolyn W. Stone
10.23(2) Sublease Agreement dated April 2, 1992, between Tennessee
Woolen Mills, Inc. and Robertshaw Controls Company
10.24(2) Asset Purchase Agreement entered into in August 1993, by and
between Man-Mill Acquisition, Inc. and Manetta Mills, Inc.
10.25(2) First Amendment to Lease and Assignment and Assumption of
Lease with Landlord's Consent dated August 30, 1993, among
Manetta Mills, Inc., Man-Mill Acquisition, Inc., and Lando
Land Company
10.26(2) First Amendment to Lease and Assignment and Assumption of
Lease and Purchase Option with Landlord's Consent dated
August 30, 1993, among Manetta Mills, Inc., Man-Mill
Acquisition, Inc., and Lando Land Company
10.27(2) Share Purchase Agreement dated as of November 4, 1993, by
and between TFC Acquisition, Inc., Leon Cornofsky, Diane
Cornofsky, Ron Flusk, Paula Flusk, Harold Hafner, Priscilla
Hafner, Allen Wellman, June Wellman, LA-JJ's Inc., L. and
D.C. Investments Inc., Harold Hafner Holdings Limited, and
835159 Ontario Limited
10.28(2) Share Purchase Agreement Amendment dated as of November 30,
1993 and effective as of November 4, 1993 by and between TFC
Acquisition, Inc., Leon Cornofsky, Diane Cornofsky, Ron
Flusk, Paula Flusk, Harold Hafner, Priscilla Hafner, Allen
Wellman, June Wellman, LA-JJ's Inc., L. and D.C. Investments
Inc., Harold Hafner Holdings Limited, and 835159 Ontario
Limited
10.29(2) Indenture dated as of February 1, 1994, by and among
Torfeaco Industries Limited and Lodestone Investments
Limited, Lese Holdings Limited, Golden Elms Limited, M.
Swadron Limited, and Helsinor Investments Limited
10.30(2) Lease dated as of March 1, 1977, by and among Torfeaco
Industries Limited and Standa Investment Limited, and Sharon
Construction Limited
II-3
<PAGE>
Exhibit No. Description
----------- -----------
10.31(2) Pennsylvania Economic Development Financing Authority
("PEDFA") Economic Development Revenue Bonds 1990 Series C
(Silversen-Hanover Corporation Project), dated April 1,
1990, Indenture of Trust between PEDFA and First
Pennsylvania Bank; Financing Agreement between PEDFA and
Silversen-Hanover Corporation; Bond Placement Agreement
among PEDFA, NCNB National Bank of North Carolina and
Silversen-Hanover Corporation; Reimbursement Agreement
between Silversen-Hanover Corporation and NCNB National Bank
of North Carolina; and Form of Bond
10.32(5) Credit Agreement, dated as of December 1, 1994, among
Pillowtex Corporation, NationsBank of Texas, N.A. and
certain lenders
10.33(5) Waiver under Credit Agreement, dated January 30, 1995
10.34(5) First Amendment to Credit Agreement, dated February 10, 1995
10.35(5) Distribution Agreement, dated February 1, 1995 by and among
Beacon Manufacturing Company, Manetta Home Fashions, Inc.,
Tennessee Woolen Mills, Inc., NEMCOR, Inc., Norm McIntyre,
Tim McIntyre and Don McIntyre
10.36(5) The Priorities Agreement, dated February 27, 1995, between
Toronto Dominion Bank, Manetta Home Fashions, Inc.,
Tennessee Woolen Mills, Inc. and Beacon Manufacturing
Company and NEMCOR, Inc.
10.37(5) A Guarantee, dated February 27, 1995, between Beacon
Manufacturing Company, Manetta Home Fashions, Inc.,
Tennessee Woolen Mills, Inc. and NEMCOR, Inc.
10.38(5) Security Agreement, dated February 16, 1995, between NEMCOR,
Inc. and Manetta Home Fashions, Inc.
10.39(5) Security Agreement, dated February 16, 1995, between NEMCOR,
Inc. and Tennessee Woolen Mills, Inc.
10.40(5) Security Agreement, dated February 16, 1995, between NEMCOR,
Inc. and Beacon Manufacturing Company
10.41(4) Amended and Restated Acquisition Agreement dated as of
November 30, 1994, by and among David H. Murdock, Beacon
Manufacturing Company, Wiscassett Mills Company, Pillowtex
Corporation, Be-Ac, Inc., Realmac, Inc., and Wiscat, Inc.
10.42(5) Purchase agreement between Coopers & Lybrand and Torfeaco
Industries Limited for certain assets, dated 8/19/94
10.43(5) Agreement, dated January 1, 1995, between The Walt Disney
Company and Beacon Manufacturing Company for the license for
"Aladdin"
10.44(5) Agreement, dated August 27, 1993, and amended February 8,
1994, between The Walt Disney Company and Beacon
Manufacturing Company for the license for "Classic Winnie
the Pooh"
10.45(5) Agreement, dated July 11, 1994, between The Walt Disney
Company and Beacon Manufacturing Company for the license for
"Home Improvement"
10.46(5) Agreement, dated November 1, 1994, between The Walt Disney
Company and Beacon Manufacturing Company for the license for
"The Lion King"
10.47(5) Agreement, dated September 1, 1994, between The Walt Disney
Company and Beacon Manufacturing Company for the license for
"Disney's Pocahontas"
II-4
<PAGE>
Exhibit No. Description
----------- -----------
10.48(5) Agreement, dated January 1, 1994, between The Walt Disney
Company and Beacon Manufacturing Company for the license for
"Mickey & Co., Baby Mickey & Co., Mickey's Stuff for Kids
and Mickey Unlimited"
10.49(5) Agreement, dated August 26, 1993, and as amended February
18, 1994, between The Walt Disney Company and Beacon
Manufacturing Company for the license for "Disney Winnie the
Pooh"
10.50(5) Agreement by and between the U.S. Postal Service and
Pillowtex Corporation
10.51(5) Agreement, dated August 4, 1994, between the Columbus Museum
of Art and Pillowtex Corporation
10.52(5) Lease Agreement, dated as of April 22, 1994, by and between
The Lincoln National Life Insurance Company and Pillowtex
Corporation
10.53(5) Lease, dated as of August 17, 1994, between 469299 Ontario
Limited and Torfeaco Industries Limited
10.54(5) Lease, dated as of August 31, 1990, by and between Jantzen,
Inc. and Beacon Manufacturing Company
10.55(5) Lease (with Option to Purchase), dated as of April 19, 1993,
by and between J.L. de Ball Girmes of America, Inc. and
Beacon Manufacturing Company
10.56(5) First Amendment to Lease, dated as of April 12, 1994, by and
between Asheville Property Administration and Leasing, Inc.
and Beacon Manufacturing Company
10.57(6) Second Amendment to Credit Agreement, dated as of March 30,
1996, between Pillowtex Corporation and NationsBank of
Texas, N.A.
10.58(7) Form of Equipment Leasing Agreement between BTM Financial &
Leasing Corporation B-4 and Beacon Manufacturing Company,
Manetta Home Fashions, Inc. and Tennessee Woolen Mills, Inc,
dated as of June 14, 1996 (without exhibits)
10.59(8) Registration Rights Agreement, dated as of November 12,
1996, by and among Pillowtex Corporation, each domestic
subsidiary of Pillowtex Corporation and NationsBanc Capital
Markets, Inc., and Merrill Lynch, Pierce, Fenner & Smith,
Incorporated
10.60(8) Restated Credit Agreement, dated as of November 12, 1996, by
and among Pillowtex Corporation and NationsBank of Texas,
N.A., as Agent for the Lenders specified therein (excludes
Schedules)
10.61(8) Form of Swing-Line Note, dated as of Novembe 12, 1996, by
and among Pillowtex Corporation and NationsBank of Texas,
N.A. (see Exhibit A-1 to Exhibit 10.61)
10.62(8) Form of Revolving Note, by and among Pillowtex Corporation
and NationsBank of Texas, N.A. (see Exhibit A-2 to Exhibit
10.61)
10.63(8) Form of Restated Guaranty, by and among Beacon Manafacturing
Company, Mannetta Home Fashions, Inc., Tennessee Woolen
Mills, Inc., Pillowtex, Inc., PTEX Holding Company, and
Pillowtex Management Services Company as guarantors,
NationsBank of Texas, N.A. as Agent and Pillowtex
Corporation as Borrower (see Exhibit B to Exhibit 10.61)
II-5
<PAGE>
Exhibit No. Description
----------- -----------
10.64(8) Form of Restated Security Agreement, by and among Pillowtex
Corporation as Debtor/ Borrower, NationsBank of Texas, N.A.
as Secured Party and Beacon Manafacturing Company, Mannetta
Home Fashions, Inc., Tennessee Woolen Mills, Inc.,
Pillowtex, Inc., PTEX Holding Company, and Pillowtex
Management Services Company as Subsidiary Debtors (see
Exhibit C-1 to Exhibit 10.61)
10.65(8) Asset Purchase Agreement, dated as of October 3, 1996, by
and among Pillowtex Corporation and Fieldcrest Cannon, Inc.
10.66(8) Trademark Licensing Agreement, dated as of November 18,
1996, by and among Pillowtex Corporation and Fieldcrest
Cannon, Inc.
12.1(8) Statement re: Computation of Ratios
21.2(5) List of Subsidiaries
23.1(8) Consent of Independent Auditors and report on financial
statement schedule
23.2(8) Consent of Jenkens & Gilchrist, a Professional Corporation,
(to be included in its opinion filed in Exhibit 5.1)
24.1(8) Power of Attorney (included on signature page hereto)
25.1(8) Statement of Eligibility under the Trust Indenture Act of
1939 on Form T-1
- ---------------
(1) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-1 (33-57314) filed January 22, 1993 and
amended on February 19, 1993, March 4, 1993, March 15, 1993, and March 17,
1993, which Registration Statement became effective March 17, 1993.
(2) Incorporated by reference to the exhibits filed with Registrant's Form 10-K
filed on March 31, 1994.
(3) Incorporated by reference to the Registrant's Form 8-K filed September 23,
1993.
(4) Incorporated by reference to the Registrant's Form 8-K filed December 14,
1994.
(5) Incorporated by reference to the exhibits filed with Registrant's Form 10-K
filed on March 31, 1995.
(6) Incorporated by reference to the exhibits filed with Registrant's Form 10-Q
filed on March 30, 1996.
(7) Incorporated by reference to the exhibits filed with Registrant's Form 10-Q
filed on June 29, 1996.
(8) Filed herewith.
(b) Financial Schedules.
Schedule No. Description
------------ -----------
Schedule II Valuation and Qualifying Accounts
All other financial schedules have been omitted because of the absence of
conditions under which they are required or because the information
required is set forth in the financial statements of the notes thereto.
II-6
<PAGE>
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers, and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned Company hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Exchange Offer Registration
Statement through the date of responding to the request.
(c) The undersigned Company hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Exchange Offer Registration Statement when it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the County of Dallas, State of
Texas, on December 11, 1996.
PILLOWTEX CORPORATION
By: /s/ Charles M. Hansen, Jr.
------------------------------
Charles M. Hansen, Jr.
------------------------------
Chairman of the Board, President and
Chief Executive Officer
Each individual whose signature appears below hereby designates and
appoints Charles M. Hansen, Jr., Jeffrey D. Cordes and Ronald M. Wehtje, and
each of them, any one of whom may act without the joinder of the other, as such
person's true and lawful attorney-in-fact and agents (the "Attorneys-in-Fact")
with full power of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
which amendments may make such changes in this Registration Statement as either
Attorney-in-Fact deems appropriate, and any registration statement relating to
the same offering filed pursuant to Rule 462(b) under the Securities Act of 1933
and requests to accelerate the effectiveness of such registration statements,
and to file each such amendment with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
such Attorneys-in-Fact and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that such Attorneys-in-
Fact or either of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
their capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Charles M. Hansen, Jr. Chairman of the Board, December 11, 1996
- -------------------------- President and Chief Executive
Charles M. Hansen, Jr. Officer (Principal Executive
Officer)
/s/ Christopher N. Baker President - Pillowtex Division December 11, 1996
- -------------------------- and a Director
Christopher N. Baker
/s/ Jeffrey D. Cordes Executive Vice President, December 11, 1996
- -------------------------- Chief Financial Officer,
Jeffrey D. Cordes Assistant Secretary and a
Director (Principal Financial
and Accounting Officer)
/s/ Scott E. Shimizu Executive Vice President - December 11, 1996
- -------------------------- Sales and Marketing and a
Scott E. Shimizu Director
/s/ Paul G. Gillease Director December 11, 1996
- --------------------------
Paul G. Gillease
/s/ William B. Madden Director December 11, 1996
- --------------------------
William B. Madden
/s/ M. Joseph McHugh Director December 11, 1996
- --------------------------
M. Joseph McHugh
/s/ Mary R. Silverthorne Director December 11, 1996
- --------------------------
Mary R. Silverthorne
<PAGE>
SCHEDULE II
PILLOWTEX CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 30, 1995 and December 31, 1994 and 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
--------------------
Balance at Charged to Charged Balance
beginning costs and to other Deductions at end of
Description of period expenses accounts (write-offs)(1) period
----------- ---------- ---------- -------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 30, 1995 $2,993 685 176(2) 1,599 2,195
------ --- --- ----- -----
------ --- --- ----- -----
Year ended December 31, 1994 $1,773 390 962(3) 192 2,993
------ --- --- ----- -----
------ --- --- ----- -----
Year ended December 31, 1993 $2,202 92 162(3) 683 1,773
------ --- --- ----- -----
------ --- --- ----- -----
</TABLE>
(1) Accounts written off, less recoveries of accounts previously written off.
(2) Adjustments to the allowance for doubtful accounts for acquired companies
after the date of acquisition.
(3) Allowance for doubtful accounts for acquired companies as of the date of
acquisition.
S-1
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
_____________
_________________________________
PILLOWTEX CORPORATION
SERIES A AND SERIES B
10% SENIOR SUBORDINATED NOTES DUE 2006
_____________________
INDENTURE
Dated as of November 12, 1996
_____________________
_____________________
Bank One, Columbus, N.A.
_____________________
Trustee
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . . . . . . . 1
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions. . . . . . . . . . . . . . . . . . . . .13
Section 1.03. Incorporation by Reference of Trust Indenture Act. . . . .14
Section 1.04. Rules of Construction. . . . . . . . . . . . . . . . . . .14
ARTICLE 2
THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . .15
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . .15
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . .16
Section 2.04. Paying Agent to Hold Money in Trust. . . . . . . . . . . .16
Section 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . . . .17
Section 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . .17
Section 2.07. Replacement Notes. . . . . . . . . . . . . . . . . . . . .22
Section 2.08. Outstanding Notes. . . . . . . . . . . . . . . . . . . . .23
Section 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . . . .23
Section 2.10. Temporary Notes. . . . . . . . . . . . . . . . . . . . . .23
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . .23
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . .24
ARTICLE 3
REDEMPTION AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . .24
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . .24
Section 3.02. Selection of Notes to Be Redeemed. . . . . . . . . . . . .24
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . .25
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . .26
Section 3.05. Deposit of Redemption Price. . . . . . . . . . . . . . . .26
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . . . .26
Section 3.07. Optional Redemption. . . . . . . . . . . . . . . . . . . .27
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . . . .27
Section 3.09. Offer to Purchase by Application of Excess Proceeds. . . .27
ARTICLE 4
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Section 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . .29
Section 4.02. Maintenance of Office or Agency. . . . . . . . . . . . . .29
Section 4.03. Reports. . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . . . . .30
Section 4.05. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .31
Section 4.06. Stay, Extension and Usury Laws . . . . . . . . . . . . . .31
Section 4.07. Restricted Payments. . . . . . . . . . . . . . . . . . . .32
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . .34
<PAGE>
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock. . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 4.10. Asset Sales. . . . . . . . . . . . . . . . . . . . . . . .36
Section 4.11. Transactions with Affiliates . . . . . . . . . . . . . . .37
Section 4.12. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . .38
Section 4.13. Guarantees of Certain Indebtedness.. . . . . . . . . . . .38
Section 4.14. Corporate Existence. . . . . . . . . . . . . . . . . . . .38
Section 4.15. Offer to Repurchase Upon Change of Control . . . . . . . .38
Section 4.16. Limitation on Layering . . . . . . . . . . . . . . . . . .39
Section 4.17. Sale and Leaseback Transactions. . . . . . . . . . . . . .39
Section 4.18. Limitation on Issuances and Sales of Capital Stock of
Wholly Owned Subsidiaries. . . . . . . . . . . . . . . . .40
ARTICLE 5
SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Section 5.01. Merger, Consolidation, or Sale of Assets . . . . . . . . .40
Section 5.02. Successor Corporation Substituted. . . . . . . . . . . . .41
ARTICLE 6
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . .41
Section 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . .41
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . .43
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . .44
Section 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . .44
Section 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . .45
Section 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . .45
Section 6.07. Rights of Holders of Notes to Receive Payment. . . . . . .45
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . .45
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . .46
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . .46
Section 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . .47
ARTICLE 7
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Section 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . .47
Section 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . .48
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . .49
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . .49
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . .49
Section 7.06. Reports by Trustee to Holders of the Notes . . . . . . . .49
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . .50
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . .51
Section 7.09. Successor Trustee by Merger, etc . . . . . . . . . . . . .52
Section 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . .52
Section 7.11. Preferential Collection of Claims Against Company. . . . .52
<PAGE>
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE. . . . . . . . . . . . . . . . .53
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance . . . . . . . . . . . . . . . . . . . . . . . .53
Section 8.02. Legal Defeasance and Discharge . . . . . . . . . . . . . .53
Section 8.03. Covenant Defeasance. . . . . . . . . . . . . . . . . . . .53
Section 8.04. Conditions to Legal or Covenant Defeasance.. . . . . . . .54
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions. . . . . . . . . . .55
Section 8.06. Repayment to Company.. . . . . . . . . . . . . . . . . . .56
Section 8.07. Reinstatement. . . . . . . . . . . . . . . . . . . . . . .56
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER . . . . . . . . . . . . . . . . . . . .57
Section 9.01. Without Consent of Holders of Notes. . . . . . . . . . . .57
Section 9.02. With Consent of Holders of Notes . . . . . . . . . . . . .57
Section 9.03. Compliance with Trust Indenture Act. . . . . . . . . . . .59
Section 9.04. Revocation and Effect of Consents. . . . . . . . . . . . .59
Section 9.05. Notation on or Exchange of Notes . . . . . . . . . . . . .59
Section 9.06. Trustee to Sign Amendments, etc. . . . . . . . . . . . . .60
ARTICLE 10
SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Section 10.01. Agreement to Subordinate. . . . . . . . . . . . . . . . .61
Section 10.02. Liquidation; Dissolution; Bankruptcy. . . . . . . . . . .61
Section 10.03. Default on Designated Senior Indebtedness . . . . . . . .61
Section 10.04. Acceleration of Notes . . . . . . . . . . . . . . . . . .62
Section 10.05. When Distribution Must Be Paid Over . . . . . . . . . . .62
Section 10.06. Notice by Company . . . . . . . . . . . . . . . . . . . .63
Section 10.07. Subrogation . . . . . . . . . . . . . . . . . . . . . . .63
Section 10.08. Relative Rights . . . . . . . . . . . . . . . . . . . . .63
Section 10.09. Subordination May Not Be Impaired by Company. . . . . . .64
Section 10.10. Distribution or Notice to Representative. . . . . . . . .64
Section 10.11. Rights of Trustee and Paying Agent. . . . . . . . . . . .64
Section 10.12. Authorization to Effect Subordination . . . . . . . . . .65
Section 10.13. Amendments. . . . . . . . . . . . . . . . . . . . . . . .65
ARTICLE 11
SUBSIDIARY GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . .66
Section 11.01. Subsidiary Guarantees. . . . . . . . . . . . . . . . . . .66
Section 11.02. Execution and Delivery of subsidiary Guarantee. . . . . .67
Section 11.03. Guarantors May Consolidate, etc., on Certain Terms. . . .67
Section 11.04. Releases Following Sale of Assets.. . . . . . . . . . . .68
Section 11.05. "Trustee" to Include Paying Agent . . . . . . . . . . . .68
Section 11.06. Subordination of Subsidiary Guarantee.. . . . . . . . . .69
<PAGE>
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
Section 12.01. Trust Indenture Act Controls. . . . . . . . . . . . . . .69
Section 12.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . .69
Section 12.03. Communication by Holders of Notes with
Other Holders of Notes. . . . . . . . . . . . . . . . . .70
Section 12.04. Certificate and Opinion as to Conditions Precedent. . . .71
Section 12.05. Statements Required in Certificate or Opinion . . . . . .71
Section 12.06. Rules by Trustee and Agents . . . . . . . . . . . . . . .71
Section 12.07. No Personal Liability of Directors, Officers,
Employees and Stockholders. . . . . . . . . . . . . . . .71
Section 12.08. Governing Law . . . . . . . . . . . . . . . . . . . . . .72
Section 12.09. No Adverse Interpretation of Other Agreements . . . . . .72
Section 12.10. Successors. . . . . . . . . . . . . . . . . . . . . . . .72
Section 12.11. Severability. . . . . . . . . . . . . . . . . . . . . . .72
Section 12.12. Counterpart Originals . . . . . . . . . . . . . . . . . .72
Section 12.13. Table of Contents, Headings, etc. . . . . . . . . . . . .73
Exhibit A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
Exhibit B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91
<PAGE>
INDENTURE dated as of November 12, 1996 among Pillowtex Corporation, a
Texas corporation (the "Company"), the corporations listed on Schedule I hereto
(each a "Guarantor" and collectively, the "Guarantors") and Bank One, Columbus,
N.A., as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 10% Series A
Senior Subordinated Discount Notes due 2006 (the "Series A Notes") and the 10%
Series B Senior Subordinated Notes due 2006 (the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other Person
merged with or into or became a Subsidiary of such specified Person that was not
incurred in connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that,
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback) other
than sales of inventory in the ordinary course of business consistent with past
practices; PROVIDED that the sale, lease, conveyance of all or substantially all
of the assets of the Company and its Subsidiaries taken as a whole will be
governed by the provisions of this Indenture described in Section 4.15 and/or
the provisions described in Sections 5.01 and 5.02 and shall not be deemed to be
"Asset Sales," and (ii) the issue or sale by the Company or any of its
Subsidiaries of Equity Interest of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $500,000
or (b) for net
1
<PAGE>
proceeds in excess of $500,000. Notwithstanding the foregoing: (i) a
transfer of assets by the Company to a Wholly Owned Subsidiary or by a Wholly
Owned Subsidiary to the Company or to another Wholly Owned Subsidiary, (ii)
an issuance of Equity Interests by a Wholly Owned Subsidiary to the Company
or to another Wholly Owned Subsidiary, and (iii) Restricted Payments that are
permitted by Section 4.07 will not be deemed to be "Asset Sales."
"ATTRIBUTABLE INDEBTEDNESS" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease including in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"BOARD OF DIRECTORS" means, with respect to any Person, the Board of
Directors of such Person, or any authorized committee of such Board of
Directors.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interest, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than 12 months from the date of acquisition, (iii) U.S. dollar or Canadian
dollar denominated (or foreign currency fully hedged) time deposits,
certificates of deposit, Eurodollar time deposits or Eurodollar certificates of
deposit of (a) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500 million or (b) any bank whose short term
commercial paper rating from Standard & Poor's Ratings Corp. ("Standard &
Poor's) is at least A-1 or the equivalent thereof or from Moody's Investor's
Service, Inc. ("Moody's") is at least P-1 or the equivalent thereof (any such
bank being an "Approved Lender"), in each case the maturities of not more than
12 months from the date of acquisition; and (iv) commercial paper issued by any
approved Lender (or by the
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parent company thereof) or any variable rate notes issued by, or guaranteed
by, any domestic corporation rated A-2 (or the equivalent thereof) or better
by Standard & Poor's or P-2 (or the equivalent thereof) or better by Moody's
and maturing within 12 months of the date of acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such terms is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties, (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of more than 50% of the Voting Stock of the
Company or (iv) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"COMPANY" means Pillowtex Corporation, a Texas corporation.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Indebtedness, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
charges (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash charges were deducted in computing such Consolidated Net
Income minus (v) non-cash items of such Person and its Subsidiaries increasing
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the
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depreciation and amortization and other non-cash charges of, a Subsidiary of
the referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in same proportion) that the
Net Income of such Subsidiary was included in calculating the Consolidated
Net Income of such Person and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by
such Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its shareholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof shall be
excluded, (ii) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its shareholders, shall be excluded,
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common shareholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the
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date of this Indenture or (ii) was nominated for election or elected to such
Board of Directors with the affirmative vote of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"CREDIT AGREEMENT" means that certain Restated Credit Agreement, dated
as of November 12, 1996, by and among the Company and NationsBank of Texas,
N.A., as agent, including any related notes, guarantees, collateral documents,
instruments and agreements executed sin connection therewith, and in each case
as amended, modified, renewed, refunded, extended, replaced or refinanced from
time to time.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestor or similar official under any Bankruptcy Law.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"DEFINITIVE NOTES" means Notes that are in the form of the Notes
attached hereto as Exhibit A, that do not include the information called for by
footnotes 1 and 3 thereof.
"DEPOSITORY" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depository with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) so long as Senior
Indebtedness is outstanding under the Credit Agreement, all Senior Indebtedness
outstanding under the Credit Agreement and (ii) thereafter, any other Senior
Indebtedness permitted under this Indenture the principal amount of which is
$25.0 million or more and that has been designated by the Company as "Designated
Senior Indebtedness."
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"ELIGIBLE INVENTORY" means, as of any date, all inventory of the
Company and any of its Subsidiaries, wherever located, valued in accordance with
GAAP and shown on the balance
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sheet of the Company for the quarterly period most recently ended prior to
such date for which financial statements of the Company are available.
"ELIGIBLE RECEIVABLES" means, as of any date, all accounts receivable
of the Company and any of its Subsidiaries arising out of the sale of inventory
in the ordinary course of business, valued in accordance with GAAP and shown on
the balance sheet of the Company for the quarterly period most recently ended
prior to such date for which financial statements of the Company are available.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries in existence on the date of this Indenture.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE OFFER" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Series B Notes for
Series A Notes.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum of (i) the consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations imputed interest with
respect to Attributable Indebtedness, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and
(ii) the consolidated interest expense of such Person and its Subsidiaries that
was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is guaranteed by such Person or one of its
Subsidiaries or secured by a Lien on assets of such Person or one of its
Subsidiaries (whether or not such guarantee or Lien is called upon) and (iv) the
product of (a) all cash dividend payments (and non-cash dividend payments in the
case of a Person that is a Subsidiary) on any series of preferred stock of such
Person, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or
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issues preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio
is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall
be calculated giving pro forma effect to such incurrence, assumption,
guarantee or redemption of Indebtedness, or such issuance or redemption of
preferred stock, as if the same had occurred at the beginning of the
applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been
made by the Company or any of its Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on
or prior to the Calculation Date shall be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated Cash Flow for
such reference period shall be calculated without giving effect to clause
(iii) of the proviso set forth in the definition of Consolidated Net Income,
and (ii) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, and (iii) the Fixed
Charges attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the Calculation
Date, shall be excluded, but only to the extent that the obligations giving
rise to such Fixed Charges will not be obligations of the referent Person or
any of its Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect on the date of this
Indenture.
"GLOBAL NOTE" means a Note that contains the paragraph referred to
in footnote 1 and the additional schedule referred to in footnote 3 to the
form of the Note attached hereto as Exhibit A.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged.
"GUARANTEE" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part
of any Indebtedness.
"GUARANTOR" means (i) each of the Company's Subsidiaries which
becomes a guarantor of the Notes pursuant to Article Eleven and (ii) each of
the Company's Subsidiaries executing a supplemental indenture in which such
Subsidiary agrees to be bound by the terms of
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this Indenture; provided that any Person constituting a Guarantor as
described above shall cease to constitute a Guarantor when its respective
Subsidiary Guarantee is released in accordance with the terms hereof.
"GUARANTOR SENIOR INDEBTEDNESS" means, with respect to any
Guarantor, (i) the guarantee of such Guarantor of the Company's Obligations
under the Credit Agreement and (ii) any other Indebtedness permitted to be
incurred by such Guarantor under the terms of this Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that
it is on a parity with or subordinated in right of payment to the Guarantee
of such Guarantor. Notwithstanding anything to the contrary in the foregoing,
Guarantor Senior Indebtedness will not include (u) any Indebtedness of such
Guarantor representing a guarantee of Indebtedness of the Company or any
other Guarantor which is subordinate or junior to, or PARI PASSU with, the
Notes or the Subsidiary Guarantee of such other Guarantor, as the case may
be, (v) any Indebtedness that is expressly subordinate or junior in right of
payment to any other Indebtedness of such Guarantor, (w) any liability for
federal, state, local or other taxes owed or owing by such Guarantor, (x) any
Indebtedness of such Guarantor to any of its Subsidiaries or other
Affiliates, (y) any trade payables or (z) that portion of any Indebtedness
that is incurred in violation of this Indenture.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates, the value of foreign currencies and the value
of commodities purchased by the Company or any of its Subsidiaries in the
ordinary course of business.
"HOLDER" means a Person in whose name a Note is registered.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP, as well
as all indebtedness of others secured by a Lien on any asset of such Person
(whether or not such indebtedness is assumed by such Person) and, to the
extent not otherwise included, the guarantee by such Person of any
indebtedness of any other Person.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time.
"INDEPENDENT" means, with respect to the Company and its Subsidiaries,
any person who (i) is in fact independent, (ii) does not have any direct
financial interest or any
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material indirect financial interest in the Company or any of its
Subsidiaries, or in any Affiliate of the Company or any of its Subsidiaries
(other than as a result of holding securities of the Company) and (iii) is
not an officer, employee, promoter, underwriter, trustee, partner or person
performing similar functions for the Company or any of its Subsidiaries.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with
GAAP; PROVIDED that an acquisition of assets, Equity Interests or other
securities by the Company for consideration consisting of common equity
securities of the Company shall not be deemed to be an Investment.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"LIQUIDATED DAMAGES" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"NET INCOME" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i)
any gain (but not loss), together with any related provision for taxes on
such gain (but not loss), realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities by such Person or any
of its Subsidiaries or the extinguishment of any Indebtedness of such Person
or any of its Subsidiaries and (ii) any extraordinary or nonrecurring gain
(but not loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash
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received upon the sale or other disposition of any non-cash consideration
received in any Asset Sale), net of the direct costs relating to such Asset
Sale (including, without limitation, legal, accounting and investment banking
fees, and sales commissions), any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements),
and any reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP.
"NOTE CUSTODIAN" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the Offering of the Notes by the Company.
"OFFICER" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company or
the Trustee.
"PERMITTED INVESTMENTS" means (i) any Investment in the Company or
in a Wholly Owned Subsidiary of the Company; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Subsidiary of the
Company in a Person, if as a result of such Investment (i) such Person
becomes a Wholly Owned Subsidiary of the Company or (ii) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Subsidiary of the Company, and (d) any Restricted Investment
made as a result of the receipt of non-cash consideration from an Asset Sale
that was made pursuant to and in compliance with Section 4.10.
"PERMITTED LIENS" means (x) Liens on assets of the Company securing
Senior Indebtedness, (y) Liens on assets of a Guarantor securing Guarantor
Senior Indebtedness of such Guarantor and (z) Liens of a Subsidiary of the
Company that is not a Guarantor which secure
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unsubordinated Indebtedness of such Subsidiary if the Notes are secured by
such assets on a subordinated basis to the Lien securing such unsubordinated
Indebtedness; PROVIDED that such Senior Indebtedness, Guarantor Senior
Indebtedness or unsubordinated Indebtedness, as the case may be was permitted
by the terms of this Indenture to be incurred; (ii) Liens in favor of the
Company; (iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Subsidiary of the
Company; PROVIDED that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, PROVIDED that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course
of business; and (vi) Liens existing on the date of this Indenture.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Subsidiaries; PROVIDED
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by the Company or by the Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or agency or political subdivision thereof (including any
subdivision or ongoing business of any such entity or substantially all of
the assets of any such entity, subdivision or business).
"PRINCIPALS" Charles M. Hansen, Jr., his spouse and any of his
lineal descendants.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of November 12, 1996, by and among the Company and the
other parties named on the
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signature pages thereof, as such agreement may be amended, modified or
supplemented from time to time.
"RELATED PARTY" means any controlled Affiliate of any Principal.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent
or representative for any Senior Indebtedness.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR INDEBTEDNESS" means (i) Indebtedness under the Credit
Agreement (including interest in respect thereof accruing after the
commencement of any bankruptcy or similar proceeding to the extent that such
interest is allowable as a bankruptcy claim in such proceeding) and (ii) any
other Indebtedness permitted to be incurred by the Company under the terms of
this Indenture, unless the instrument under which such Indebtedness is
incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Notes. Notwithstanding anything to the contrary in
the foregoing, Senior Indebtedness will not include (v) any Indebtedness that
is expressly subordinated or junior in right of payment to any other
Indebtedness of the Company, (w) any liability for federal, state, local or
other taxes owed or owing by the Company (x) any Indebtedness of the Company
to any of its Subsidiaries or other Affiliates, (y) any trade payables or (z)
that portion of Indebtedness that is incurred in violation of this Indenture.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such Regulation is in
effect on the date hereof.
"STATED MATURITY" means, with respect to any payment of interest on
or principal of any Indebtedness, the date on which such payment was
scheduled to be made in the documentation governing such Indebtedness,
without regard to the occurrence of any subsequent event or contingency.
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"SUBSIDIARY" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"SUBSIDIARY GUARANTEE" means, individually and collectively, the
guarantees given by the Guarantors pursuant to Article 11 hereof, including a
notation in the Securities substantially in the form included in Exhibit A.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TRANSFER RESTRICTED SECURITIES" means securities that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture
and thereafter means the successor serving hereunder.
"VOTING STOCK" means, with respect to any Person as of any date,
the Capital Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by (ii)
the then outstanding principal amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
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SECTION 1.02 OTHER DEFINITIONS
Defined in
Term Section
---- ----------
"Affiliate Transaction" . . . . . . . . . . . . . . . 4.11
"Asset Sale". . . . . . . . . . . . . . . . . . . . . 4.10
"Asset Sale Offer". . . . . . . . . . . . . . . . . . 3.09
"Change of Control Offer" . . . . . . . . . . . . . . 4.15
"Change of Control Payment" . . . . . . . . . . . . . 4.15
"Change of Control Payment Date". . . . . . . . . . . 4.15
"Covenant Defeasance" . . . . . . . . . . . . . . . . 8.03
"Event of Default". . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . 4.10
"incur" . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . . . . 8.02
"Offer Amount". . . . . . . . . . . . . . . . . . . . 3.09
"Offer Period". . . . . . . . . . . . . . . . . . . . 3.09
"Paying Agent". . . . . . . . . . . . . . . . . . . . 2.03
"Purchase Date" . . . . . . . . . . . . . . . . . . . 3.09
"Registrar" . . . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payments" . . . . . . . . . . . . . . . . 4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes and the Subsidiary Guaranties;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Notes means the Company and any successor obligor
upon the Notes or any Guarantor.
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All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the
TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form included in Exhibit A hereto. The Subsidiary
Guarantees shall be substantially in the form of Exhibit A, the terms of which
are incorporated in and made part of this Indenture. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Notes issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the text referred to in footnotes 1 and 3
thereto). Notes issued in definitive
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form shall be substantially in the form of Exhibit A attached hereto (but
without including the text referred to in footnotes 1 and 3 thereto). Each
Global Note shall represent such of the outstanding Notes as shall be
specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges
and redemptions. Any endorsement of a Global Note to reflect the amount of
any increase or decrease in the amount of outstanding Notes represented
thereby shall be made by the Trustee or the Note Custodian, at the direction
of the Trustee, in accordance with instructions given by the Holder thereof
as required by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to the aggregate principal
amount stated in paragraph 4 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("REGISTRAR") and an
office or agency where Notes may be presented for payment ("PAYING AGENT"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails
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to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company or any Guarantor in making
any such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Company or
a Subsidiary) shall have no further liability for the money. If the Company or
a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
Upon any bankruptcy or reorganization proceedings relating to the Company or a
Guarantor, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company and the Guarantors shall otherwise comply with TIA Section
312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES. When Definitive
Notes are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal
amount of Definitive Notes of other authorized
denominations,
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the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; PROVIDED, HOWEVER, that the
Definitive Notes presented or surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his
attorney, duly authorized in writing; and
(ii) in the case of a Definitive Note that is a Transfer
Restricted Security, such request shall be accompanied
by the following additional information and documents,
as applicable:
(A) if such Transfer Restricted Security is being
delivered to the Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification to that effect from such
Holder (in substantially the form of Exhibit B
hereto); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act)
in accordance with Rule 144A under the Securities
Act or pursuant to an exemption from registration
in accordance with Rule 144 or Rule 904 under the
Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto); or
(C) if such Transfer Restricted Security is being
transferred in reliance on another exemption from
the registration requirements of the Securities
Act, a certification to that effect from such
Holder (in substantially the form of Exhibit B
hereto) and an Opinion of Counsel from such Holder
or the transferee reasonably acceptable to the
Company and to the Registrar to the effect that
such transfer is in compliance with the Securities
Act.
(b) TRANSFER OF A DEFINITIVE NOTE FOR A BENEFICIAL INTEREST IN A
GLOBAL NOTE. A Definitive Note may not be exchanged for a beneficial interest
in a Global Note except upon satisfaction of the requirements set forth below.
Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied
by appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) if such Definitive Note is a Transfer Restricted Security, a
certification from the Holder thereof (in substantially the form
of Exhibit B hereto) to the effect that such Definitive Note is
being transferred by such Holder to a "qualified institutional
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buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Note is a Transfer Restricted
Security, written instructions from the Holder thereof directing
the Trustee to make, or to direct the Note Custodian to make, an
endorsement on the Global Note to reflect an increase in the
aggregate principal amount of the Notes represented by the Global
Note,
in which case the Trustee shall cancel such Definitive Note in accordance with
Section 2.11 hereof and cause, or direct the Note Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depository and the Note Custodian, the aggregate principal amount of Notes
represented by the Global Note to be increased accordingly. If no Global Notes
are then outstanding, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate a new Global Note in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL NOTES. The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through the
Depository, in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL NOTE FOR A
DEFINITIVE NOTE.
(i) Any Person having a beneficial interest in a Global Note may
upon request exchange such beneficial interest for a
Definitive Note. Upon receipt by the Trustee of written
instructions or such other form of instructions as is
customary for the Depository, from the Depository or its
nominee on behalf of any Person having a beneficial interest
in a Global Note, and, in the case of a Transfer Restricted
Security, the following additional information and documents
(all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred
to the Person designated by the Depository as
being the beneficial owner, a certification to
that effect from such Person (in substantially the
form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred
to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in
accordance with Rule 144 or Rule 904 under the
Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that
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effect from the transferor (in substantially the
form of Exhibit B hereto); or
(C) if such beneficial interest is being transferred
in reliance on another exemption from the
registration requirements of the Securities Act, a
certification to that effect from the transferor
(in substantially the form of Exhibit B hereto)
and an Opinion of Counsel from the transferee or
transferor reasonably acceptable to the Company
and to the Registrar to the effect that such
transfer is in compliance with the Securities Act,
in which case the Trustee or the Note Custodian, at the
direction of the Trustee, shall, in accordance with the
standing instructions and procedures existing between the
Depository and the Note Custodian, cause the aggregate
principal amount of Global Notes to be reduced accordingly
and, following such reduction, the Company shall execute
and, upon receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall authenticate and
deliver to the transferee a Definitive Note in the
appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.06(d)
shall be registered in such names and in such authorized
denominations as the Depository, pursuant to instructions
from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes
are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(f) AUTHENTICATION OF DEFINITIVE NOTES IN ABSENCE OF DEPOSITORY. If
at any time:
(i) the Depository for the Notes notifies the Company that the
Depository is unwilling or unable to continue as Depository
for the Global Notes and a successor Depository for the
Global Notes is not appointed by the Company within 90 days
after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive
Notes under this Indenture,
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then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) LEGENDS.
(i) Except as permitted by the following paragraphs (ii) and
(iii), each Note certificate evidencing Global Notes and
Definitive Notes (and all Notes issued in exchange therefor
or substitution thereof) shall bear legends in substantially
the following form:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH NOTE MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (1) ABOVE."
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(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a
Global Note) pursuant to Rule 144 under the Securities Act
or pursuant to an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted Security that is
a Definitive Note, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted
Security for a Definitive Note that does not bear the
first legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer Restricted
Security; and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer Restricted
Security shall not be required to bear the first legend
set forth in (i) above, but shall continue to be
subject to the provisions of Section 2.06(c) hereof;
PROVIDED, HOWEVER, that with respect to any request for
an exchange of a Transfer Restricted Security that is
represented by a Global Note for a Definitive Note that
does not bear the first legend set forth in (i) above,
which request is made in reliance upon Rule 144, the
Holder thereof shall certify in writing to the
Registrar that such request is being made pursuant to
Rule 144 (such certification to be substantially in the
form of Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Company shall issue and, upon receipt of
an authentication order in accordance with Section 2.02
hereof, the Trustee shall authenticate Series B Notes in
exchange for Series A Notes accepted for exchange in the
Exchange Offer, which Series B Notes shall not bear the
legend set forth in (i) above, and the Registrar shall
rescind any restriction on the transfer of such Notes, in
each case unless the Holder of such Series A Notes is either
(A) a broker-dealer, (B) a Person participating in the
distribution of the Series A Notes or (C) a Person who is an
affiliate (as defined in Rule 144A) of the Company.
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as
all beneficial interests in Global Notes have been exchanged for Definitive
Notes, redeemed, repurchased or canceled, all Global Notes shall be returned to
or retained and canceled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Notes, redeemed, repurchased or canceled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Notes Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
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(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall
authenticate Definitive Notes and Global Notes at the
Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer
taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 3.07, 4.10,
4.15 and 9.05 hereto).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for
redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive
Notes or Global Notes shall be the valid obligations of
the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the
Definitive Notes or Global Notes surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to
exchange Notes during a period beginning at the
opening of business 15 days before the day of any
selection of Notes for redemption under Section
3.02 hereof and ending at the close of business on
the day of selection; or
(B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in
part, except the unredeemed portion of any Note
being redeemed in part; or
(C) to register the transfer of or to exchange a Note
between a record date and the next succeeding
interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name any
Note is registered as the absolute owner of such Note
for the purpose of receiving payment of principal of
and interest on such Notes, and neither the Trustee,
any Agent nor the Company shall be affected by notice
to the contrary.
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(vii) The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of
Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
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SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by
the Company, any Guarantor or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Company, shall be considered as though not outstanding, except that for
the purposes of determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Notes that a Trustee knows are
so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon a written
order of the Company signed by two Officers of the Company. Temporary Notes
shall be substantially in the form of definitive Notes but may have
variations that the Company considers appropriate for temporary Notes and as
shall be reasonably acceptable to the Trustee. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive Notes
in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall destroy canceled Notes (subject to the record retention requirement of
the Exchange Act). Certification of the destruction of all canceled Notes
shall be delivered to the Company. The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.01 hereof. The Company shall notify
the Trustee in writing of the amount of defaulted interest proposed to be
paid on each Note and the date of the proposed payment. The Company shall
fix or cause to be fixed each such special record date and payment date,
PROVIDED that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days
before the special record date, the Company (or, upon the written request of
the Company, the Trustee in the name and at the
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expense of the Company) shall mail or cause to be mailed to Holders a notice
that states the special record date, the related payment date and the amount
of such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
PRO RATA basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
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(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion shall be issued upon cancellation of the
original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
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If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) The Company shall not have the option to redeem the Notes
pursuant to this Section 3.07 prior to November 15, 2001. Thereafter, the
Company shall have the option to redeem the Notes, in whole or in part, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
applicable redemption date, if redeemed during the 12 month period beginning on
November 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2001 . . . . . . . . . . . . . . . . 105.000%
2002 . . . . . . . . . . . . . . . . 103.333%
2003 . . . . . . . . . . . . . . . . 101.667%
2004 and thereafter. . . . . . . . . 100.000%
(b) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
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SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company
shall not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "ASSET
SALE OFFER"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "OFFER PERIOD"). No later than
five Business Days after the termination of the Offer Period (the "PURCHASE
DATE"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "OFFER AMOUNT") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale
Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment,
any Note accepted for payment pursuant to the Asset Sale Offer shall cease
to accrue interest after the Purchase Date;
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(e) that Holders electing to have a Note purchased pursuant to
an Asset Sale Offer may only elect to have all of such Note purchased and
may not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if
the Company, the depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Company shall select the Notes to
be purchased on a PRO RATA basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a PRO RATA basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depository or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
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ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
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The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company shall furnish to the Trustee
and to all Holders (i) all quarterly and annual financial information that would
be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Company were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all reports that would be required to
be filed with the SEC on Form 8-K if the Company were required to file such
reports. In addition, whether or not required by the rules and regulations of
the SEC, the Company shall file a copy of all such information with the SEC for
public availability (unless the SEC will not accept such a filing) and shall
promptly make such information available to all securities analysts and
prospective investors who request it in writing. The Company and the Guarantors
shall at all times comply with TIA Section 314(a).
(b) For so long as any Transfer Restricted Securities remain
outstanding, the Company and the Guarantors shall furnish to all Holders and
prospective purchasers of the Notes designated by the Holders of Transfer
Restricted Securities, promptly upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to
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Section 4.03(a) above shall be accompanied by a written statement of the
Company's independent public accountants (who shall be a firm of established
national reputation) that in making the examination necessary for
certification of such financial statements, nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly
to any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each Guarantor (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the execution
of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Equity Interests of the Company or any
of its Subsidiaries (including, without limitation, any payment in connection
with any merger or consolidation involving the Company or any of its
Subsidiaries) or to the direct or indirect holders of the Equity Interests of
the Company or any of its Subsidiaries in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company, dividends or distributions payable to the Company or any
Subsidiary of the Company or dividends or distributions made by a Subsidiary of
the Company to all holders of its Common Stock on a PRO RATA basis);
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(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company, any Subsidiary of the Company or any direct or
indirect parent of the Company, (other than any such Equity Interests owned
by the Company or any Subsidiary of the Company); (iii) make any payment on
or in respect of, or purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness that is PARI PASSU with or subordinated to the
Notes, except at Stated Maturity or (iv) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time
of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 of this Indenture; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date
of this Indenture (excluding Restricted Payments permitted by clauses (v)
and (w) of the next succeeding paragraph), is less than the sum of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) commencing September 29, 1996 to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds received
by the Company from the issue or sale since the date of this Indenture of
Equity Interests of the Company or of debt securities of the Company that
have been converted into such Equity Interests (other than Equity Interests
(or convertible debt securities) sold to a Subsidiary of the Company and
other than Disqualified Stock or debt securities that have been converted
into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of this Indenture is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) $7.5 million.
The foregoing provisions will not prohibit (u) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (v) the making of any Restricted Investment, or the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the proceeds of, the substantially concurrent
sale (other than to a Subsidiary of the Company) of other Equity Interests of
the Company (other than any Disqualified Stock); PROVIDED that the amount of any
such net cash proceeds that are utilized for
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any such Restricted Investment, redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; (w) the defeasance, redemption or repurchase of PARI PASSU or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness or the substantially concurrent sale
(other than to a Subsidiary of the Company) of Equity Interests of the
Company (other than Disqualified Stock); PROVIDED that the amount of any such
net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (x) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Subsidiary
of the Company held by any member of the Company's (or any of its
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of this
Indenture; PROVIDED that (A) the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$250,000 in any 12-month period plus the aggregate cash proceeds received by
the Company during such 12-month period from any reissuance of Equity
Interests by the Company to members of management of the Company and its
Subsidiaries, and (B) no Default or Event of Default shall have occurred and
be continuing immediately after such transaction; (y) so long as no Default
or Event of Default shall have occurred and be continuing, Investments in the
same or similar lines of business as the Company was engaged in on the date
of this Indenture in an aggregate amount not to exceed $7.5 million since the
date of this Indenture (measured as of the date made and without giving
effect to subsequent changes in value); and (z) so long as no Default or
Event of Default shall have occurred and be continuing, ordinary dividends
paid by the Company in respect of its Common Stock in an aggregate amount not
to exceed $2.5 million since the date of this Indenture.
The amount of all Restricted Payments (other than cash) shall be
the fair market value (evidenced by a resolution of the Board of Directors or
a committee of the Board of Directors having at least one Independent
director set forth in an Officers' Certificate delivered to the Trustee) on
the date of the Restricted Payment of the asset(s) proposed to be transferred
by the Company or such Subsidiary, as the case may be, pursuant to the
Restricted Payment. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this Section 4.07 were computed,
which calculations may be based upon the Company's latest available financial
statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Subsidiary to (i)(a) pay dividends or make any other distributions to the
Company or any of its Subsidiaries (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
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Subsidiaries or (iii) transfer any of its properties or assets to the Company
or any of its Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (a) applicable law, (b) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company
or any of its Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired, (c)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (d) purchase money
obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired or (e) Permitted Refinancing Indebtedness, PROVIDED
that, the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Indebtedness) and
that the Company will not issue any Disqualified Stock and will not permit any
of its Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER,
that (x) the Company may incur Indebtedness (including Acquired Indebtedness) or
issue shares of Disqualified Stock and (y) a Guarantor may incur Acquired
Indebtedness, in each case if the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company of Indebtedness under the Credit
Agreement (and guarantees thereof by the Guarantors) in an aggregate
principal amount at any time outstanding (with letters of credit being deemed
to have a principal amount equal to the maximum potential liability of the
Company and its Subsidiaries thereunder) not to exceed the greater of (x)
$175.0 million and (y) the sum of (A) 80% of Eligible Accounts Receivable and
(B) 65% of Eligible Inventory, less, in the case of each of clause (x) and
clause (y), the aggregate amount of all Net Proceeds of Asset Sales applied
to permanently reduce the commitments with respect to such Indebtedness
pursuant to Section 4.10.;
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(ii) the incurrence by the Company of Indebtedness represented by the
Notes and the incurrence by the Guarantors of Indebtedness represented by the
Subsidiary Guarantees;
(iii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations (whether or not
incurred pursuant to sale and leaseback transactions), mortgage financing or
purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or such Subsidiary, in an aggregate principal amount not to exceed
$5.0 million at any time outstanding;
(iv) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Existing Indebtedness or Indebtedness that was permitted by this Indenture to
be incurred (other than any such Indebtedness incurred pursuant to clause
(i), (ii), (iii), (v), (vi), (vii) (viii) or (ix) of this paragraph);
(v) the incurrence by the Company or any of its Wholly Owned
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly Owned Subsidiaries; PROVIDED, HOWEVER, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinate to the payment in full of all Obligations with respect to the
Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than the
Company or a Wholly Owned Subsidiary and (B) any sale or other transfer of
any such Indebtedness to a Person that is not either the Company or a Wholly
Owned Subsidiary shall be deemed, in each case, to constitute an incurrence
of such Indebtedness by the Company or such Subsidiary, as the case may be;
(vi) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate risk that is
permitted by the terms of this Indenture to be incurred;
(vii) the incurrence by the Company of Hedging Obligations under
commodity hedging and currency exchange agreements; PROVIDED that, such
agreements were entered into in the ordinary course of business for the
purpose of limiting risks that arise in the ordinary course of business;
(viii) the incurrence of Indebtedness of a Guarantor represented by
guarantees of Indebtedness of the Company that has been incurred in
accordance with the terms of this Indenture; and
(ix) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph) in an aggregate
principal amount (or accreted value, as applicable) at any time outstanding
not to exceed $10.0 million.
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SECTION 4.10. ASSET SALES.
(a) The Company will not, and will not permit any of its Subsidiaries
to, consummate an Asset Sale unless (i) the Company (or the Subsidiary, as
the case may be) receives consideration at the time of such Asset Sale at
least equal to the fair market value (evidenced by a resolution of the Board
of Directors or a committee of the Board of Directors having at least one
Independent director, set forth in an Officers' Certificate delivered to the
Trustee, or by an independent appraisal by an accounting, appraisal or
investment banking firm of national standing) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of
the consideration therefor received by the Company or such Subsidiary is in
the form of cash.
(b) Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (i) to
permanently reduce Senior Indebtedness (and correspondingly reduce
commitments with respect thereto in the case of any reduction of borrowings
under the Credit Agreement), (ii) to the acquisition of a controlling
interest in another business, the making of a capital expenditure or the
acquisition of other long-term assets ("Productive Assets"), in each case, in
the same or a similar line of business as the Company was engaged in on the
date of this Indenture or (iii) to reimburse the Company or its subsidiaries
for expenditures made, and costs incurred, to repair, rebuild, replace or
restore property subject to loss, damage or taking to the extent that the net
proceeds consist of insurance proceeds received on account of such loss,
damage or taking. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce Senior Indebtedness or otherwise invest
such Net Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this clause (b) will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company will be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon to the date of
purchase, in accordance with the procedures set forth in this Indenture. To
the extent that the aggregate amount of Notes tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount
of Excess Proceeds, the Trustee shall select the Notes to be purchased on a
PRO RATA basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.
(c) The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of Notes pursuant to an Asset Sale Offer.
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(d) Notwithstanding subsections (a), (b), and (c), the Company and
its Subsidiaries will be permitted to consummate one or more Asset Sales with
respect to assets or properties with an aggregate fair market value not in
excess of $5.0 million in the aggregate since the date of this Indenture
without complying with clause (ii) of subsection (a); PROVIDED that (y) at
least 75% of the consideration for such Asset Sale constitutes either
Productive Assets or cash, and (z) any Net Proceeds received by the Company
or any of its Subsidiaries in connection with any Asset Sale permitted to be
consummated under this clause (d) shall be subject to the provisions of
clauses (b) and (c) of this covenant.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction
is on terms that are no less favorable to the Company or the relevant
Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person and
(ii) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $2.0 million the
Company delivers to the Trustee a resolution of the Board of Directors set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (i) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, the Company delivers to the Trustee an opinion as to the fairness to
the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; PROVIDED that (w) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans approved
by the Board of Directors or the payment of fees and indemnities to directors
of the Company and its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practices of the Company or such
Subsidiary, (x) loans or advances to employees in the ordinary course of
business, (y) transactions between or among the Company and/or its Wholly
Owned Subsidiaries and (z) Restricted Payments (other than Investments) that
are permitted by the provisions of Section 4.07, in each case, shall not be
deemed Affiliate Transactions.
SECTION 4.12. LIENS.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any
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right to receive income therefrom, except Permitted Liens unless all payments
due under this Indenture and the Notes are secured on an equal and ratable
basis with the Indebtedness so secured until such time as such Indebtedness
is no longer secured by a Lien; PROVIDED that if such Indebtedness is by its
terms expressly subordinated to the Notes or any Subsidiary Guarantee the
Lien securing such Indebtedness shall be subordinate and junior to the Lien
securing the Notes and the Subsidiary Guarantees with the same relative
priority as such subordinate or junior Indebtedness shall have with respect
to the Notes and the Subsidiary Guarantees.
SECTION 4.13. GUARANTEES OF CERTAIN INDEBTEDNESS.
The Company will not permit any of its Subsidiaries that is not a
Guarantor to incur, guarantee or secure through the granting of Liens the
payment of any Senior Indebtedness, and the Company will not, and will not
permit any of its Subsidiaries to, pledge any intercompany notes representing
obligations of any of its Subsidiaries, to secure the payment of any Senior
Indebtedness, in each case unless such Subsidiary, the Company and the
Trustee execute and deliver a supplemental indenture to this Indenture
evidencing such Subsidiary's Subsidiary Guarantee (providing for the
unconditional guarantee by such Subsidiary, on a senior subordinated basis,
of the Notes).
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or
any such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Subsidiaries, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company
and its Subsidiaries, taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon to the date
of purchase (the "Change of Control Payment"). Within ten days following any
Change of Control, the Company will mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase Notes pursuant to the procedures required by this
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Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
(b) On the Change of Control Payment Date, the Company will, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions
thereof being purchased by the Company. The Paying Agent will promptly mail
to each Holder of Notes so tendered the Change of Control Payment for such
Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED
that each such new Note will be in a principal amount of $1,000 or an
integral multiple thereof. This Indenture will provide that, prior to
complying with the provisions of this covenant, but in any event within 90
days following a Change of Control, the Company will either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by this covenant. The Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
SECTION 4.16. LIMITATION ON LAYERING
Notwithstanding the provisions of Section 4.09 hereof, (i) the
Company shall not incur any Indebtedness that is subordinate or junior in
right of payment to any Indebtedness of the Company and senior in any respect
in right of payment to the Notes, and (ii) no Guarantor shall incur any
Indebtedness that is subordinated or junior in right of payment to any
Indebtedness of such Guarantor and senior in any respect in right of payment
to the Subsidiary Guarantee of such Guarantor.
SECTION 4.17. SALE AND LEASEBACK TRANSACTIONS.
The Company will not, and will not permit any of its Subsidiaries
to, enter into any sale and leaseback transaction; PROVIDED that the Company
may enter into a sale and leaseback transaction if (i) the Company could have
(a) incurred Indebtedness in an amount equal to the Attributable Indebtedness
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 of this
Indenture and (b) incurred a Lien to secure such Indebtedness pursuant to
Section 4.12, (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in
good faith by the Board of Directors or a committee of the Board of Directors
having at least one Independent director and set forth in an Officers'
Certificate delivered to the
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Trustee or an independent appraisal by an accounting, appraisal or investment
banking firm of national standing) of the property that is the subject of
such sale and leaseback transaction and (iii) the transfer of assets in such
sale and leaseback transaction is permitted by, and the Company applies the
proceeds of such transaction in compliance with Section 4.10.
SECTION 4.18. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED SUBSIDIARIES.
The Company (i) will not, and will not permit any Wholly Owned
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise
dispose of any Capital Stock of any Wholly Owned Subsidiary of the Company to
any Person (other than the Company or a Wholly Owned Subsidiary of the
Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Subsidiary and
(b) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with Section 4.10 and (ii) will
not permit any Wholly Owned Subsidiary of the Company to issue any of its
Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Company or a Wholly Owned Subsidiary of the Company.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Notes and this Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with
or into a Wholly Owned Subsidiary of the Company, the Company or the entity
or Person formed by or surviving any such consolidation or merger (if other
than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will have
Consolidated Net Worth immediately after the transaction equal to or greater
than 95% of the Consolidated Net Worth of the Company immediately preceding
the transaction
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and (B) will, at the time of such transaction and after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 of this Indenture.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all
of the assets of the Company in accordance with Section 5.01 hereof, the
successor corporation formed by such consolidation or into or with which the
Company is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted
for (so that from and after the date of such consolidation, merger, sale,
lease, conveyance or other disposition, the provisions of this Indenture
referring to the "Company" shall refer instead to the successor corporation
and not to the Company, other than for purposes of calculating Consolidated
Net Income in connection with Section 4.07), and may exercise every right and
power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; PROVIDED, HOWEVER,
that the predecessor Company shall not be relieved from the obligation to pay
the principal of and interest on the Notes except in the case of a sale of
all of the Company's assets that meets the requirements of Section 5.01
hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
the subordination provisions of this Indenture);
(b) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination
provisions of this Indenture);
(c) failure by the Company to comply with the provisions described
under Sections 4.07, 4.09, 4.10, or 4.15;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes
for 60 days after notice to the Company by the Trustee or the Holders of at
least 25% in principal amount of the Notes then outstanding;
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(e) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of this Indenture, which default (i) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness at its final stated maturity or (ii) results in the
acceleration of such Indebtedness prior to its maturity and, in each case,
the principal amount of which Indebtedness, together with the principal
amount of any other such Indebtedness described in clauses (a) and (b)
above, aggregates $5.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any of its Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5 million;
(g) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due;
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a Custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary or for all
or substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary; or
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(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(i) the Subsidiary Guarantee of any Guarantor is held in judicial
proceedings to be unenforceable or invalid or ceases for any reason to be
in full force and effect (other than in accordance with the terms of this
Indenture) or any Guarantor or any Person acting on behalf of any Guarantor
denies or disaffirms such Guarantor's obligations under its Subsidiary
Guarantee (other than by reason of a release of such Guarantor from its
Subsidiary Guarantee in accordance with the terms of this Indenture.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Upon any such declaration, the Notes shall become due and
payable immediately; provided, however, that if any Senior Indebtedness is
outstanding under the Credit Agreement, upon a declaration of acceleration,
the Notes shall be payable upon earlier of (x) the day which is five Business
Days after the provision to the Company and the agent under the Credit
Agreement of written notice of such declaration and (y) the date of
acceleration of any Indebtedness under the Credit Agreement. Notwithstanding
the foregoing, if an Event of Default specified in clause (g) or (h) of
Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by
written notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default (except
nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to the optional redemption provisions of this Indenture, an
equivalent premium shall also become and be immediately due and payable to
the extent permitted by law upon the acceleration of the Notes. If an Event
of Default occurs prior to November 15, 2001, by reason of any willful action
(or inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the Notes
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prior to November 15, 2001 upon the acceleration of the Notes an additional
premium shall also become and be immediately due and payable in an amount,
for each of the years beginning on November 15 of years set forth below, as
set forth below:
YEAR PERCENTAGE
---- ----------
1996 113.333%
1997 111.667%
1998 110.000%
1999 108.333%
2000 106.667%
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision
of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal
amount of the Notes then outstanding by notice to the Trustee may on behalf
of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under this Indenture except a continuing Default
or Event of Default in the payment of interest on, or the principal of, the
Notes (including in connection with an offer to purchase); provided, however,
that the Holders of a majority in aggregate principal amount of the then
outstanding Notes may rescind an acceleration and its consequences, including
any related payment default that resulted from such acceleration. Upon any
such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of
this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
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SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee
determines may be unduly prejudicial to the rights of other Holders of Notes
or that may involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
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SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own
name and as trustee of an express trust against the Company or any Guarantor
for the whole amount of principal of, premium and Liquidated Damages, if any,
and interest remaining unpaid on the Notes and interest on overdue principal
and, to the extent lawful, interest and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and
distribute any money or other property payable or deliverable on any such
claims and any custodian in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee, and in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same
shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation
or under any plan of reorganization or arrangement or otherwise. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of
the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
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SECOND: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages,
if any and interest, respectively; and
THIRD: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this
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Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel. The Trustee may consult
with counsel and the written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
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(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or Guarantor shall be
sufficient if signed by an Officer of the Company or such Guarantor.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports
as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held
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in trust to pay principal and interest on particular Notes. Such Lien shall
survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
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If the Trustee, after written request by any Holder of a Note who
has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee,
PROVIDED all sums owing to the Trustee hereunder have been paid and subject
to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement
of the Trustee pursuant to this Section 7.08, the Company's obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States
of America or of any state thereof that is authorized under such laws to
exercise corporate trustee power, that is subject to supervision or
examination by federal or state authorities and that has a combined capital
and surplus of at least $100 million as set forth in its most recent
published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject
to TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes
upon compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and
the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following
provisions which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Notes to receive solely
from the trust fund described in Section 8.04 hereof, and as more fully set
forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Article 2 and Section 4.02
hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and (d) this
Article Eight. Subject to compliance with this Article Eight, the Company
may exercise its option under this Section 8.02 notwithstanding the prior
exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other
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purposes hereunder (it being understood that such Notes shall not be deemed
outstanding for accounting purposes). For this purpose, Covenant Defeasance
means that, with respect to the outstanding Notes, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or
an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof
of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(d) through 6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders, cash in United States
dollars, non-callable Government Securities, or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, premium and Liquidated Damages, if any, and interest on
the outstanding Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of
this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
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Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the incurrence of Indebtedness all or
a portion of the proceeds of which will be used to defease the Notes
pursuant to this Article Eight concurrently with such incurrence) or
insofar as Sections 6.01(g) or 6.01(h) hereof is concerned, at any
time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this Indenture) to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
opinion of counsel to the effect that on the 91st day or on the day
after the last day of the applicable preference period under
Bankruptcy Law following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
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The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
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ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's or Guarantor's
obligations to the Holders of the Notes in the case of a merger or
consolidation in accordance with this Indenture.
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Notes; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company and the Guarantors accompanied by a
resolution of their respective Boards of Directors authorizing the execution of
any such amended or supplemental Indenture, and upon receipt by the Trustee of
the documents described in Section 7.02 hereof, the Trustee shall join with the
Company and the Guarantors in the execution of any amended or supplemental
Indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture (including
Section 3.09, 4.10 and 4.15 hereof), the Notes and the Subsidiary Guarantees may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a purchase of, or a tender offer or exchange offer,
for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, if any, or
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interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of
this Indenture or the Notes may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for the
Notes).
Upon the request of the Company and the Guarantors accompanied by a
resolution of their respective Boards of Directors authorizing the execution of
any such amended or supplemental Indenture, and upon the filing with the Trustee
of evidence satisfactory to the Trustee of the consent of the Holders of Notes
as aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors
in the execution of such amended or supplemental Indenture unless such amended
or supplemental Indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected,
an amendment or waiver may not (with respect to any Notes held by a non-
consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Note or alter or waive any of the provisions with respect to the
redemption of the Notes (other than with respect to Sections 3.09,
4.10 and 4.15 hereof);
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes
and a waiver of the payment default that resulted from such
acceleration);
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(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating
to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of premium in and/or interest on the
Notes;
(g) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions;
(h) waive a redemption payment with respect to any Note (other
than a payment required by one of the covenants described above under
Sections 4.10 and 4.15);
(i) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or the Indenture, except in accordance with the
terms of the Indenture; or
(j) make any change in the foregoing amendment and waiver
provisions.
In addition, any amendment to the provisions of Article 10 of the Indenture
(which relate to subordination) or the related definitions will require the
consent of the Holders of at least 75% in aggregate principal amount of the
Notes then outstanding if such amendment would adversely affect the rights of
Holders of Notes.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Subsidiary
Guarantees or the Notes shall be set forth in a amended or supplemental
Indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company and each Subsidiary Guarantor may not sign an amendment or
supplemental Indenture until the Boards of Directors approves it. In executing
any amended or supplemental indenture, the Trustee shall be entitled to receive
and (subject to Section 7.01) shall be fully protected in relying upon, an
Officer's Certificate and an Opinion of Counsel stating that the execution of
such amended or supplemental indenture is authorized or permitted by this
Indenture.
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ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Note is subordinated in right of payment, to
the extent and in the manner provided in this Article, to the prior payment
in full of all Senior Indebtedness (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Indebtedness.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property,
in an assignment for the benefit of creditors or any marshaling of the
Company's assets and liabilities:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness)
before Note holders shall be entitled to receive any payment with respect
to the Notes (except that Holders may receive (i) Equity Interests or debt
securities that are subordinated to at least the same extent as the Notes
to (a) Senior Indebtedness and (b) any securities issued in exchange for
Senior Indebtedness and (ii) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Indebtedness (as
provided in subsection (1) above) are paid in full, any distribution to
which Holders would be entitled but for this Article shall be made to
holders of Senior Indebtedness (except that Holders may receive (i) Equity
Interest or debt securities that are subordinated to at least the same
extent as the Notes to (a) Senior Indebtedness and (b) any securities
issued in exchange for Senior Indebtedness and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section
8.01 hereof), as their interests may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
The Company may not make any payment or distribution to the Trustee
or any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (i) Equity Interests or debt securities that are subordinated to at
least the same extent as the Notes to (a) Senior Indebtedness and (b) any
securities issued in exchange for Senior Indebtedness and (ii) payments and
other distributions
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made from any defeasance trust created pursuant to Section 8.01 hereof) until
all principal and other Obligations with respect to the Senior Indebtedness
have been paid in full if:
(i) a default in the payment of any principal or other Obligations
with respect to Designated Senior Indebtedness occurs and is continuing
beyond any applicable grace period in the agreement, indenture or other
document governing such Designated Senior Indebtedness; or
(ii) a default, other than a payment default, on Designated Senior
Indebtedness occurs and is continuing that then permits holders of the
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from a
Representative with respect to such Designated Senior Debt. If the Trustee
receives any such Payment Blockage Notice, no subsequent Payment Blockage
Notice shall be effective for purposes of this Section unless and until (i)
at least 360 days shall have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice and (ii) all scheduled payments
of principal, premium, if any, and interest on the Notes that have come due
have been paid in full in cash. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been waived for a period of not less
than 90 days.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.03(ii) hereof,
179 days pass after notice is received if the maturity of such Designated
Senior Indebtedness has not been accelerated,
if this Article otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge that such payment is prohibited by
Section 10.03 hereof, such payment shall be held
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by the Trustee or such Holder, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of Senior
Indebtedness as their interests may appear or their Representative under the
indenture or other agreement (if any) pursuant to which Senior Indebtedness
may have been issued, as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior
Indebtedness remaining unpaid to the extent necessary to pay such Obligations
in full in accordance with their terms, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
10, except if such payment is made as a result of the willful misconduct or
gross negligence of the Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article.
SECTION 10.07. SUBROGATION.
After all Senior Indebtedness is paid in full and until the Notes
are paid in full, Holders shall be subrogated (equally and ratably with all
other Indebtedness pari passu with the Notes) to the rights of holders of
Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the
Holders have been applied to the payment of Senior Indebtedness. A
distribution made under this Article to holders of Senior Indebtedness that
otherwise would have been made to Holders is not, as between the Company and
Holders, a payment by the Company on the Notes.
SECTION 10.08. RELATIVE RIGHTS.
This Article defines the relative rights of Holders and holders of
Senior Indebtedness. Nothing in this Indenture shall:
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(1) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Indebtedness to receive distributions and
payments otherwise payable to Holders.
If the Company fails because of this Article to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
10.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to
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the Notes to violate this Article. Only the Company or a Representative may
give the notice. Nothing in this Article 10 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Notes.
SECTION 10.13. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Indebtedness.
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ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEES.
Each of the Guarantors hereby, jointly and severally, unconditionally
guaranty to each Holder of a Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Notes or the obligations of the Company
hereunder or thereunder, that: (a) the principal of and interest on the Notes
will be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and interest
on the Notes, if any, if lawful, and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or any of such other
obligations, that same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors will be jointly and severally obligated to pay the same immediately.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Subsidiary Guarantee will not be discharged except by
complete performance of the obligations contained in the Notes and this
Indenture. If any Holder or the Trustee is required by any court or otherwise
to return to the Company or Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either the Company or Guarantors,
any amount paid by either to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor agrees that they shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 for
the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6, such obligations (whether or not due
and payable) shall forthwith become due and payable by the Guarantors for the
purpose of this Subsidiary Guarantee. The Guarantors shall have the right to
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seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
SECTION 11.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit A shall be endorsed by an officer
of such Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Guarantor by
its President or one of its Vice Presidents and attested to by an Officer.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth
in Section 11.01, shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an officer or Officer whose signature is on this Indenture or on
the Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Guarantors.
SECTION 11.03. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into the Company or shall prevent any sale or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety,
to the Company.
(b) Except as set forth in Articles 4 and 5, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into a corporation or corporations other than the Company
(whether or not affiliated with the Guarantor), or successive consolidations or
mergers in which a Guarantor or its successor or successors shall be a party or
parties, or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety, to a corporation other than the
Company (whether or not affiliated with the Guarantor) authorized to acquire and
operate the same; PROVIDED, HOWEVER, that each Guarantor hereby covenants and
agrees that, upon any such consolidation, merger, sale or conveyance, the
Subsidiary Guarantee endorsed on the Notes, and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to be
performed by such Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in the merger), by supplemental
indenture reasonably satisfactory in form to the Trustee, executed and delivered
to the Trustee, by the corporation formed by such
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consolidation, or into which the Guarantor shall have been merged, or by the
corporation which shall have acquired such property. In case of any such
consolidation, merger, sale or conveyance and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to
the Trustee and satisfactory in form to the Trustee, of the Subsidiary
Guarantee endorsed upon the Notes and the due and punctual performance of all
of the covenants and conditions of this Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be substituted for
the Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be signed any
or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution hereof.
SECTION 11.04. RELEASES FOLLOWING SALE OF ASSETS.
Concurrently with any sale of assets (including, if applicable, all of
the capital stock of any Guarantor), any Liens in favor of the Trustee in the
assets sold thereby shall be released; PROVIDED that in the event of an Asset
Sale, the Net Proceeds from such sale or other disposition are treated in
accordance with the provisions of Section 4.10 hereof. If the assets sold in
such sale or other disposition include all or substantially all of the assets of
any Guarantor or all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition of all of the capital stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all or substantially all of the assets of a Guarantor)
shall be released and relieved of its obligations under its Subsidiary Guarantee
or Section 11.03, hereof, as the case may be; PROVIDED that in the event of an
Asset Sale, the Net Proceeds from such sale or other disposition are treated in
accordance with the provisions of Section 4.10 hereof. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to
the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee shall execute any documents reasonably required
in order to evidence the release of any Guarantor from its obligations under its
Subsidiary Guarantee. Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
SECTION 11.05. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 11, shall in such case (unless the context shall
otherwise require) be construed as extending to and includ-
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ing such Paying Agent within its meaning as fully and for all intents and
purposes as if such Paying Agent were named in this Article 11, in place of
the Trustee.
SECTION 11.06. SUBORDINATION OF SUBSIDIARY GUARANTEE.
The obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Guarantor
Senior Subsidiary Guarantees of such Guarantor on the same basis as the Notes
are junior and subordinated to Senior Indebtedness. For the purposes of the
foregoing sentence, the Trustee and the Holders shall have the right to receive
and/or retain payments by any of the Guarantors only at such times as they may
receive and/or retain payments in respect of the Notes pursuant to this
Indenture, including Article 10 hereof.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company, a Guarantor or the Trustee
to the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company or a Guarantor:
Pillowtex Corporation
4111 Mint Way
Dallas, Texas 75237
Telecopier No.: (214) 330-6016
Attention: Jeffrey D. Cordes
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If to the Trustee:
Bank One Trust Company, Columbus, N.A.
100 E. Broad Street, 8th Floor
Columbus, OH 43271-0181
Telecopier No.: (614) 248-5195
Attention: Ted Kravits
The Company, a Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
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SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company and/or any Guarantor
to the Trustee to take any action under this Indenture, the Company and/or
such Guarantor, as the case may be, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a
certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the
provisions of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
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SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or shareholder of the
Company or any Guarantor, as such, shall have any liability for any obligations
of the Company or any Guarantor under the Notes, the Subsidiary Guarantees, this
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal Notes laws and it is the view of the SEC
that such a waiver is against public policy.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture, the Notes or the Subsidiary Guarantees.
SECTION 12.10. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture,
the Subsidiary Guarantees and the Notes shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture, the Subsidiary Guarantees or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
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<PAGE>
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and Headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part of this Indenture and shall in no way modify or restrict
any of the terms or provisions hereof.
Signatures on following page
75
<PAGE>
SIGNATURES
Dated as of November 12, 1996 PILLOWTEX CORPORATION
By: /s/ Jeffrey D. Cordes
---------------------------------
Name: Jeffrey D. Cordes
Title: EVP & CFO
Attest:
/s/ T. R. Tunnell
- -----------------------------
PILLOWTEX INCORPORATED
By: /s/ Norman J. Shuman
---------------------------------
Name: Norman J. Shuman
Title: Secretary
Attest:
/s/ Jeffrey D. Cordes
- -----------------------------
BEACON MANUFACTURING COMPANY
By: /s/ Jeffrey D. Cordes
---------------------------------
Name: Jeffrey D. Cordes
Title: EVP
Attest:
/s/ T.R. Tunnell
- -----------------------------
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<PAGE>
MANETTA HOME FASHION, INC.
By: /s/ Jeffrey D. Cordes
---------------------------------
Name: Jeffrey D. Cordes
Title: VP
Attest:
/s/ T. R. Tunell
- ----------------------------
TENNESSEE WOOLEN MILLS, INC.
By: /s/ Jeffrey D. Cordes
---------------------------------
Name: Jeffrey D. Cordes
Title: VP
Attest:
/s/ T.R. Tunnell
- ----------------------------
PTEX HOLDING COMPANY
By: /s/ Norman J. Shuman
---------------------------------
Name: Norman J. Shuman
Title: Secretary
Attest:
/s/ Jeffrey D. Cordes
- ----------------------------
PILLOWTEX MANAGEMENT SERVICES COMPANY
By: /s/ Jeffrey D. Cordes
---------------------------------
Name: Jeffrey D. Cordes
Title: VP
Attest:
/s/ Sharon Moffett
- ----------------------------
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<PAGE>
BANK ONE, COLUMBUS, N.A.
By: /s/ Ted Kravitz
---------------------------------
Name: Ted Kravitz
Title: Authorized Signer
Attest:
/s/ Jon Beacham
- ----------------------------
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<PAGE>
EXHIBIT A
(Face of Note)
10% [Series A] [Series B] Senior Subordinated Notes due 2006
No. $__________
PILLOWTEX CORPORATION
promises to pay to
or registered assigns,
the principal sum of
Dollars on November 15, 2006,
Interest Payment Dates: May 15, and November 15
Record Dates: May 1, and November 1
Dated: _______________
Pillowtex Corporation
By:______________________________
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
Bank One, Columbus, N.A.
as Trustee
By:__________________________________
(Back of Note)
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<PAGE>
10% [Series A] [Series B] Senior Subordinated Notes due 2006
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.(1)
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER
OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN OF RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION
_______________________________
1. This paragraph should be included only if the Debenture is issued in
global form.
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<PAGE>
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (1) ABOVE.(2)
Capitalized terms used herein shall have the meanings assigned to them in
this Indenture referred to below unless otherwise indicated.
1. INTEREST. Pillowtex Corporation, a Texas corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 10% per annum
from November 12, 1996 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company will pay interest and Liquidated Damages semi-annually on
May 15 and November 15 of each year, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest Payment Date"). Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of issuance; PROVIDED that
if there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; PROVIDED, FURTHER, that the first Interest
Payment Date shall be May 15, 1997. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the May 1 or November 1 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of this Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium, interest and Liquidated Damages at the
office or agency of the Company maintained for such purpose within or without
the City and State of New York, or, at the option of the Company, payment of
interest and Liquidated Damages may be made by check mailed to the Holders at
their addresses set forth in the register of Holders, and provided that payment
by wire transfer of immediately available will be required with respect to
principal of and interest, premium and Liquidated Damages on, all Global Notes
and all other Notes the
_______________________________
2. This paragraph should be included only if the Note is a Transfer
Restricted Security.
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<PAGE>
Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Bank One, Columbus, NA, the
Trustee under this Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
November 12, 1996 ("Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in this Indenture and
those made part of this Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to this Indenture and such Act for a
statement of such terms. The Notes are unsecured obligations of the Company
limited to $125 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
The Company shall not have the option to redeem the Notes prior to
November 15, 1996. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
November 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2001. . . . . . . . . . . . . . 105.000%
2002. . . . . . . . . . . . . . 103.333%
2003. . . . . . . . . . . . . . 101.667%
2004 and thereafter . . . . . . 100.000%
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
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<PAGE>
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (in either case, the "Change of
Control Payment"). Within 10 days following any Change of Control, the Company
shall mail a notice to each Holder setting forth the procedures governing the
Change of Control Offer as required by this Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$5 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date fixed for
the closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a PRO RATA basis. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in this Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by this Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
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<PAGE>
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, this
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, this Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's, or any Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under this Indenture of any
such Holder, or to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust Indenture
Act.
12. DEFAULTS AND REMEDIES. Events of Default include:
(a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not
prohibited by the subordination provisions of this Indenture);
(b) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination
provisions of this Indenture); (c) failure by the Company to comply
with the provisions described under Sections 4.07, 4.09, 4.10, or
4.15; (d) failure by the Company for 60 days after notice to comply
with any of its other agreements in this Indenture or the Notes;
(e) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is Subsidiary Guaranteed by the
Company or any of its Subsidiaries) whether such Indebtedness or
Subsidiary Guarantee now exists, or is created after the date of this
Indenture, which default (i) is caused by a failure to pay principal
of or premium, if any, or interest on such Indebtedness at its final
stated maturity or (ii) results in the acceleration of such
Indebtedness prior to its maturity and, in each case, the principal
amount of which Indebtedness, together with the principal amount of
any other such Indebtedness described in clauses (a) and (b) above,
aggregates $5.0 million or more; (f) failure by the Company or any of
its Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a
period of 60 days; (g) certain events of bankruptcy or insolvency with
respect to the Company or any of its Subsidiaries; (h) the Subsidiary
Guarantee of any Guarantor is held in judicial proceedings to be
unenforceable or invalid or ceases for any reason to be in full force
and effect (other than in accordance with the terms of the Indenture)
or any Guarantor or any Person acting on behalf of any Guarantor
denies or disaffirms such
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<PAGE>
Guarantor's obligations under its Subsidiary Guarantee (other than
by reason of a release of such Guarantor from its Subsidiary
Guarantee in accordance with the terms of the Indenture). If any
Event of Default (other than an Event of Default specified in
clause (g) above occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding
Notes may declare all the Notes to be due and payable immediately;
provided, however, that if any Senior Indebtedness is outstanding
under the Credit Agreement, upon a declaration of acceleration, the
Notes shall be payable upon earlier of (x) the day which is five
Business Days after the provision to the Company and the agent
under the Credit Agreement of written notice of such declaration
and (y) the date of acceleration of any Indebtedness under the
Credit Agreement. Notwithstanding the foregoing, in the case of an
Event of Default specified in clause (g) of this Section all
outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the Notes
notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount
of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing
Default or Event of Default and its consequences under the
Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The
Holding Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Holding
Company is required upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such
Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT
85
<PAGE>
TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under this Indenture,
Holders of Transferred Restricted Securities shall have all the rights set forth
in the A/B Exchange Registration Rights Agreement dated as of November 12, 1996,
between the Company and the parties named on the signature pages thereof (the
"Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of this Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Pillowtex Corporation
4111 Mint Way
Dallas, Texas 75237
Attention: Secretary
86
<PAGE>
FORM OF NOTATION OF SECURITY
RELATING TO SUBSIDIARY GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture, (a) the due and punctual payment of the principal
of, premium, if any, and interest on the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on overdue
principal and premium, and, to the extent permitted by law, interest, and the
due and punctual performance of all other obligations of the Company to the
Holders or the Trustee all in accordance with the terms of the Indenture and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. The obligations of the
Guarantors to the Holders of Notes and to the Trustee pursuant to the Subsidiary
Guarantee and the Indenture are expressly set forth in Article XI of the
Indenture and reference is hereby made to the Indenture for the precise terms of
the Subsidiary Guarantee. The Indebtedness evidenced by this Subsidiary
Guarantee is, to the extent and in the manner provided in the Indenture,
subordinate and subject in right of payment to the prior payment in full of all
Guarantor Senior Indebtedness as defined in the Indenture, and this Subsidiary
Guarantee is issued subject to such provisions. Each Holder of a Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose; PROVIDED, HOWEVER, that the Indebtedness evidenced by
this Subsidiary Guarantee shall cease to be so subordinated and subject in right
of payment upon any defeasance of this Note in accordance with the provisions of
the Indenture.
Guarantors:
Pillowtex, Inc., Manetta Home Fashion, Inc., Tennessee
Woolen Mills, Inc., Beacon Manufacturing Company, PTEX
Holding Company, Pillowtex Management Services Company.
By
-------------------------------
Name:
Title:
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<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- ---------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ___________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- ---------------------------------------------------------------------------
Date:
-----------
Your Signature:
--------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Subsidiary Guarantee.
88
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of this Indenture, check the box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of this Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
-------------- ---------------------------
(Sign exactly as your name
appears on the Note)
Tax Identification No.:
------------------
Signature Subsidiary Guarantee.
89
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE(3)
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ---------------- --------------------- --------------------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
</TABLE>
_________________
3. This should be included only if the Note is issued in global form.
90
<PAGE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES
Re: 10% Senior Notes due 2006 of Pillowtex Corporation.
This Certificate relates to $_____ principal amount of Notes held in
*________ book-entry or *_______ definitive form by ________________ (the
"Transferor").
The Transferor*:
/ / has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Note held by the Depository a Note or
Notes in definitive, registered form of authorized denominations in an aggregate
principal amount equal to its beneficial interest in such Global Note (or the
portion thereof indicated above); or
/ / has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with this Indenture
relating to the above captioned Notes and as provided in Section 2.06 of such
Indenture, the transfer of this Note does not require registration under the
Securities Act (as defined below) because:*
/ / Such Note is being acquired for the Transferor's own account, without
transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of
this Indenture).
/ / Such Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(A) or Section 2.06(d)(i) (B) of this Indenture)
or pursuant to an exemption from registration in accordance with Rule 904 under
the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of this Indenture.)
91
<PAGE>
_______________
*Check applicable box.
92
<PAGE>
/ / Such Note is being transferred in accordance with Rule 144 under the
Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of this Indenture).
/ / Such Note is being transferred in reliance on and in compliance with
an exemption from the registration requirements of the Securities Act, other
than Rule 144A, 144 or Rule 904 under the Securities Act. An Opinion of Counsel
to the effect that such transfer does not require registration under the
Securities Act accompanies this Certificate (in satisfaction of Section
2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of this Indenture).
----------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------------
Date:
------------------------------
_____________
93
<PAGE>
*Check applicable box.
94
<PAGE>
EXHIBIT 5.1
[JENKENS & GILCHRIST LETTERHEAD]
December 12, 1996
Pillowtex Corporation
4111 Mint Way
Dallas, Texas 75237
Ladies and Gentlemen:
This opinion is being delivered in connection with the proposed offer to
exchange (the "Exchange Offer") by Pillowtex Corporation (the "Issuer") its 10%
Senior Subordinated Notes Due 2006 (the "Exchange Notes") for any and all of its
10% Senior Subordinated Notes Due 2006 (the "Old Notes"). The Exchange Notes
are to be issued pursuant to a Registration Statement on Form S-4 (the
"Registration Statement"), Registration No. 333-______, filed by the Issuer on
or about December 12, 1996 with the Securities and Exchange Commission under the
Securities Act of 1933. The Exchange Notes will be issued under an Indenture,
dated as of November 12, 1996 (the "Indenture"), among the Issuer, certain of
its subsidiaries and Bank One, Columbus, N.A. as Trustee (the "Trustee"), in
substantially the form filed as Exhibit 4.1.
We are of the opinion that, when (a) the Indenture, under which the
Exchange Notes will be issued has been qualified under the Trust Indenture Act
of 1939, as amended, (b) the Exchange Notes have been executed by the Issuer and
(c) the Exchange Notes have been delivered in exchange for the Old Notes in the
manner and for the consideration stated in the Registration Statement and the
Indenture, the Exchange Notes will be legally issued and binding obligations of
the Issuer.
We note for you that certain matters relating to the legal issuance and
binding effect of the Exchange Notes are governed by New York law. We are
licensed to practice law only in the State of Texas. For purposes of rendering
such opinions governed by New York law, we have assumed, with your consent, that
the laws of the State of New York and the State of Texas are identical with
respect to such matters.
<PAGE>
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the registration Statement and in the Prospectus included therein.
In giving such consent, we do not admit that we come within the category of
persons whose consent is required by Section 7 of the Act or the rules and
regulations of the Commission thereunder.
Very truly yours,
/s/
JENKENS & GILCHRIST,
A Professional Corporation
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of November 12, 1996
by and among
Pillowtex Corporation,
each domestic subsidiary of
Pillowtex Corporation
and
NationsBanc Capital Markets, Inc., and
Merrill Lynch, Pierce Fenner & Smith, Incorporated
===============================================================================
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of November 12, 1996 by and among Pillowtex Corporation, a
Texas corporation (the "COMPANY"), and each of the domestic subsidiaries of
the Company set forth on the signature pages hereto (each a "GUARANTOR" and,
collectively, the "Guarantors"), and NationsBanc Capital Markets, Inc. and
Merrill Lynch & Co. (each a "PURCHASER" and, collectively, the "PURCHASERS"),
each of whom has agreed to purchase the Company's __% Series A Senior
Subordinated Notes due 2006 (the "SERIES A NOTES") pursuant to the Purchase
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
November __, 1996 (the "PURCHASE AGREEMENT"), by and among the Company, the
Guarantors and the Purchasers. In order to induce the Purchasers to purchase
the Series A Notes, the Company and the Guarantors (collectively, the
"Issuers") have agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Purchasers set forth in Section 7 of the Purchase
Agreement.
The parties hereby agree as follows:
SECTION
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
BROKER-DEALER: Any broker or dealer registered under the Exchange
Act.
CLOSING DATE: The date of this Agreement.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Issuers
to the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
DAMAGES PAYMENT DATE: With respect to the Series A Notes, each
Interest Payment Date.
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EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The registration by the Issuers under the Act of the
Series B Notes pursuant to a Registration Statement pursuant to which the
Issuers offer the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Purchasers propose to
sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) and
(7) of Regulation D under the Act ("ACCREDITED INSTITUTIONS").
HOLDERS: As defined in Section 2(b) hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURE: The Indenture, dated as of November 12, 1996, among the
Issuers and Bank One, Columbus, N.A., as trustee (the "Trustee"), pursuant to
which the Notes are to be issued, as such Indenture is amended or supplemented
from time to time in accordance with the terms thereof.
INTEREST PAYMENT DATE: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
NOTES: The Series A Notes and the Series B Notes.
PERSON: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
PROSPECTUS: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
PURCHASER: As defined in the preamble hereto.
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RECORD HOLDER: With respect to any Damages Payment Date relating to
the Notes, each Person who is a Holder of Notes on the record date with respect
to the Interest Payment Date on which such Damages Payment Date shall occur.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Issuers
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, which is filed pursuant to the provisions of
this Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
SERIES B NOTES: The Company's 10.0% Series B Senior Subordinated
Notes due 2006 to be issued pursuant to the Indenture in the Exchange Offer.
SHELF FILING DEADLINE: As defined in Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to
occur of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (b) the date on which such Note
has been effectively registered under the Act and disposed of in accordance with
a Shelf Registration Statement or (c) the date on which such Note is distributed
to the public pursuant to Rule 144 under the Act or by a Broker-Dealer pursuant
to the "Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including delivery of the Prospectus contained therein).
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) TRANSFER RESTRICTED SECURITIES. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
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<PAGE>
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with), the Issuers shall (i) cause to be filed
with the Commission as soon as practicable after the Closing Date, but in no
event later than 30 days after the Closing Date, a Registration Statement under
the Act relating to the Series B Notes and the Exchange Offer, (ii) use their
best efforts to cause such Registration Statement to become effective at the
earliest possible time, but in no event later than 90 days after the Closing
Date, (iii) in connection with the foregoing, file (A) all pre-effective
amendments to such Registration Statement as may be necessary in order to cause
such Registration Statement to become effective, (B) if applicable, a
post-effective amendment to such Registration Statement pursuant to Rule 430A
under the Act and (C) cause all necessary filings in connection with the
registration and qualification of the Series B Notes to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Registration Statement,
commence the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the Series B Notes to be offered in exchange for
the Transfer Restricted Securities and to permit resales of Notes held by
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement
to be effective continuously and shall keep the Exchange Offer open for a period
of not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the Notes shall be included in the Exchange
Offer Registration Statement. The Company shall use its best efforts to cause
the Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series A Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer may
be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements
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<PAGE>
of the Act in connection with any resales of the Series B Notes received by
such Broker-Dealer in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such Broker-Dealer of the
Prospectus contained in the Exchange Offer Registration Statement. Such
"Plan of Distribution" section shall also contain all other information with
respect to such resales by Broker-Dealers that the Commission may require in
order to permit such resales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
The Issuers shall use their best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Notes acquired by Broker-Dealers for
their own accounts as a result of market-making activities or other trading
activities, and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of one year from the date on which the
Exchange Offer Registration Statement is declared effective.
The Issuers shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Issuers are not required to file
an Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 business days of the Consummation of the Exchange Offer (A)
that such Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not resell the
Series B Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Series A Notes
acquired directly from the Company or one of its affiliates, then the Issuers
shall
(x) cause to be filed a shelf registration statement
pursuant to Rule 415 under the Act, which may be an amendment to the
Exchange Offer Registration Statement (in either event, the "SHELF
REGISTRATION STATEMENT") on or prior to the earliest to occur of (1)
the 30th day after the date on which the Company determines that it is
not required to file the Exchange Offer Registration Statement, (2)
the 30th day after the date on which the Company receives notice from
a Holder of Transfer Restricted Securities as contemplated by clause
(ii) above, or (3) the 60th day after the Closing Date (such earliest
date being the
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<PAGE>
"SHELF FILING DEADLINE"), which Shelf Registration Statement shall provide
for resales of all Transfer Restricted Securities the Holders of which
shall have provided the information required pursuant to Section 4(b)
hereof; and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the
60th day after the Shelf Filing Deadline.
The Issuers shall use their best efforts to keep such Shelf Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for resales of Notes by the Holders of Transfer Restricted
Securities entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least three years following the Closing Date.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH
THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a post-
effective amendment to such Registration Statement that cures such failure and
that is itself immediately declared effective (each such event referred to in
clauses (i) through (iv), a "REGISTRATION DEFAULT"), the Issuers hereby jointly
and severally agree to pay liquidated damages to each Holder of Transfer
Restricted Securities with respect to the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal to
$.05 per week per $1,000 principal amount of Transfer Restricted Securities held
by such Holder for each week or portion thereof that the Registration Default
continues. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of
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<PAGE>
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.30 per week per $1,000 principal amount of Transfer
Restricted Securities. All accrued liquidated damages shall be paid to
Record Holders by the Company by wire transfer of immediately available funds
or by federal funds check on each Damages Payment Date, as provided in the
Indenture. Following the cure of all Registration Defaults relating to any
particular Transfer Restricted Securities, the accrual of liquidated damages
with respect to such Transfer Restricted Securities will cease.
All obligations of the Issuers set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Security shall have
been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Issuers shall comply with all of the provisions of Section
6(c) below, shall use their best efforts to effect such exchange to permit the
sale of Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and shall comply with all of
the following provisions:
(i) If in the reasonable opinion of counsel to the Company there
is a question as to whether the Exchange Offer is permitted by applicable
law, the Issuers hereby agree to seek a no-action letter or other favorable
decision from the Commission allowing the Issuers to Consummate an Exchange
Offer for such Series A Notes. The Issuers hereby agree to pursue the
issuance of such a decision to the Commission staff level but shall not be
required to take commercially unreasonable action to effect a change of
Commission policy. The Issuers hereby agree, however, to (A) participate
in telephonic conferences with the Commission, (B) deliver to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation thereof, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an affiliate of
the Issuers, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any
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<PAGE>
person to participate in, a distribution of the Series B Notes to be issued
in the Exchange Offer and (C) it is acquiring the Series B Notes in its
ordinary course of business. In addition, all such Holders of Transfer
Restricted Securities shall otherwise cooperate in the Issuers'
preparations for the Exchange Offer. Each Holder hereby acknowledges and
agrees that any Broker-Dealer and any such Holder using the Exchange Offer
to participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated
in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL
HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction should be covered
by an effective registration statement containing the selling security
holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Series B Notes obtained by such Holder
in exchange for Series A Notes acquired by such Holder directly from the
Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Issuers shall provide a supplemental letter to the
Commission (A) stating that the Issuers are registering the Exchange Offer
in reliance on the position of the Commission enunciated in EXXON CAPITAL
HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC.
(available June 5, 1991) and, if applicable, any no-action letter obtained
pursuant to clause (i) above and (B) including a representation that
neither the Company nor any Guarantor has entered into any arrangement or
understanding with any Person to distribute the Series B Notes to be
received in the Exchange Offer and that, to the best of the Company's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Issuers shall comply with all the provisions of
Section 6(c) below and shall use their best efforts to effect such registration
to permit the sale of the Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Issuers will as expeditiously as possible prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) GENERAL PROVISIONS. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
Notes by Broker-Dealers), the Issuers shall:
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<PAGE>
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of the Guarantors) for the period specified in Section 3 or 4 of
this Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Issuers shall file promptly an
appropriate amendment to such Registration Statement, in the case of clause
(A), correcting any such misstatement or omission, and, in the case of
either clause (A) or (B), use its best efforts to cause such amendment to
be declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement or the Prospectus in order to make the
statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities
or Blue Sky laws, the
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<PAGE>
Issuers shall use their best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review of
such Holders and underwriter(s), if any, for a period of at least three
business days, and the Issuers will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder of Transfer Restricted
Securities covered by such Registration Statement or the underwriter(s), if
any, shall reasonably object within three business days after the receipt
thereof;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make the Issuers representatives available for
discussion of such document and other customary due diligence matters, and
include such information in such document prior to the filing thereof as
such selling Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Issuers and
cause the Issuers' officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter, attorney
or accountant in connection with such Registration Statement subsequent to
the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s),
if any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the offering of
the Transfer Restricted Securities to be sold in such offering; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Issuers are notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
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(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Issuers hereby consent
to the use of the Prospectus and any amendment or supplement thereto by
each of the selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xi) enter into such agreements (including an underwriting
agreement), and make such representations and warranties, and take all such
other actions in connection therewith in order to expedite or facilitate
the disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement, all to such extent
as may be reasonably requested by any Purchaser or by any Holder of
Transfer Restricted Securities or underwriter in connection with any sale
or resale pursuant to any Registration Statement contemplated by this
Agreement; and whether or not an underwriting agreement is entered into and
whether or not the registration is an Underwritten Registration, the
Issuers shall:
(A) furnish to each Purchaser, each selling Holder and each
underwriter, if any, in such substance and scope as they may
reasonably request and as are customarily made by issuers to
underwriters in primary underwritten offerings, upon the date of the
Consummation of the Exchange Offer and, if applicable, the
effectiveness of the Shelf Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
President or any Vice President and (z) a principal financial or
accounting officer of the Company confirming, as of the date
thereof, the matters set forth in paragraphs (b), (c) and (d) of
Section 7 of the Purchase Agreement and such other matters as
such parties may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Issuers, covering the matters set forth in paragraph (g) of
Section 7 of the Purchase Agreement and such other matter as such
parties may reasonably request, and in any
11
<PAGE>
event including a statement to the effect that such counsel
has participated in conferences with officers and other
representatives of the Issuers, representatives of the
independent public accountants for the Issuers, the Purchasers'
representatives and the Purchasers' counsel in connection with
the preparation of such Registration Statement and the related
Prospectus and have considered the matters required to be
stated therein and the statements contained therein, and
although such counsel has not independently verified the
accuracy, completeness or fairness of such statements, on
the basis of the foregoing (relying as to materiality to a
large extent upon facts provided to such counsel by officers
and other representatives of the Issuers and without independent
check or verification), no facts came to such counsel's attention
that caused such counsel to believe that the applicable
Registration Statement, at the time such Registration Statement
or any post-effective amendment thereto became effective, and,
in the case of the Prospectus included in the Exchange Offer
Registration Statement, as of the date of Consummation,
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading, or that the
Prospectus contained in such Registration Statement as of its
date and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of exhibits, the financial
statements, notes and schedules and other financial and
statistical data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from the
Issuers' independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 7(a) of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Issuers
pursuant to this clause (xi), if any.
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<PAGE>
If at any time the Issuers become aware that the representations and
warranties of the Issuers contemplated in clause (A)(1) above cease to be
true and correct, the Issuers shall so advise the Purchasers and the
underwriter(s), if any, and each selling Holder promptly and, if requested
by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s) may reasonably request and do any and all other acts or
things reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the Shelf
Registration Statement; PROVIDED, HOWEVER, that neither the Company nor any
of the Guarantors shall be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration Statement,
in any jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Series A
Notes covered by the Shelf Registration Statement, Series B Notes, having
an aggregate principal amount equal to the aggregate principal amount of
Series A Notes surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such Series B Notes to be registered
in the name of such Holder or in the name of the purchaser(s) of such
Notes, as the case may be; in return, the Series A Notes held by such
Holder shall be surrendered to the Company for cancellation;
(xiv) cooperate with the selling Holders and the underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to any
sale of Transfer Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s), if
any, to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (viii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the
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Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide the Trustee under the Indenture with printed certificates for
the Transfer Restricted Securities which are in a form eligible for deposit
with the Depositary Trust Company;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if not
sold to underwriters in such an offering, beginning with the first month of
the Company's first fiscal quarter commencing after the effective date of
the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use their best efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner;
(xxi) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section
13 and Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "ADVICE") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference
14
<PAGE>
in the Prospectus. If so directed by the Company, each Holder will deliver
to the Company (at the Issuers' expense) all copies, other than permanent
file copies then in such Holder's possession, of the Prospectus covering such
Transfer Restricted Securities that was current at the time of receipt of
such notice. In the event the Company shall give any such notice, the time
period regarding the effectiveness of such Registration Statement set forth
in Section 3 or 4 hereof, as applicable, shall be extended by the number of
days during the period from and including the date of the giving of such
notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when
each selling Holder covered by such Registration Statement shall have
received the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xvi) hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Issuers' performance of or
compliance with this Agreement will be borne by the Company or the respective
Guarantor, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter" and
its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company and, subject to Section
7(b) below, the Holders of Transfer Restricted Securities; (v) all application
and filing fees in connection with listing Notes on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Issuers (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Issuers will bear their internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by any Issuer.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Issuers will reimburse the
Purchasers and the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant to
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins or
such other counsel as may be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
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SECTION 8. INDEMNIFICATION
(a) The Issuers jointly and severally, agree to indemnify and hold
harmless (i) each Holder and (ii) each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) any Holder
(any of the persons referred to in this clause (ii) being hereinafter referred
to as a "controlling person") and (iii) the respective officers, directors,
partners, employees, representatives and agents of any Holder or any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "INDEMNIFIED HOLDER"), to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, judgments, actions and
expenses (including without limitation and as soon as reasonably practicible,
reimbursement of all reasonable costs of investigating, preparing, pursuing or
defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable
fees and expenses of counsel to any Indemnified Holder) directly or indirectly
caused by, related to, based upon, arising out of or in connection with any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (or any amendment or supplement thereto),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that is made in reliance upon and in conformity with information
relating to any of the Holders furnished in writing to the Company by any of the
Holders expressly for use therein.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Indemnified Holders with respect to which indemnity may be sought against
the Issuers, such Indemnified Holder (or the Indemnified Holder controlled by
such controlling person) shall promptly notify the Issuers in writing (PROVIDED,
that the failure to give such notice (i) will not relieve the Issuers from
liability under paragraph (a) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a)
above). Such Indemnified Holder shall have the right to employ its own counsel
in any such action and the fees and expenses of such counsel shall be paid, as
soon as reasonably practicable after they are incurred, by the Issuers
(regardless of whether it is ultimately determined that an Indemnified Holder is
not entitled to indemnification hereunder). The Issuers shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Holders, which firm shall be
designated by the Holders. The Issuers shall be liable for any settlement of
any such action or proceeding effected with the Issuers' prior written consent,
which consent shall not be withheld unreasonably, and the Issuers agree to
indemnify and hold harmless any Indemnified Holder from and against any loss,
claim, damage, liability or expense by reason of any settlement of any action
effected with the written consent of the Issuers. The Issuers
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<PAGE>
shall not, without the prior written consent of each Indemnified Holder,
settle or compromise or consent to the entry of judgment in or otherwise seek
to terminate any pending or threatened action, claim, litigation or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Holder is a party thereto), unless
such settlement, compromise, consent or termination includes an unconditional
release of each Indemnified Holder from all liability arising out of such
action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Issuers, and their
respective directors, officers, and any person controlling (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) the Issuers, and the
respective officers, directors, partners, employees, representatives and agents
of each such person, to the same extent as the foregoing indemnity from the
Issuers to each of the Indemnified Holders, but only with respect to claims and
actions based on information relating to such Holder furnished in writing by
such Holder expressly for use in any Registration Statement. In case any action
or proceeding shall be brought against any of the Issuers or their directors or
officers or any such controlling person and in respect of which indemnity may be
sought against a Holder of Transfer Restricted Securities, such Holder shall
have the rights and duties given the Issuers and the Issuers or their directors
or officers or such controlling person shall have the rights and duties given to
each Holder by the preceding paragraph. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers on the one hand and the Holders on the other hand from the sale by the
Company of the Series A Notes or if such allocation is not permitted by
applicable law, the relative fault of the Issuers on the one hand and of the
Indemnified Holder on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of the
Issuers on the one hand and of the Indemnified Holder on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers or by the
Indemnified Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 8(a),
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
17
<PAGE>
The Issuers and each Holder of Transfer Restricted Securities agree
that it would not be just and equitable if contribution pursuant to this Section
8(c) were determined by pro rata allocation (even if the Holders were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, none of the
Holders (and its related Indemnified Holders) shall be required to contribute,
in the aggregate, any amount in excess of the amount by which the total discount
received by such Holder with respect to the Series A Notes exceeds the amount of
any damages which such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders' obligations to
contribute pursuant to this Section 8(c) are several in proportion to the
respective principal amount of Series A Notes held by each of the Holders
hereunder and not joint.
SECTION 9. RULE 144A
The Issuers hereby agree with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
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SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; PROVIDED, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) REMEDIES. The Issuers agree that monetary damages (including the
liquidated damages contemplated hereby) would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Issuers will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. Neither the
Company nor the Guarantors have previously entered into any agreement granting
any registration rights with respect to its securities to any Person. The
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of the Issuers'
securities under any agreement in effect on the date hereof.
(c) ADJUSTMENTS AFFECTING THE NOTES. The Issuers will not take any
action, or permit any change to occur, with respect to the Notes that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless the Issuers have obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
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(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Issuers:
Pillowtex Corporation
4111 Mint Way
Dallas, TX 75237
Telecopier No.: (214) 339-8565
Attention: Jeff Cordes
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities from such Holder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
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(k) ENTIRE AGREEMENT. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Issuers with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Pillowtex Corporation
By: /s/ Jeffrey D. Cordes
------------------------------------
Name: Jeffrey D. Cordes
Title: EVP & CFO
Pillowtex Inc.
BY: /s/ Norman J. Shuman
------------------------------------
Name: Norman J. Shuman
Title: Secretary
Beacon Manufacturing Company
By: /s/ Jeffrey D. Cordes
------------------------------------
Name: Jeffrey D. Cordes
Title: VP
Manetta Home Fashions, Inc.
BY: /s/ Jeffrey D. Cordes
------------------------------------
Name: Jeffrey D. Cordes
Title: VP
Tennessee Woolen Mills, Inc.
By: /s/ Jeffrey D. Cordes
------------------------------------
Name: Jeffrey D. Cordes
Title: VP
PTX Holding Company
22
<PAGE>
BY: /s/ Norman J. Shuman
------------------------------------
Name: Norman J. Shuman
Title: Secretary
Pillowtex Management Services Company
By: /s/ Jeffrey D. Cordes
------------------------------------
Name: Jeffrey D. Cordes
Title: EVP
NationsBanc Capital Markets, Inc.
By: /s/ Jonathan B. Wigser
------------------------------------
Name: Jonathan B. Wigser
Title: Associate
Merrill Lynch, Pierce, Fenner & Smith, Incorporated
By: /s/ Bertram Michel
------------------------------------
Name: Bertram Michel
Title: Associate
23
<PAGE>
CONFORMED*
RESTATED CREDIT AGREEMENT
between
PILLOWTEX CORPORATION
BORROWER
NATIONSBANK OF TEXAS, N.A.
AGENT
and
CERTAIN LENDERS
LENDERS
$175,000,000
NOVEMBER 12, 1996
====================================
PREPARED BY HAYNES AND BOONE, L.L.P.
====================================
*Conformed to show signatures
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Time References . . . . . . . . . . . . . . . . . . . . . . . . .15
1.3 Other References. . . . . . . . . . . . . . . . . . . . . . . . .15
1.4 Accounting Principles . . . . . . . . . . . . . . . . . . . . . .15
SECTION 2 COMMITMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.1 Revolving Facility. . . . . . . . . . . . . . . . . . . . . . . .15
2.2 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . .16
2.3 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . .17
2.4 Swing-Line Subfacility. . . . . . . . . . . . . . . . . . . . . .19
2.5 Borrowing Requests and LC Requests. . . . . . . . . . . . . . . .20
2.6 Extension of Facility . . . . . . . . . . . . . . . . . . . . . .20
2.7 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.8 Increases in Revolving Facility . . . . . . . . . . . . . . . . .21
SECTION 3 TERMS OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . .21
3.1 Notes and Payments. . . . . . . . . . . . . . . . . . . . . . . .21
3.2 Interest and Principal Payments . . . . . . . . . . . . . . . . .21
3.3 Interest Options. . . . . . . . . . . . . . . . . . . . . . . . .22
3.4 Quotation of Rates. . . . . . . . . . . . . . . . . . . . . . . .22
3.5 Default Rate. . . . . . . . . . . . . . . . . . . . . . . . . . .22
3.6 Interest Recapture. . . . . . . . . . . . . . . . . . . . . . . .22
3.7 Interest Calculations . . . . . . . . . . . . . . . . . . . . . .23
3.8 Maximum Rate. . . . . . . . . . . . . . . . . . . . . . . . . . .23
3.9 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . .23
3.10 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . .24
3.11 Order of Application. . . . . . . . . . . . . . . . . . . . . . .24
3.12 Sharing of Payments, Etc... . . . . . . . . . . . . . . . . . . .24
3.13 Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
3.14 Booking Borrowings. . . . . . . . . . . . . . . . . . . . . . . .25
3.15 Basis Unavailable or Inadequate for CD Rate, Swing Rate, or LIBOR
Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
3.16 Additional Costs. . . . . . . . . . . . . . . . . . . . . . . . .25
3.17 Change in Laws. . . . . . . . . . . . . . . . . . . . . . . . . .26
3.18 Funding Loss. . . . . . . . . . . . . . . . . . . . . . . . . . .26
3.19 Foreign Lenders, Participants, and Assignees. . . . . . . . . . .27
SECTION 4 FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
4.1 Treatment of Fees . . . . . . . . . . . . . . . . . . . . . . . .27
4.2 Fees to Agent and Affiliates. . . . . . . . . . . . . . . . . . .27
4.3 LC Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 5 SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.1 Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.2 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.3 Creation of Liens and Further Assurances. . . . . . . . . . . . .29
5.4 Collateral Release. . . . . . . . . . . . . . . . . . . . . . . .29
5.5 Additional Companies. . . . . . . . . . . . . . . . . . . . . . .29
5.6 Change in Tax Laws. . . . . . . . . . . . . . . . . . . . . . . .30
<PAGE>
SECTION 6 CONDITIONS PRECEDENT AND SUBSEQUENT . . . . . . . . . . . . . . .30
6.1 Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . .30
6.2 Conditions Subsequent . . . . . . . . . . . . . . . . . . . . . .30
SECTION 7 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . .31
7.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
7.2 Corporate Existence, Good Standing, and Authority . . . . . . . .31
7.3 Subsidiaries and Names. . . . . . . . . . . . . . . . . . . . . .31
7.4 Authorization and Contravention . . . . . . . . . . . . . . . . .31
7.5 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . .32
7.6 Financial Statements. . . . . . . . . . . . . . . . . . . . . . .32
7.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
7.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
7.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . . .32
7.10 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . .32
7.11 Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . .33
7.12 Government Regulations. . . . . . . . . . . . . . . . . . . . . .33
7.13 Transactions with Affiliates. . . . . . . . . . . . . . . . . . .33
7.14 Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.15 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . . .33
7.19 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
7.20 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . .34
7.21 Fieldcrest Asset Acquisition. . . . . . . . . . . . . . . . . . .34
SECTION 8 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . .34
8.1 Certain Items Furnished . . . . . . . . . . . . . . . . . . . . .34
8.2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . .35
8.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . .36
8.4 Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.6 Payment of Obligations. . . . . . . . . . . . . . . . . . . . . .36
8.7 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.8 Maintenance of Existence, Assets, and Business. . . . . . . . . .36
8.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . .36
8.11 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . .37
8.12 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . .37
SECTION 9 NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . .38
9.1 Payroll Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.2 Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.3 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . .38
9.4 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . .39
9.5 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
9.6 Transactions with Affiliates. . . . . . . . . . . . . . . . . . .39
9.7 Compliance with Laws and Documents. . . . . . . . . . . . . . . .39
9.8 Loans, Advances, and Investments. . . . . . . . . . . . . . . . .39
9.9 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . .39
9.10 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . .39
(ii)
<PAGE>
9.11 Mergers, Consolidations, and Dissolutions . . . . . . . . . . . .40
9.12 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
9.13 Fiscal Year and Accounting Methods. . . . . . . . . . . . . . . .40
9.14 New Businesses. . . . . . . . . . . . . . . . . . . . . . . . . .40
9.15 Government Regulations. . . . . . . . . . . . . . . . . . . . . .40
9.16 Contingent Liabilities. . . . . . . . . . . . . . . . . . . . . .40
9.17 Operating Leases. . . . . . . . . . . . . . . . . . . . . . . . .40
9.18 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . .40
9.19 Asset Purchase Agreement. . . . . . . . . . . . . . . . . . . . .40
9.20 Strict Compliance . . . . . . . . . . . . . . . . . . . . . . . .41
9.21 Legal Defeasance and Covenant Defeasance. . . . . . . . . . . . .41
SECTION 10 FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . .41
10.1 Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . . .41
10.2 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . .41
10.3 Funded Debt/EBITDA. . . . . . . . . . . . . . . . . . . . . . . .41
10.4 Minimum Interest Coverage Ratio . . . . . . . . . . . . . . . . .41
SECTION 11 DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
11.1 Payment of Obligations. . . . . . . . . . . . . . . . . . . . . .41
11.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
11.3 Debtor Relief . . . . . . . . . . . . . . . . . . . . . . . . . .42
11.4 Judgments and Attachments . . . . . . . . . . . . . . . . . . . .42
11.5 Government Action . . . . . . . . . . . . . . . . . . . . . . . .42
11.6 Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . .42
11.7 Ownership of Other Companies. . . . . . . . . . . . . . . . . . .42
11.8 Change of Control of Borrower . . . . . . . . . . . . . . . . . .43
11.9 Other Funded Debt . . . . . . . . . . . . . . . . . . . . . . . .43
11.10 SEC Reporting Requirements. . . . . . . . . . . . . . . . . . . .43
11.11 Validity and Enforceability . . . . . . . . . . . . . . . . . . .44
11.12 LCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
SECTION 12 RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . .44
12.1 Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . .44
12.2 Company Waivers. . . . . . . . . . . . . . . . . . . . . . . . .44
12.3 Performance by Agent. . . . . . . . . . . . . . . . . . . . . . .45
12.4 Not in Control. . . . . . . . . . . . . . . . . . . . . . . . . .45
12.5 Course of Dealing . . . . . . . . . . . . . . . . . . . . . . . .45
12.6 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . .45
12.7 Application of Proceeds . . . . . . . . . . . . . . . . . . . . .45
12.8 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . .45
12.9 Expenditures by Lenders . . . . . . . . . . . . . . . . . . . . .46
12.10 Diminution in Value of Collateral . . . . . . . . . . . . . . . .46
SECTION 13 AGENT AND LENDERS . . . . . . . . . . . . . . . . . . . . . . . .46
13.1 Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
13.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
13.3 Proportionate Absorption of Losses. . . . . . . . . . . . . . . .47
13.4 Delegation of Duties; Reliance. . . . . . . . . . . . . . . . . .48
13.5 Limitation of Agent's Liability . . . . . . . . . . . . . . . . .48
13.6 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
13.7 Collateral Matters. . . . . . . . . . . . . . . . . . . . . . . .49
(iii)
<PAGE>
13.8 Limitation of Liability . . . . . . . . . . . . . . . . . . . . .50
13.9 Relationship of Lenders . . . . . . . . . . . . . . . . . . . . .50
13.10 Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . .50
SECTION 14 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .50
14.1 Nonbusiness Days. . . . . . . . . . . . . . . . . . . . . . . . .50
14.2 Communications. . . . . . . . . . . . . . . . . . . . . . . . . .50
14.3 Form and Number of Documents. . . . . . . . . . . . . . . . . . .50
14.4 Exceptions to Covenants . . . . . . . . . . . . . . . . . . . . .51
14.5 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
14.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .51
14.7 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . .51
14.8 Amendments, Consents, Conflicts, and Waivers. . . . . . . . . . .51
14.9 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . .52
14.10 Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
14.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . .53
14.12 Entirety. . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
(iv)
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1.1(a) - Lenders and Commitments
Schedule 1.1(b) - Existing Letters of Credit
Schedule 1.1(c) - Fiscal-Month Ends
Schedule 5.5 - Lender-Lien Limitation
Schedule 6 - Closing Documents
Schedule 7.3 - Companies and Names
Schedule 9.2 - Permitted Debt
Schedule 9.5 - Permitted Liens
Schedule 9.8 - Permitted Loans, Advances, and Investments
Exhibit A-1 - Swing-Line Note
Exhibit A-2 - Revolving Note
Exhibit B - Guaranty
Exhibit C-1 - Security Agreement
Exhibit C-2 - Release of Mortgage and Deed of Trust (North
and South Carolina)
Exhibit C-3 - Release of Second Mortgage (Pennsylvania)
Exhibit D-1 - Notice of Conversion
Exhibit D-2 - Compliance Certificate
Exhibit D-3 - Closing Certificate
Exhibit E-1 - Opinion of Texas Counsel
Exhibit E-2 - Opinion of Mexico Counsel
Exhibit F - Assignment and Assumption Agreement
(v)
<PAGE>
RESTATED CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of November 12, 1996, between
PILLOWTEX CORPORATION, a Texas corporation ("BORROWER"), Lenders (defined
below), and NATIONSBANK OF TEXAS, N.A., as agent for Lenders.
Borrower, certain Lenders, and Agent are party to the Credit Agreement (as
amended, through the date of this agreement, the "EXISTING CREDIT AGREEMENT")
dated as of December 1, 1994, providing for (a) revolving loans, (b) a term
loan, and (c) the issuance by Agent of letters of credit.
Borrower has requested that Lenders enter into this agreement to renew,
extend, and entirely amend and restate the Existing Credit Agreement and provide
for (a) a revolving line of credit in an amount totaling $175,000,000 (with
certain subfacilities for letters of credit and swing-line advances) to be used
by Borrower as provided in SECTION 7.1 in the form of a revolving-credit
facility of $175,000,000 (the "REVOLVING FACILITY") to be funded by Lenders from
time to time. Lenders are willing to extend the requested credit on the terms
and conditions of this agreement.
ACCORDINGLY, for adequate and sufficient consideration, Borrower, Lenders,
and Agent agree as follows:
SECTION 1 DEFINITIONS AND TERMS.
1.1 DEFINITIONS. As used in the Loan Documents:
ASSET PURCHASE AGREEMENT means the Asset Purchase Agreement dated as of
October 3, 1996, between Fieldcrest Cannon, Inc. and Borrower providing for the
Fieldcrest Asset Acquisition.
AFFILIATE of a Person means any other individual or entity who has the
power (directly or indirectly through ownership, voting securities, contract, or
otherwise -- but not solely by being an officer or director of that Person) to
direct or cause the direction of management or policies of that Person.
AGENT means, at any time, NationsBank of Texas, N.A. -- or its successor
appointed under SECTION 13 below -- acting as AGENT for Lenders under the Loan
Documents. References to Agent in respect of LCs are to that institution in its
individual capacity.
APPLICABLE MARGIN means, for any day, the margin of interest over the Base
Rate, the CD Rate, or the LIBOR Rate, as the case may be, that is applicable
when any interest rate is determined under this agreement.
(a) The Applicable Margin is subject to adjustment (upwards or
downwards, as appropriate) based on the better of (1) Borrower's Senior
Debt Rating or (2) the ratio of Funded Debt to EBITDA, as stated in the
table below:
<TABLE>
<CAPTION>
==================================================================================================================================
APPLICABLE APPLICABLE APPLICABLE APPLICABLE
SENIOR RATIO OF FUNDED MARGIN FOR MARGIN FOR MARGIN FOR MARGIN FOR APPLICABLE
DEBT RATING DEBT TO EBITDA BASE-RATE LIBOR-RATE SWING CD-RATE PERCENTAGES
BORROWINGS BORROWINGS BORROWINGS BORROWINGS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B+/B1 Less than or 0% 1.50% 1.75% 1.625% .375%
equal to 4.00,
but greater
than 3.50 to
1.00
BB-/Ba3 Less than or 0% 1.125% 1.375% 1.250% .250%
equal to 3.50
to 1.00, but
greater than
3.00 to 1.00
BB/Ba2 Less than or 0% .875% 1.125% 1.00% .250%
equal to 3.00
to 1.00, but
greater than
2.50 to 1.00
BB+/Ba1 Less than or 0% .625% .875% .750% .225%
equal to 2.50
to 1.00, but
greater than
2.00 to 1.00
BBB-/Baa3 Less than or 0% 0.50% .75% .625% .200%
equal 2.00 to
1.00
==================================================================================================================================
</TABLE>
(b) From the Closing Date through the date that Agent receives the
Current Financials and Compliance Certificate for the year ending
December 28, 1996, the Applicable Margin is deemed to be .875% for LIBOR-
Rate Borrowings and 1.00% for CD-Rate Borrowings, and the Applicable
Percentage is deemed to be .250%.
(c) After receipt of the Current Financials and Compliance
Certificate for the year ending December 28, 1996 -- EXCEPT as otherwise
stated in CLAUSE (a) above -- the Applicable Margin and Applicable
Percentage in effect at any time are based upon either the Senior Debt
Rating or the ratio of Funded Debt to EBITDA as determined from the Current
Financials and related Compliance Certificate then most recently received
by Agent, effective as of the date received by Agent.
2
<PAGE>
(d) For purposes of the definitions of APPLICABLE MARGIN and
APPLICABLE PERCENTAGE, EBITDA is calculated for the Companies' most
recently-completed-four-fiscal quarters, and Funded Debt is determined as
of the last day of that four-fiscal-quarter period.
(e) If Borrower fails to timely furnish to Agent any Financial
Statements and related Compliance Certificate as required by this
agreement, then the maximum Applicable Margin and Applicable Percentage
apply from the date those Financial Statements and related Compliance
Certificate are required to be delivered and remain in effect until
Borrower furnishes them to Agent.
APPLICABLE PERCENTAGE means, for any day, a commitment-fee percentage
applicable under SECTION 4.4, subject to adjustment (upwards or downwards, as
appropriate), based on the measurements set forth in the chart set out in the
definition of the term APPLICABLE MARGIN. The Applicable Percentage is
calculated and determined as further provided in the definition of the term
APPLICABLE MARGIN.
ASSESSMENT RATE means, for any day and any CD-Rate Borrowing, the actual
(if published) or the estimated (if the actual rate is not known) assessment
rate (rounded upwards, if necessary, to the nearest 0.01%) paid by Agent to the
Federal Deposit Insurance Corporation for that corporation's insuring liability
for U.S. dollar deposits.
ASSET SALE means any sale, lease, assignment, conveyance, transfer, or
other disposition of assets (including, without limitation, the sale, issuance,
or disposition of any stock or other equity securities and also including,
without limitation, sale/leaseback arrangements) by Borrower or any of
Borrower's Subsidiaries, including, without limitation, an actual or
constructive loss of property, an agreed or compromised loss of property, or the
taking of any property under the power of eminent domain.
ASSIGNEE is defined in SECTION 14.10(c).
ASSIGNMENT AND ASSUMPTION AGREEMENTS is defined in SECTION 14.10(c).
BA means a banker's acceptance, which is a draft drawn by Borrower on Agent
and accepted and held (but not discounted) by Agent in connection with a draft
or drawing under a LC with extended payment terms.
BASE RATE means, for any day, the greater of EITHER (a) the annual interest
rate most recently announced by Agent as its prime rate (which may not
necessarily represent the lowest or best rate actually charged to any customer)
in effect at its principal office in Dallas, Texas, automatically fluctuating
upward and downward as specified in each announcement without special notice to
Borrower or any other Person, OR (b) the SUM of the Federal-Funds Rate PLUS
0.5%.
BASE-RATE BORROWING means a Borrowing bearing interest at the SUM of the
Base Rate PLUS the Applicable Margin.
BEACON means Beacon Manufacturing Company, a North Carolina corporation.
BORROWER is defined in the preamble to this agreement.
3
<PAGE>
BORROWING means any amount disbursed (a) by one or more Lenders to or on
behalf of Borrower under the Loan Documents, including any Swing Borrowing,
either as an original disbursement of funds, a renewal, extension, or
continuation of an amount outstanding, or a payment under an LC or (b) by any
Lender in accordance with, and to satisfy the obligations of any Company under,
any Loan Document.
BORROWING DATE is defined in SECTION 2.2(a).
BORROWING REQUEST means a request by Borrower to Agent for a Borrowing
either by telephone or in writing (in form acceptable to Agent) under
SECTION 2.2(a).
BUSINESS DAY means (a) for purposes of any LIBOR-Rate Borrowing, a day when
commercial banks are open for international business in London, England, and (b)
for all other purposes, any day OTHER THAN Saturday, Sunday, and any other day
that commercial banks are authorized by Law to be closed in Texas.
CAPITAL LEASE means any capital lease or sublease that is required by GAAP
to be capitalized on a balance sheet.
CAPITAL STOCK means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
CAPITALIZATION means, at any time, the sum of (a) Borrower's stockholder's
equity, plus (b) Funded Debt.
CD RATE means, for a CD-Rate Borrowing and for its Interest Period, the
annual interest rate (rounded upward, if necessary, to the nearest 0.01%) equal
to the SUM of (a) the annual rate bid by certificate of deposit dealers of
recognized standing on the first day of that Interest Period for the purchase at
face value from Agent of a certificate of deposit in an amount comparable to
that CD-Rate Borrowing and having a maturity approximately equal to that
Interest Period, PLUS (b) the Assessment Rate on the first day of that Interest
Period.
CD-RATE BORROWING means a Borrowing bearing interest at the SUM of the CD
Rate PLUS the Applicable Margin.
CERCLA means the COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND
LIABILITY ACT OF 1980, 42 U.S.C. Sections 9601 ET SEQ.
CHANGE OF CONTROL means the occurrence of any of the events described in
SECTION 11.8.
CLOSING DATE means the date agreed to by Borrower and Agent for the initial
Borrowing, which must be a Business Day occurring, if ever, no later than
November 29, 1996.
CODE means the INTERNAL REVENUE CODE OF 1986.
4
<PAGE>
COLLATERAL is defined in SECTION 5.2.
COMMITMENT means, at any time and for any Lender, the amounts stated beside
that Lender's name on the most-recently amended SCHEDULE 1.1(a).
COMMITMENT PERCENTAGE means, for any Lender, the proportion (stated as a
percentage) that its Commitment bears to the total Commitments of all Lenders.
COMMITMENT USAGE means, at any time, the SUM of (a) the Principal Debt
(which includes, without limitation, the Principal Debt under the Swing-Line
Subfacility) PLUS (b) the LC Exposure for documentary LCs or BAs into which any
documentary LC may have been converted.
COMPANIES means, at any time, Borrower and each of its Subsidiaries.
COMPLIANCE CERTIFICATE means a certificate substantially in the form of
EXHIBIT D-2 and signed by a Responsible Officer.
CONTAMINATED SITE LIST means (a) the NATIONAL PRIORITIES LIST established
under CERCLA, (b) the COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND
LIABILITY AND INFORMATION SYSTEM established under CERCLA, or (c) any other
list, registry, or other compilation established by any Tribunal of sites that
require or potentially require removal, remedial, or other actions in response
to the Release or threatened Release of any Hazardous Substance.
CURRENT FINANCIALS, unless otherwise specified:
(a) means EITHER (i) the Companies' consolidated Financial Statements
for the year ending December 30, 1995, TOGETHER WITH the Companies'
Financial Statements for the portion of the fiscal year ending on
September 28, 1996, OR (ii) at any time after annual Financial Statements
are first delivered under SECTION 8.1, the Companies' annual Financial
Statements then most recently delivered to Lenders under SECTION 8.1(a),
TOGETHER WITH the Companies' quarterly Financial Statements then most
recently delivered to Lenders under SECTION 8.1(b); but
(b) EXCEPT as provided in the definition of EBITDA, does not include
the results of operation and cash flows for any Company for the time period
before it becomes a member of Borrower's consolidated group.
CURRENT RATIO means, at any time, the QUOTIENT of the SUM of the Company's
(a) cash, PLUS (b) accounts receivable, PLUS (c) inventory DIVIDED BY the SUM of
the Company's (x) accounts payable PLUS (y) Principal Debt.
DEBT of any Person means, at any time and without duplication (a) all
obligations required by GAAP to be classified upon that Person's balance sheet
as liabilities, (b) liabilities secured (or for which the holder of the Debt has
an existing Right, contingent or otherwise, to be so secured) by any Lien
existing on property owned or acquired by that Person, (c) obligations that have
been (or under GAAP should be) capitalized for financial reporting purposes, and
(d) all guaranties, endorsements, and other contingent obligations for Debt of
others.
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DEBTOR RELIEF LAWS means the BANKRUPTCY CODE OF THE UNITED STATES OF
AMERICA and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar Laws affecting creditors' Rights.
DEFAULT is defined in SECTION 11.
DEFAULT RATE means, for any day, an annual interest rate equal from day to
day to the lesser of EITHER (a) the then-existing Base Rate PLUS 2% OR (b) the
Maximum Rate.
DETERMINING LENDERS means, at any time, any combination of Lenders holding
(directly or indirectly) AT LEAST EITHER (a) 51% of the total Commitments while
there is no Principal Debt or LC Exposure OR (b) 51% of the Principal Debt PLUS
the LC Exposure while there is any Principal Debt or LC Exposure.
DISTRIBUTION means, with respect to any shares of any capital stock or
other equity securities issued by a Person (a) the retirement, redemption,
purchase, or other acquisition for value of those securities, (b) the
declaration or payment of any dividend on or with respect to those securities,
(c) any loan or advance by that Person to, or other investment by that Person
in, the holder of any of those securities OTHER THAN those loans and advances
referred to in ITEM 5 on SCHEDULE 9.8, and (d) any other payment by that Person
with respect to those securities.
EBITDA means -- for any Person, for any period, and without duplication --
the SUM of (a) Net Income PLUS (b) to the extent actually deducted in
calculating Net Income, interest expense (including, without limitation,
interest that is capitalized), Taxes, depreciation, and amortization.
EMPLOYEE PLAN means an employee pension benefit plan covered by TITLE IV of
ERISA and established or maintained by any Company.
ENVIRONMENTAL INDEMNITY AGREEMENT means any agreement (including, without
limitation, insurance policies) known to any Company by which any Company or
Predecessor is (or may reasonably claim to be) entitled to receive reimbursement
or other payment on account of any Environmental Liability OTHER THAN any
agreements (a) in the nature of environmental consulting or engineering
agreements for professional services or (b) the terms of which preclude any
Company or Predecessor from asserting a claim for reimbursement or other payment
on account of any Environmental Liability.
ENVIRONMENTAL INVESTIGATION means any health, safety, or environmental site
assessment, investigation, study, review, audit, compliance audit, or compliance
review conducted at any time or from time to time -- whether at the request of
Agent or any Lender, upon the order or request of any Tribunal, or at the
voluntary instigation of any Company -- concerning any Real Property or the
business operations or activities of any Company, including, without limitation
(a) air, soil, groundwater, or surface-water sampling and monitoring, (b)
repair, cleanup, remediation, or detoxification, (c) preparation and
implementation of any closure, remedial, spill, emergency, or other plans, and
(d) any health, safety, or environmental compliance audit or review.
ENVIRONMENTAL LAW means any applicable Law that relates to (a) the
condition of air, ground or surface water, soil, or other environmental media,
(b) the environment or natural resources, (c) safety or health, or (d) the
regulation of any contaminants, wastes, and Hazardous Substances, including,
without
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limitation, CERCLA, OSHA, the HAZARDOUS MATERIALS TRANSPORTATION ACT (49
U.S.C. Section 1801 ET SEQ.), the RESOURCE CONSERVATION AND RECOVERY ACT (42
U.S.C. Section 6901 ET SEQ.), the CLEAN WATER ACT (33 U.S.C. Section 1251 ET
SEQ.), the CLEAN AIR ACT (42 U.S.C. Section 7401 ET SEQ.), the TOXIC
SUBSTANCES CONTROL ACT (15 U.S.C. Section 2601 ET SEQ.), the FEDERAL
INSECTICIDE, FUNGICIDE, AND RODENTICIDE ACT (7 U.S.C. Section 136 ET SEQ.),
the EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT (42 U.S.C. Section
11001 ET SEQ.), the SAFE DRINKING WATER ACT (42 U.S.C. Section 201 AND
Section 300F ET SEQ.), the RIVERS AND HARBORS ACT (33 U.S.C. Section 401 ET
SEQ.), the OIL POLLUTION ACT (33 U.S.C. Section 2701 ET SEQ.), analogous
state and local Laws, and any analogous future enacted or adopted Law, or (c)
to the Release or threatened Release of Hazardous Substances.
ENVIRONMENTAL LIABILITY means any liability, loss, fine, penalty,
charge, lien, damage, cost, or expense of any kind that results directly or
indirectly, in whole or in part (a) from the violation of any Environmental
Law, (b) from the Release or threatened Release of any Hazardous Substance,
(c) from removal, remediation, or other actions in response to the Release or
threatened Release of any Hazardous Substance, (d) from actual or threatened
damages to natural resources, (e) from the imposition of injunctive relief or
other orders, (f) from personal injury, death, or property damage which
occurs as a result of any Company's use, storage, handling, or the Release or
threatened Release of a Hazardous Substance, or (g) from any Environmental
Investigation performed at, on, or for any Real Property.
ENVIRONMENTAL PERMIT means any permit, license, or other authorization
from any Tribunal that is required under any Environmental Law for the lawful
conduct of any business, process, or other activity.
ENVIRONMENTAL REPORT means any written or verbal report memorializing
any Environmental Investigation.
EQUITY INTERESTS means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
ERISA means the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.
EXISTING CREDIT AGREEMENT is defined in the preamble to this Agreement.
EXISTING LCS means the letters of credit issued by Agent or any of
Agent's Affiliates for the account of any Company prior to the Closing Date
and which are set out on SCHEDULE 1.1(b).
EXISTING-LC EXPOSURE means the total undrawn and face amount of the
Existing LCs.
EXISTING PRINCIPAL DEBT means the Principal Debt under the Existing
Credit Agreement owing to Lenders as of the date of this agreement.
FEDERAL-FUNDS RATE means, for any day, the annual rate (rounded upwards,
if necessary, to the nearest 0.01%) determined (which determination is
conclusive and binding, absent manifest error) by Agent to be equal to (a)
the weighted average of the rates on overnight federal-funds transactions
with member banks of the Federal Reserve System arranged by federal-funds
brokers on that day, as published by the Federal Reserve Bank of New York on
the next Business Day, or (b) if those rates are not published for any day,
the average of the quotations at approximately 10:00 a.m. received by Agent
from three federal-funds brokers of recognized standing selected by Agent in
its sole discretion.
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FIELDCREST ASSET ACQUISITION means the acquisition under the Asset
Purchase Agreement by Pillowtex Corporation of certain assets of Fieldcrest
Cannon, Inc.
FINANCIAL STATEMENTS of a Person means balance sheets, profit and loss
statements, reconciliations of capital and surplus, and statements of cash
flow prepared (a) according to GAAP (subject to year end audit adjustments
with respect to interim Financial Statements) and (b) except as stated in
SECTION 1.4, in comparative form to prior year-end figures or corresponding
periods of the preceding fiscal year, as applicable.
FISCAL MONTH means (a) for any period before December 31, 1994, a
calendar month, and (b) thereafter, a period of four, five, or six weeks
having seven days in each week ending on a Saturday and that otherwise
approximates a calendar-monthly period. The fiscal-month ends for 1996
through 2001 are described on SCHEDULE 1.1(c). Reference to a fiscal month by
the name of a calendar month means the fiscal month that encompasses the most
of that calendar month (e.g., the fiscal month of January 1996 ends on
February 3, 1996).
FISCAL QUARTER means (a) for any period before December 31, 1994, a
calendar quarter, and (b) thereafter, any quarter of a fiscal year ending on
the last day of a fiscal month (e.g., the third fiscal quarter in 1996 ends
on September 26, 1996). The fiscal-quarter ends for 1996 through 2001 are
indicated on SCHEDULE 1.1(c) by asterisks.
FISCAL YEAR means (a) for any period before December 31, 1994, a
calendar year, and (b) thereafter, Borrower's fiscal year for accounting and
Tax purposes, which consists of 52- or 53-week period beginning on the first
day after the end of the immediately preceding fiscal year and ending on the
Saturday nearest to the December 31 following that first day. References to a
fiscal year with a number corresponding to any calendar year means the fiscal
year ending on the Saturday nearest to December 31 during that calendar year
(e.g., fiscal year 1999 ends on January 1, 2000).
FUNDED DEBT means -- at any time and without duplication -- the SUM of
(a) the balance of any obligation for borrowed money that is required by GAAP
to be shown as a liability, PLUS (b) the total net rentals (net of any
interest, Taxes, or other expenses included in those rentals) payable under
Capital Leases.
FUNDING LOSS means any loss, expense, or reduction in yield that any
Lender reasonably incurs because (a) Borrower fails or refuses (for any
reason whatsoever OTHER THAN a default by Agent or the Lender claiming that
loss, expense, or reduction in yield) to take any Borrowing that it has
requested under this agreement, or (b) Borrower prepays or pays any Borrowing
or converts any Borrowing to a Borrowing of another Type, in each case, other
than on the last day of the applicable Interest Period.
GAAP means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants
and the Financial Accounting Standards Board that are applicable from time to
time.
GUARANTY means a guaranty substantially in the form of the attached
EXHIBIT B.
HAZARDOUS SUBSTANCE means (a) any substance that is reasonably expected
to require, removal, remediation, or other response under any Environmental
Law, (b) any substance that is designated, defined
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<PAGE>
or classified as a hazardous waste, hazardous material, pollutant,
contaminant, explosive, corrosive, flammable, infectious, carcinogenic,
mutagenic, radioactive, dangerous, or toxic or hazardous substance under any
Environmental Law, including, without limitation, any hazardous substance
within the meaning of Section 101(14) of CERCLA, (c) petroleum, oil,
gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel,
and other petroleum hydrocarbons, (d) asbestos and asbestos-containing
materials in any form, (e) polychlorinated biphenyls, (f) urea formaldehyde
foam, or (g) any substance the presence of which on any Real Property either
(i) poses or threatens to pose a hazard to the health or safety of persons or
to the environment or (ii) could constitute a health or safety hazard to
persons or the environment if it emanated or migrated from the Real Property.
INTEREST PERIOD is determined in accordance with SECTION 3.9.
LAWS means all applicable statutes, laws, treaties, ordinances, rules,
regulations, orders, writs, injunctions, decrees, judgments, opinions, and
interpretations of any Tribunal.
LC means (a) a documentary or standby letter of credit issued by Agent,
any Lender, or any of their Affiliates under this agreement and under an LC
Agreement, or -- although not a letter of credit -- any BA into which a
documentary letter of credit has been converted and (b) any Existing LC.
LC AGREEMENT means (a) for Existing LC Nos. 120780 and 37025, the
Reimbursement Agreements described as ITEMS 2 and 3, respectively, on
SCHEDULE 9.2, and (b) for any other LC, a letter of credit application and
agreement (in form and substance satisfactory to Agent or such Lender,
respectively, issuing the LC) submitted and executed by Borrower to Agent or
Lender or any of their Affiliates for an LC for the account of any Company.
LC EXPOSURE means, without duplication, the SUM of (a) the total face
amount of all undrawn and uncancelled LCs and any BAs into which any
documentary LCs have been converted PLUS (b) the total unpaid reimbursement
obligations of Borrower under drawings or drafts under any LC.
LC REQUEST means a request by Borrower to Agent or Lender by electronic
device or in writing (in form acceptable to Agent or such Lender,
respectively) for an LC.
LC SUBFACILITY means a subfacility for the issuance of LCs, as described
in SECTION 2.3, under which the LC Exposure for (a) standby LCs issued by
Agent or any Lender may never exceed $20,000,000 in the aggregate, and (b)
for documentary LCs and BAs into which documentary LCs may have been
converted issued by Agent or any Lender may never collectively exceed
$20,000,000 in the aggregate, and (c) for standby or documentary LCs (and BAs
into which documentary LCs may have been converted) issued by Lenders other
than Agent may never exceed $3,000,000 in the aggregate.
LENDER LIEN means any present or future first-priority (UNLESS a
different priority is specifically provided in the Loan Documents) Lien
securing the Obligations and assigned, conveyed, or granted to or created in
favor of Agent for the benefit of Lenders.
LENDERS means the financial institutions -- including, without
limitation, Agent (possibly acting through one or more of its Affiliates for
LCs) in respect of its share of Borrowings (including Swing Borrowings) and
LCs -- named on SCHEDULE 1.1(a) or on the most-recently-amended SCHEDULE
1.1(a), if
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<PAGE>
any, delivered by Agent under this agreement, and, subject to this agreement,
their respective successors and assigns (but not any Participant who is not
otherwise a party to this agreement).
LIBOR RATE means, for a LIBOR-Rate Borrowing and for the relevant
Interest Period, the annual interest rate (rounded upward, if necessary, to
the nearest 0.01%) equal to the quotient obtained by DIVIDING (a) the rate
that deposits in United States dollars are offered to Agent in the London
interbank market at approximately 11:00 a.m. London time two Business Days
before the first day of that Interest Period in an amount comparable to that
LIBOR-Rate Borrowing and having a maturity approximately equal to that
Interest Period, BY (b) one MINUS the Reserve Requirement (expressed as a
decimal) applicable to the relevant Interest Period.
LIBOR-RATE BORROWING means a Borrowing bearing interest at the SUM of
the LIBOR Rate PLUS the Applicable Margin.
LIEN means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind and any other
arrangement for a creditor's claim to be satisfied from assets or proceeds
prior to the claims of other creditors or the owners.
LITIGATION means any action by or before any Tribunal.
LOAN DOCUMENTS means (a) this agreement, certificates and reports
delivered under this agreement, and exhibits and schedules to this agreement,
(b) all agreements, documents, and instruments in favor of Agent or Lenders
(or Agent on behalf of Lenders) ever delivered under this agreement or
otherwise delivered in connection with all or any part of the Obligations
other than Assignment and Assumption Agreements, (c) any contract entered
into between Borrower and any Lender or Affiliate of any Lender under
(whether or not in excess of the minimum dollar requirements of) ITEM 14 OF
SCHEDULE 9.2, (d) all LCs and LC Agreements, (e) the letter agreement
described in SECTION 4.2, and (f) all renewals, extensions, and restatements
of, and amendments and supplements to, any of the foregoing.
MATERIAL ADVERSE EVENT means any circumstance or event that,
individually or collectively, is reasonably expected to result (at any time
before the Commitments are fully canceled or terminated and the Obligations
are fully paid and performed) in any (a) material impairment of (i) the
ability of Borrower to perform any of its payment or other material
obligations under any Loan Document, (ii) the Companies as a whole to perform
any of their payment or other material obligations under any Loan Document,
or (iii) the ability of Agent or any Lender to enforce any of those
obligations or any of their respective Rights under the Loan Documents, (b)
material and adverse effect on the financial condition of the Companies as a
whole as represented to Lenders in the Current Financials most recently
delivered as of EITHER the date of this agreement OR such later date to which
Determining Lenders may have, in their sole discretion, agreed with Borrower
in writing, or (c) Default or Potential Default.
MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for a Lender, the
maximum non-usurious amount and the maximum non-usurious rate of interest
that, under applicable Law, that Lender is permitted to contract for, charge,
take, reserve, or receive on the Obligations.
MINIMUM NET WORTH is defined in SECTION 10.1.
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MULTIEMPLOYER PLAN means a multiemployer plan as defined in SECTIONS
3(37) or 4001(a)(3) of ERISA or SECTION 414(f) of the Code to which any
Company (or any Person that, for purposes of TITLE IV of ERISA, is a member
of Borrower's controlled group or is under common control with Borrower
within the meaning of SECTION 414 of the Code) is making, or has made, or is
accruing, or has accrued, an obligation to make contributions.
NET INCOME of any Person means that Person's profit or loss after
deducting its Tax expense before deducting the unamortized Lender fees
associated with the Existing Credit Agreement.
NET PROCEEDS means the aggregate cash proceeds received by the Borrower
or any of its Subsidiaries in respect of any Permitted Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Permitted Asset Sale), net of the
direct costs relating to such Permitted Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions), any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements), and any reserve
for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
NET WORTH means -- at any time and for any Person -- its stockholders'
equity.
NOTES means all of the Revolving Notes and the Swing-Line Note.
NOTICE OF CONVERSION means a request substantially in the form of
EXHIBIT D-1.
OBLIGATED COMPANIES means, at any time:
(a) Borrower; and
(b) Each of Borrower's Subsidiaries EITHER (i) that has executed a
Guaranty and a Security Agreement OR (ii) if it is a foreign entity
and if its execution of a Guaranty or a Security Agreement would
create a material Tax obligation for the Companies that would not
otherwise exist, with respect to which a Lender Lien has been created
in as much -- but in no event less than 65% -- of its capital stock as
may be pledged without creating a material Tax obligation for the
Companies that would not otherwise exist.
Nothing in this definition implies that Borrower is not obligated to comply with
SECTION 8.11.
OBLIGATIONS means all present and future (a) Debts, liabilities, and
obligations of any Company to Agent, any Lender, or NationsBanc Capital
Markets, Inc., and related to any Loan Document, whether principal, interest,
fees, costs, attorneys' fees, or otherwise, and (b) renewals, extensions, and
modifications of any of the foregoing.
OPERATING LEASE means a lease or sublease that is not a Capital Lease.
OSHA means the OCCUPATIONAL SAFETY AND HEALTH ACT OF 1970, 29 U.S.C.
Section 651 ET SEQ.
PARTICIPANT is defined in SECTION 14.10(b).
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PBGC means the Pension Benefit Guaranty Corporation.
PERMITTED ACQUISITION means both (a) the Fieldcrest Asset Acquisition
(without regard to the following conditions) and (b) formation or acquisition
by any Company of a Subsidiary or the acquisition -- which, subject to
SECTION 9.11, may be by merger -- by any Company of substantially all the
assets of another Person if:
(i) no Default or Potential Default exists or would exist as a result
of that formation or acquisition (including, but not limited to, non-
compliance with the covenants set forth in SECTION 10 after giving effect
to a Permitted Acquisition);
(ii) that formation or acquisition is within the Companies' current
line of business of "designing, manufacturing, and marketing bedroom
textile furnishings" and related or similar products;
(iii) at least 15 days before that formation or acquisition, Borrower
gives to Agent and Lenders a written description of that formation or
acquisition, which includes a reasonably-detailed calculation of -- and
description of the funding sources, if applicable, for -- the total
investment or purchase price involved (including, without limitation all
Debt for which the acquired Person is to remain obligated and what portion
of it, if any, that is to be guaranteed, assumed, or paid -- through merger
or otherwise -- by any other Company);
(iv) the total of all investments in any newly-formed Subsidiaries
PLUS, without duplication, the total purchase price -- INCLUDING, without
limitation and without duplication, the total Funded Debt to be guaranteed,
assumed, or paid by any other Company but EXCLUDING other Debt of the
acquired Persons and fundings through equity issuances -- for all of those
acquisitions do not exceed 15% of the total Capitalization of the Borrower;
(v) any new Subsidiary as a result of that formation or acquisition
becomes an Obligated Company concurrently with that formation or
acquisition;
(vi) the Companies execute and deliver such other documents and take
such action as any Lender may reasonably request in order to effect the
provisions of the Loan Documents; and
(vii) concurrently with the closing of that formation or acquisition,
Borrower provides Agent and Lenders with a certificate of a Responsible
Officer of Borrower certifying that all the conditions in this definition
have been fulfilled for that formation or acquisition to be -- and it is --
a "PERMITTED ACQUISITION."
PERMITTED ASSET SALES means (a) sales and dispositions of assets in the
ordinary course of business for fair and adequate consideration; (b) sales of
assets that are obsolete or are no longer in use and are not significant to
the continuation of that Company's business; (c) sales of assets (i) obtained
as the result of mergers and consolidating permitted under this agreement and
Permitted Acquisitions and (ii) that are unnecessary to the Companies'
business operations; and (d) sales and dispositions from any Company to any
Obligated Company.
PERMITTED DEBT means Debt described on SCHEDULE 9.2.
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PERMITTED LIENS means the Liens described on SCHEDULE 9.5.
PERSON means any individual, entity, or Tribunal.
PHC means Ptex Holding Company, a Delaware corporation and a direct
Subsidiary of Borrower.
PMSC means Pillowtex Management Services Company, a Delaware business
trust, a direct Subsidiary of PHC, and an indirect Subsidiary of Borrower.
POTENTIAL DEFAULT means any event's occurrence or any circumstance's
existence that would -- upon any required notice, time lapse, or both -- become
a Default.
PREDECESSOR means any Person for whose obligations and liabilities any
Company is reasonably expected to be liable as the result of any merger, DE
FACTO merger, stock purchase, asset purchase or divestiture, combination, joint
venture, investment, reclassification, or other similar business transaction.
PRINCIPAL DEBT means, at any time, the unpaid principal balance of all
Borrowings.
PRO RATA and PRO RATA PART mean, at any time and for any Lender, the
proportion (stated as a percentage) that the Principal Debt owed to it bears to
the total Principal Debt owed to all Lenders.
PILLOWTEX, INC. means Pillowtex, Inc., a Delaware corporation and a direct
Subsidiary of Borrower.
REAL PROPERTY means any land, buildings, fixtures, and other improvements
to land now or in the future directly or indirectly owned by any Company, leased
to or otherwise operated by any Company, or subleased by any Company to any
other Person.
RELEASE means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, disposal, migrating, or
other movement into the air, ground or surface water, or soil.
RELEASE RATING means -- at any time the Senior Unsecured Debt Rating of
Borrower by Standard & Poor's Corporation and Moody's Investors Service are
equal to or better than BBB- and Baa3, respectively, PROVIDED, HOWEVER, that no
more than one ratings differential shall apply.
REPRESENTATIVES means representatives, officers, directors, employees,
accountants, attorneys, and agents.
RESERVE REQUIREMENT means, for any LIBOR-Rate Borrowing and for the
relevant Interest Period, the maximum total reserve requirements (including all
basic, supplemental, emergency, special, marginal, and other reserves required
by applicable Law) applicable to a member bank of the Federal Reserve System for
eurocurrency fundings or liabilities.
RESPONSIBLE OFFICER means Borrower's chairman, president, chief executive
officer, chief financial officer, chief accounting officer, or treasurer.
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REVOLVING FACILITY is defined in the recitals to this agreement and
which includes the LC Subfacility and the Swing-Line Subfacility.
REVOLVING NOTE means one of the promissory notes substantially in the
form of EXHIBIT A-2.
RIGHTS means rights, remedies, powers, privileges, and benefits.
SECURITY AGREEMENT means a Security Agreement in substantially the form
of EXHIBIT C-1.
SENIOR SUBORDINATED DEBT means that debt issued pursuant to the Offering
Memorandum of Borrower dated November 6, 1996, in an amount of up to
$140,000,000.
SENIOR DEBT RATING means the rating on the Borrower's Existing Credit
Facility provided by (1) the higher of either Standard & Poor's Corporation
or Moody's Investors Service provided that (a) no more than one ratings
differential shall apply, or (b) if two or more ratings deferential, the
rating shall be that rating that is one rating greater than the lowest
rating, or, (2) if not available from one of the above corporations, then
that rating that is two levels better than the rating given by such
corporations on the Senior Subordinated Debt.
SENIOR UNSECURED DEBT RATING means the Borrower's Senior Unsecured Debt
Rating provided by (1) the higher of either Standard & Poor's Corporation or
Moody's Investors Service provided that (a) no more than one ratings
differential shall apply, or, (b) if two or more ratings differential, the
rating shall be that rating that is one rating greater than the lowest
rating, or, (2) if not available from one of the above corporations, then
that rating that is two levels better than the rating given by such
corporations on the Senior Subordinated Debt.
SOLVENT means, as to any Person, that (a) the aggregate fair market
value of its assets exceeds its liabilities, (b) it has sufficient cash flow
to enable it to pay its Debts as they mature, and (c) it does not have
unreasonably small capital to conduct its businesses.
SUBSIDIARY of any Person means any entity of which more than 50% (in
number of votes) of the stock (or equivalent interests) is owned of record or
beneficially, directly or indirectly, by that Person.
SWING-LINE NOTE means a promissory note substantially in the form of the
attached EXHIBIT A-1, as renewed, extended, amended, and restated.
SWING BORROWING means a Borrowing under the Swing-Line Subfacility
bearing interest at the sum of the Federal-Funds Rate PLUS the Applicable
Margin for Swing Borrowings.
SWING-LINE SUBFACILITY means the facility under the Revolving Facility
described in SECTION 2.4.
TAXES means, for any Person, taxes, assessments, or other governmental
charges or levies imposed upon it, its income, or any of its properties,
franchises, or assets.
TERMINATION DATE means the earlier of EITHER (a) the fifth anniversary
of the Closing Date (as that date may be extended by Borrower and Lenders
under SECTION 2.7) OR (b) the effective date that Lenders'
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<PAGE>
commitments to lend and issue LCs under this agreement are otherwise canceled
or terminated in accordance with this agreement.
TORFEACO means Torfeaco Industries Limited, an Ontario corporation.
TRIBUNAL means any (a) local, state, territorial, federal, or foreign
judicial, executive, regulatory, administrative, legislative, or governmental
agency, board, bureau, commission, department, or other instrumentality, (b)
private arbitration board or panel, or (c) central bank.
TYPE means any type of Borrowing determined with respect to the
applicable interest option.
WORKING CAPITAL means -- for any Person and at any time -- the SUM of
(a) current assets (excluding cash and cash equivalents) MINUS (b) current
liabilities (excluding the current portion of each of Funded Debt, deferred
Taxes, and income Tax liabilities).
1.2 TIME REFERENCES. Unless otherwise specified, in the Loan Documents
(a) time references (E.G., 10:00 a.m.) are to time in Dallas, Texas, and (b)
in calculating a period from one date to another, the word "FROM" means "FROM
AND INCLUDING" and the word "TO" or "UNTIL" means "TO BUT EXCLUDING."
1.3 OTHER REFERENCES. Unless otherwise specified, in the Loan
Documents (a) where appropriate, the singular includes the plural and VICE
VERSA, and words of any gender include each other gender, (b) heading and
caption references may not be construed in interpreting provisions, (c)
monetary references are to currency of the United States of America, (d)
section, paragraph, annex, schedule, exhibit, and similar references are to
the particular Loan Document in which they are used, (e) references to
"TELECOPY," "FACSIMILE," "FAX," or similar terms are to facsimile or telecopy
transmissions, (f) references to "INCLUDING" mean including without limiting
the generality of any description preceding that word, (g) the rule of
construction that references to general items that follow references to
specific items are limited to the same type or character of those specific
items is not applicable in the Loan Documents, (h) references to any Person
include that Person's heirs, personal representatives, successors, trustees,
receivers, and permitted assigns, (i) references to any Law include every
amendment or supplement to it, rule and regulation adopted under it, and
successor or replacement for it, and (j) references to any Loan Document or
other document include every renewal and extension of it, amendment and
supplement to it, and replacement or substitution for it.
1.4 ACCOUNTING PRINCIPLES. Unless otherwise specified, in the Loan
Documents (a) GAAP determines all accounting and financial terms and
compliance with financial covenants, (b) GAAP in effect on the date of this
agreement determines compliance with financial covenants, (c) otherwise, all
accounting principles applied in a current period must be comparable in all
material respects to those applied during the preceding comparable period,
and (d) while Borrower has any consolidated Subsidiaries (i) all accounting
and financial terms and compliance with reporting covenants must be on a
consolidating and consolidated basis, as applicable and (ii) compliance with
financial covenants must be on a consolidated basis.
SECTION 2 COMMITMENT. Subject to the provisions in the Loan Documents, each
Lender severally but not jointly agrees to extend credit to Borrower in
accordance with the following provisions.
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2.1 REVOLVING FACILITY. Each Lender severally but not jointly agrees to
lend to Borrower that Lender's Commitment Percentage of Borrowings (OTHER THAN
Swing Borrowings) which Borrower may borrow, repay, and reborrow under this
agreement SUBJECT TO the following conditions:
(a) Each Borrowing may only occur on a Business Day on or after the
Closing Date and before the Termination Date;
(b) Each Borrowing may only be (i) $1,000,000 or a greater integral
multiple of $100,000 if a Base-Rate Borrowing or (ii) $4,000,000 or a
greater integral multiple of $1,000,000 if a CD-Rate Borrowing or a LIBOR-
Rate Borrowing;
(c) The SUM of (i) the Commitment Usage, PLUS (ii) the total undrawn
and uncancelled face amount of, and all unpaid drafts or drawings under,
all documentary and all standby letters of credit, the reimbursement
obligations for which have been assumed by any Company in connection with
any Permitted Acquisition after the Closing Date, PLUS (iii) the LC
Exposure for standby LCs MAY NEVER EXCEED the total Commitments; and
(d) The SUM of the Commitment Usage plus the LC Exposure for standby
LCs (in each case whether direct or participated) owed to that Lender MAY
NEVER EXCEED that Lender's Commitment.
2.2 BORROWING PROCEDURE. The following procedures apply to Borrowings
OTHER THAN Swing Borrowings (see SECTION 2.4):
(a) EXISTING PRINCIPAL DEBT. On the Closing Date (i) the Existing
Principal Debt is renewed, (ii) by 10:00 a.m., Agent shall notify Lenders
of the amount that each Lender must pay or receive, as the case may be, so
that each Lender is owed, under the Revolving Facility, its Commitment
Percentage of the remaining Existing Principal Debt, (iii) by 1:00 p.m.,
each Lender shall pay to Agent the amount required by it to be paid
according to that notice, (iv) by 3:00 p.m., to the extent those payments
are received by Agent, it shall distribute the amounts to be received by
each Lender according to that notice, and (v) the remaining Existing
Principal Debt under CLAUSE (ii) above will then constitute a Base-Rate
Borrowing under the Revolving Facility.
(b) BORROWING REQUEST. Borrower may request a Borrowing by making or
delivering a Borrowing Request to Agent, which is irrevocable and binding
on Borrower, stating the Type, amount, and Interest Period for each
Borrowing and which must be received by Agent no later than 11:00 a.m. on
the (i) second Business Day before the date on which funds are requested
(the "BORROWING DATE") for any LIBOR-Rate Borrowing or CD-Rate Borrowing,
or (ii) Borrowing Date for any Base-Rate Borrowing. Agent shall promptly
notify each Lender of any Borrowing Request.
(c) FUNDING. Each Lender shall remit its Commitment Percentage of
each requested Borrowing to Agent's principal office in Dallas, Texas, in
funds that are available for immediate use by Agent by 2:00 p.m. on the
applicable Borrowing Date. Subject to receipt of those funds, Agent shall
(unless to its actual knowledge any of the applicable conditions precedent
have not been satisfied by Borrower or waived by the requisite Lenders
under SECTION 14.8) make those funds available to Borrower by (at
Borrower's option) (i) wiring the funds to or for the account of
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Borrower at the direction of Borrower or (ii) depositing the funds in
Borrower's account with Agent.
(d) FUNDING ASSUMED. Absent contrary written notice from a Lender,
Agent may assume that each Lender has made its Commitment Percentage of the
requested Borrowing available to Agent on the applicable Borrowing Date,
and Agent may, in reliance upon such assumption (but shall not be required
to), make available to Borrower a corresponding amount. If a Lender fails
to make its Commitment Percentage of any requested Borrowing available to
Agent on the applicable Borrowing Date, Agent may recover the applicable
amount on demand, (i) from that Lender TOGETHER WITH interest, commencing
on the Borrowing Date and ending on (but excluding) the date Agent recovers
the amount from that Lender, at an annual interest rate equal to the
Federal-Funds Rate, or (ii) if that Lender fails to pay its amount upon
demand, then from Borrower. No Lender is responsible for the failure of
any other Lender to make its Commitment Percentage of any Borrowing;
HOWEVER, failure of any Lender to make its Commitment Percentage of any
Borrowing does not excuse any other Lender from making its Commitment
Percentage of any Borrowing.
2.3 LETTERS OF CREDIT.
(a) EXISTING-LC EXPOSURE. The Existing-LC Exposure is renewed
without any additional fees under SECTION 4.3 EXCEPT when an Existing LC is
reissued or extended or as may be otherwise provided in the related LC
Agreement.
(b) CONDITIONS. Subject to the terms and conditions of this
agreement and applicable Law, Agent (itself or through one of its
Affiliates, and references in this SECTION 2.3 to AGENT include those
Affiliates), and, in some instances, certain Lenders, agree to issue LCs
upon Borrower's making or delivering an LC Request and delivering an LC
Agreement, both of which must be received by Agent or Lender no later than
on the Business Day before the requested LC is to be issued, SO LONG AS
(i) no LC may expire after three Business Days before the Termination Date,
(ii) the LC Exposure for standby LCs does not exceed $20,000,000 (or, if
issued by a Lender, after aggregation with the documentary LCs and BAs
issued by any Lender other than Agent and all outstanding standby LCs
issued by any Lender other than Agent, $3,000,000), (iii) the LC Exposure
for documentary LCs and BAs into which they may have been converted does
not exceed $20,000,000 (or if issued by a Lender, after aggregation with
the standby LCs issued by any Lender other than Agent, and all outstanding
documentary LCs and BAs issued by any Lender other than Agent, $3,000,000),
and (iv) the limitations in SECTIONS 2.1(c) and (d) are not exceeded.
(c) PARTICIPATION. Immediately upon Agent's or any Lender's issuance
of any LC (Lender in such capacity referred to herein as "ISSUING LENDER")
Agent or Issuing Lender shall be deemed to have sold and transferred to
each other Lender, and each other Lender shall be deemed irrevocably and
unconditionally to have purchased and received from Agent, without recourse
or warranty, an undivided interest and participation to the extent of such
Lender's Commitment Percentage in the LC and all applicable Rights of Agent
or Issuing Lender in the LC -- OTHER THAN Rights to receive certain fees
provided in SECTION 4.3 to be for Agent's sole account. If no Default or
Potential Default exists on the Termination Date for those Lenders whose
Commitments are not extended under SECTION 2.6, then (i) the participation
of those Lenders in
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each outstanding LC shall be terminated and (ii) the participation by each
Lender whose Commitment has been extended under SECTION 2.6 shall be
deemed to have irrevocably and unconditionally increased in all
then-outstanding LCs to that Lender's Commitment Percentage recalculated
to take into account the termination of the Commitments of those Lenders
described in CLAUSE (i) above.
(d) REIMBURSEMENT OBLIGATIONS. To induce Agent to issue and maintain
LCs, and to induce Lenders to participate in issued LCs, Borrower agrees to
pay or reimburse Agent (i) on the date when any draft or draw request is
presented under any LC, the amount paid or to be paid by Agent and
(ii) promptly, upon demand, the amount of any additional fees Agent
customarily charges for the application and issuance of an LC, for amending
LC Agreements, for honoring drafts and draw requests, and for taking
similar action in connection with letters of credit. If Borrower has not
reimbursed Agent for any drafts or draws paid or to be paid on the date of
Agent's demand for reimbursement, Agent is irrevocably authorized to fund
Borrower's reimbursement obligations as a Base-Rate Borrowing if proceeds
are available and if the conditions in this agreement for such a Borrowing
(OTHER THAN any notice requirements or minimum funding amounts) have, to
Agent's knowledge, been satisfied. The proceeds of that Borrowing shall be
advanced directly to Agent to pay Borrower's unpaid reimbursement
obligations. If funds cannot be advanced, then Borrower's reimbursement
obligation shall constitute a demand obligation. Borrower's obligations
under this section are absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim, or defense to
payment that Borrower may have at any time against Agent or any other
Person. From Agent's demand for reimbursement to the date paid (including
any payment from proceeds of a Base-Rate Borrowing), unpaid reimbursement
amounts accrue interest that is payable on demand at the Default Rate
thereafter.
(e) GENERAL. Agent or Issuing Lender shall promptly notify Borrower
of the date and amount of any draft or draw request presented for honor
under any LC (but failure to give notice will not affect Borrower's
obligations under this agreement). Agent or Issuing Lender shall pay the
requested amount upon presentment of a draft or draw request unless
presentment on its face does not comply with the terms of the applicable
LC. When making payment, Agent or Issuing Lender may disregard (i) any
default or potential default that exists under any other agreement and
(ii) obligations under any other agreement that have or have not been
performed by the beneficiary or any other Person (and neither Agent nor
Issuing Lender is liable for any of those obligations). Borrower's
reimbursement obligations to Agent and Lenders, and each Lender's
obligations to Agent, under this section are absolute and unconditional
irrespective of, and Agent is not responsible for, (i) the validity,
enforceability, sufficiency, accuracy, or genuineness of documents or
endorsements (even if they are in any respect invalid, unenforceable,
insufficient, inaccurate, fraudulent, or forged), (ii) any dispute by any
Company with or any Company's claims, setoffs, defenses, counterclaims, or
other Rights against Agent, any Lender, or any other Person, or (iii) the
occurrence of any Potential Default or Default. However, nothing in this
agreement constitutes a waiver of Borrower's Rights to assert any claim or
defense based upon the gross negligence or willful misconduct of Agent or
any Lender. Agent shall promptly distribute reimbursement payments
received from Borrower to all Lenders according to their Pro Rata Part.
(f) OBLIGATIONS OF LENDERS. If Borrower fails to reimburse Agent as
provided in SECTION 2.3(d) within 24 hours after Agent's demand for
reimbursement, and funds cannot be
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advanced to satisfy the reimbursement obligations, Agent shall promptly
notify each Lender of Borrower's failure, of the date and amount paid,
and of each Lender's Commitment Percentage of the unreimbursed amount.
Each Lender shall promptly and unconditionally make available to Agent
in immediately available funds its Commitment Percentage of the unpaid
reimbursement obligation, subject to the limitations of SECTION 2.1(d).
Funds are due and payable to Agent before the close of business on the
Business Day when Agent gives notice to each Lender of Borrower's
reimbursement failure (if notice is given before 1:00 p.m.) or on the
next succeeding Business Day (if notice is given after 1:00 p.m.). All
amounts payable by any Lender accrue interest after the due date at the
Federal-Funds Rate from the day the applicable draft or draw is paid by
Agent to (but not including) the date the amount is paid by the Lender
to Agent.
(g) DUTIES OF AGENT. Agent and Issuing Lenders agrees with each
Lender that it will exercise and give the same care and attention to each
LC as it gives to its other letters of credit. Each Lender and Borrower
agree that, in paying any draft or draw under any LC, neither Agent nor
Issuing Lender has responsibility to obtain any document (OTHER THAN any
documents expressly required by the respective LC) or to ascertain or
inquire as to any document's validity, enforceability, sufficiency,
accuracy, or genuineness or the authority of any Person delivering it.
Neither Agent nor its Representatives will be liable to any Lender or any
Company for any LC's use or for any beneficiary's acts or omissions. Any
action, inaction, error, delay, or omission taken or suffered by Agent or
any of its Representatives in connection with any LC, applicable draws,
drafts, or documents, or the transmission, dispatch, or delivery of any
related message or advice, if in good faith and in conformity with
applicable Laws and in accordance with the standards of care specified in
the UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDITS (1993 REVISION),
INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500 (as amended or
modified), is binding upon the Companies and Lenders and does not place
Agent or any of its Representatives under any resulting liability to any
Company or any Lender. Agent is not liable to any Company or any Lender
for any action taken or omitted, in the absence of gross negligence or
willful misconduct, by Agent or its Representative in connection with any
LC.
(h) CASH COLLATERAL. On the Termination Date and if requested by
Determining Lenders while a Default exists, Borrower shall provide Agent
and Issuing Lenders, for the benefit of Lenders, cash collateral in an
amount to equal the then-existing LC Exposure.
(i) INDEMNIFICATION. BORROWER SHALL PROTECT, INDEMNIFY, PAY, AND
SAVE AGENT, EACH LENDER, AND THEIR RESPECTIVE REPRESENTATIVES HARMLESS FROM
AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, DAMAGES, LOSSES,
COSTS, CHARGES, AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) WHICH
ANY OF THEM MAY INCUR OR BE SUBJECT TO AS A CONSEQUENCE OF THE ISSUANCE OF
ANY LC, ANY DISPUTE ABOUT IT, OR THE FAILURE OF AGENT TO HONOR A DRAFT OR
DRAW REQUEST UNDER ANY LC AS A RESULT OF ANY ACT OR OMISSION (WHETHER RIGHT
OR WRONG) OF ANY PRESENT OR FUTURE TRIBUNAL. HOWEVER, NO PERSON IS
ENTITLED TO INDEMNITY UNDER THE FOREGOING FOR ITS OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.
(j) LC AGREEMENTS. Although referenced in any LC, terms of any
particular agreement or other obligation to the beneficiary are not
incorporated into this agreement in any manner. The fees and other amounts
payable with respect to each LC are as provided in this agreement, drafts
and draws under each LC are part of the Obligations, only the events
specified
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in this agreement as a Default shall constitute a default under any LC,
and the terms of this agreement control any conflict between the terms
of this agreement and any LC Agreement.
2.4 SWING-LINE SUBFACILITY.
(a) CONDITIONS. For the convenience of the parties, Agent, solely
for its own account, may make any requested Borrowing of $100,000 (or a
greater integral multiple of $50,000) directly to Borrower as a Swing
Borrowing without requiring each other Lender to fund its Commitment
Percentage thereof unless and until SECTION 2.4(b) is applicable. Swing
Borrowings are subject to the following conditions:
(i) Each Swing Borrowing must occur on a Business Day before the
Termination Date;
(ii) The total Principal Debt for Swing Borrowings may not exceed
$5,000,000, and the Commitment Usage may not exceed the total
Commitments (as that amount is reduced and cancelled in accordance
with this agreement);
(iii) The first Borrowing Request after Borrower has received
a Swing Borrowing shall be for an amount at least equal to that Swing
Borrowing and the proceeds of the requested Borrowing shall be used to
reduce the Principal Debt for Swing Borrowings to zero; and
(iv) Each Swing Borrowing bears interest at the lesser of (a) the
Swing Rate or (b) the Maximum Rate; and
(v) Each Borrowing under the Swing-Line Subfacility is available
and may be prepaid on same-day telephonic notice from Borrower to
Agent, if notice is received by 2:00 p.m.
(b) If Borrower fails to repay any Swing Borrowing within two
Business Days after demand by Agent (or upon the Termination Date), Agent
shall promptly notify each Lender of Borrower's failure and the unpaid
amount. No later than the close of business on the date Agent gives notice
(if notice is given before 12:00 noon on any Business Day, or, if made at
any other time, on the next Business Day following the date of notice),
each Lender shall irrevocably and unconditionally purchase and receive from
Agent a ratable participation in such Swing Borrowing and shall make
available to Agent in immediately available funds its Commitment Percentage
of such unpaid amount, together with interest from the date when its
payment was due to, but not including, the date of payment, at the Default
Rate. If a Lender does not promptly pay its amount upon Agent's demand,
and until Lender makes the required payment, Agent is deemed to continue to
have outstanding a Swing Borrowing in the amount of the Lender's unpaid
obligation. Borrower shall make each payment of all or any part of any
Swing Borrowing to Agent for the ratable benefit of Agent and those Lenders
who have funded their participations in Swing Borrowings under this section
(but all interest accruing on Swing Borrowings before the funding date of
any participation is payable solely to Agent for its own account).
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2.5 BORROWING REQUESTS AND LC REQUESTS. Each Borrowing Request and LC
Request constitutes a representation and warranty by Borrower that as of the
Borrowing Date or the date of issuance of the requested LC, as the case may be,
that all of the conditions precedent in SECTION 6 have been satisfied.
2.6 EXTENSION OF FACILITY. At any time during the 90-day period before
the first anniversary of the Closing Date, Borrower may give a written request
to Agent that Determining Lenders extend the Termination Date for one year.
Determining Lenders may, in their sole discretion, grant Borrower's request by
executing an amendment to this agreement amending CLAUSE (a) of the definition
of Termination Date to be the sixth anniversary of the Closing Date as between
themselves and Borrower. For those Lenders that do not execute that amendment,
the date in CLAUSE (a) of the definition of Termination Date remains the fifth
anniversary of the Closing Date as between them and Borrower. If Determining
Lenders fail to respond to Borrower's request, Borrower's request is deemed
denied.
2.7 TERMINATION. Borrower may -- upon giving at least five Business
Days prior written and irrevocable notice to Agent -- terminate all or part of
the unused portion of the Commitment. Each partial termination must be in an
amount of not less than $10,000,000 or a greater integral multiple of
$1,000,000, and must be ratable in accordance with each Lender's Commitment
Percentage. At the time of any termination, Borrower shall pay to Agent, for
the account of each Lender, as applicable, all accrued and unpaid fees under
this agreement and the interest attributable to the amount of that reduction.
Any part of the Commitments terminated may not be reinstated.
2.8 INCREASES IN REVOLVING FACILITY. Notwithstanding anything to the
contrary, Borrower may request one or more Lenders to increase their respective
share of the Revolving Facility so that the total Revolving Facility may be
increased to no more than $175,000,000. That increase, unless prior to the
Closing Date, must be effected by an amendment to this agreement under
SECTION 14.8 that is executed by Borrower, Agent, and the one or more Lenders
selected by Borrower who have agreed to increase their Commitments and by
Borrower's execution and delivery of a replacement Revolving Note.
SECTION 3 TERMS OF PAYMENT.
3.1 NOTES AND PAYMENTS.
(a) NOTES. Principal Debt under the Revolving Facility (OTHER THAN
Principal Debt under the Swing-Line Subfacility) is evidenced by the
Revolving Notes, one payable to each Lender in the stated amount of its
Commitment. Principal Debt under the Swing-Line Subfacility shall be
evidenced by a Swing-Line Note payable to Agent in the stated principal
amount of $5,000,000.
(b) PAYMENT. Borrower must make each payment and prepayment on the
Obligations to Agent's principal office in Dallas, Texas in immediately
available funds by 2:00 p.m. on the day due; otherwise, but subject to
SECTION 3.8, those funds continue to accrue interest as if they were
received on the next Business Day. Agent shall promptly pay to each Lender
the part of any payment or prepayment to which that Lender is entitled
under this agreement on the same day Agent receives the funds from
Borrower.
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(c) PAYMENT ASSUMED. Unless Agent has received notice from Borrower
prior to the date on which any payment is due under this agreement that
Borrower will not make that payment in full, Agent may assume that Borrower
has made the full payment due and Agent may, in reliance upon that
assumption, cause to be distributed to each Lender on that date the amount
then due to each Lender. If and to the extent Borrower does not make the
full payment due to Agent, each Lender shall repay to Agent on demand the
amount distributed to that Lender by Agent together with interest for each
day from the date that Lender received payment from Agent until the date
that Lender repays Agent (unless such repayment is made on the same day as
such distribution), at an interest rate equal to the Federal-Funds Rate.
3.2 INTEREST AND PRINCIPAL PAYMENTS.
(a) INTEREST. Accrued interest on each CD-Rate Borrowing and LIBOR-
Rate Borrowing is due and payable on the last day of its respective
Interest Period. If any Interest Period for a LIBOR-Rate Borrowing is
greater than three months, then accrued interest is also due and payable on
the date three months after the commencement of the Interest Period. If
any Interest Period for a CD-Rate Borrowing is greater than 90 days, then
accrued interest is also due and payable on the 90th day after the
commencement of the Interest Period. Accrued interest on each Borrowing is
due and payable on the last day of each March, June, September, and
December -- commencing on the first of those dates that follows the Closing
Date -- and on the Termination Date. Accrued interest on each Base-Rate
Borrowing which is also a Swing Borrowing is due and payable on the last
day of each month (commencing December 28, 1996) and on the Termination
Date.
(b) PRINCIPAL. The Principal Debt is due and payable on the
Termination Date. Before that date, Borrower may at any time prepay,
without penalty and in whole or in part, the Principal Debt SO LONG AS (i)
each voluntary partial prepayment must be in a principal amount not less
than $1,000,000 or a greater integral multiple of $100,000 and (ii)
Borrower shall pay any related Funding Loss upon demand. Conversions under
SECTION 3.10 are not prepayments.
(c) REVOLVING FACILITY MANDATORY PREPAYMENTS.
(i) CHANGE OF CONTROL. Upon the occurrence of a Change of
Control, Borrower shall prepay the Principal Debt.
(ii) ASSET SALE. Within 270 days after any Permitted Asset Sale,
which, in a single transaction or series of related transactions, has
either (i) a fair market value in excess of $500,000, or (ii) Net
Proceeds in excess of $500,000, Borrower shall make a mandatory
prepayment of the Obligation in an amount equal to 100% of the Net
Proceeds, but only to the extent Borrower or its Subsidiary has not
used such proceeds for working capital or general corporate purposes
or not otherwise prohibited in this agreement or in the Indenture
executed by the Companies and Bank One, Columbus, N.A., as trustee, or
reinvested the Net Proceeds in property or assets related to the
business of Borrower.
(iii) EQUITY ISSUANCE. Upon any issuance of Equity Interests
by a Company, such Company shall make a mandatory prepayment of the
Obligation in an amount equal to 100% of the Net Proceeds to the
extent Company has not used such proceeds for
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working capital or general corporate purposes or not otherwise
prohibited in this agreement or in the Indenture executed by the
Companies and Bank One, Columbus, N.A., as trustee, or reinvested
the Net Proceeds in property or assets related to the business of
Borrower within 270 days after such issuance.
3.3 INTEREST OPTIONS. Except that the LIBOR Rate and CD Rate may not be
selected when a Default or Potential Default exists and except as otherwise
provided in this agreement, Borrowings bear interest at an annual rate equal to
the LESSER OF (a) the Base Rate plus the Applicable Margin, the CD Rate plus the
Applicable Margin, or the LIBOR Rate plus the Applicable Margin (in each case as
designated or deemed designated by Borrower), as the case may be, AND (b) the
Maximum Rate. Each change in the Base Rate and Maximum Rate is effective,
without notice to Borrower or any other Person, upon the effective date of
change.
3.4 QUOTATION OF RATES. Borrower may call Agent before delivering a
Borrowing Request to receive an indication of the interest rates then in effect,
but the indicated rates do not bind Agent or Lenders or affect the interest rate
that is actually in effect when Borrower makes a Borrowing request or on the
Borrowing Date.
3.5 DEFAULT RATE. If permitted by Law, all past-due Principal Debt,
Borrower's past-due payment and reimbursement obligations in connection with
LCs, and past-due interest accruing on any of the foregoing bears interest from
the date due (stated or by acceleration) at the Default Rate until paid,
regardless whether payment is made before or after entry of a judgment.
3.6 INTEREST RECAPTURE. If the designated interest rate applicable to any
Borrowing exceeds the Maximum Rate, the interest rate on that Borrowing is
limited to the Maximum Rate, but any subsequent reductions in the designated
rate shall not reduce the interest rate thereon below the Maximum Rate until the
total amount of accrued interest equals the amount of interest that would have
accrued if that designated rate had always been in effect. If at maturity
(stated or by acceleration), or at final payment of the Notes, the total
interest paid or accrued is less than the interest that would have accrued if
the designated rates had always been in effect, then, at that time and to the
extent permitted by Law, Borrower shall pay an amount equal to the difference
between (a) the LESSER of the amount of interest that would have accrued if the
designated rates had always been in effect AND the amount of interest that would
have accrued if the Maximum Rate had always been in effect, and (b) the amount
of interest actually paid or accrued on the Notes.
3.7 INTEREST CALCULATIONS. Interest will be calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed but computed as if each calendar year consisted of 360 days (unless the
calculation would result in an interest rate greater than the Maximum Rate, in
which event interest will be calculated on the basis of a year of 365 or 366
days, as the case may be). All interest rate determinations and calculations by
Agent are conclusive and binding absent manifest error.
3.8 MAXIMUM RATE. Regardless of any provision contained in any Loan
Document, no Lender is entitled to contract for, charge, take, reserve, receive,
or apply, as interest on all or any part of the Obligations, any amount in
excess of the Maximum Rate, and, if Lenders ever do so, then any excess shall be
treated as a partial prepayment of principal and any remaining excess shall be
refunded to Borrower. In determining if the interest paid or payable exceeds
the Maximum Rate, Borrower and Lenders shall, to the maximum extent permitted
under applicable Law, (a) treat all Borrowings as but a single extension of
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credit (and Lenders and Borrower agree that is the case and that provision in
this agreement for multiple Borrowings is for convenience only), (b)
characterize any nonprincipal payment as an expense, fee, or premium rather
than as interest, (c) exclude voluntary prepayments and their effects, and
(d) amortize, prorate, allocate, and spread the total amount of interest
throughout the entire contemplated term of the Obligations. However, if the
Obligations are paid in full before the end of their full contemplated term,
and if the interest received for its actual period of existence exceeds the
Maximum Amount, Lenders shall refund any excess (and Lenders may not, to the
extent permitted by Law, be subject to any penalties provided by any Laws for
contracting for, charging, taking, reserving, or receiving interest in excess
of the Maximum Amount). If the Laws of the State of Texas are applicable for
purposes of determining the "MAXIMUM RATE" or the "MAXIMUM AMOUNT," then
those terms mean the "INDICATED RATE CEILING" from time to time in effect
under ARTICLE 5069-1.04, TITLE 79, REVISED CIVIL STATUTES OF TEXAS, as
amended. Borrower agrees that CHAPTER 15, SUBTITLE 79, REVISED CIVIL STATUTES
OF TEXAS, 1925, as amended (which regulates certain revolving credit loan
accounts and revolving triparty accounts), does not apply to the Obligations.
3.9 INTEREST PERIODS. When Borrower requests any CD-Rate Borrowing or
LIBOR-Rate Borrowing, Borrower may elect the applicable interest period (each an
"INTEREST PERIOD"), which may be, at Borrower's option, 30, 60, 90, or 180 days
for CD-Rate Borrowings, and one, two, three, or six months for LIBOR-Rate
Borrowings, subject to the following conditions: (a) the initial Interest
Period for a CD-Rate Borrowing and a LIBOR-Rate Borrowing commences on the
applicable Borrowing Date or conversion date, and each subsequent Interest
Period applicable to any Borrowing commences on the day when the next preceding
applicable Interest Period expires; (b) if any Interest Period for a CD-Rate
Borrowing or a LIBOR-Rate Borrowing begins on a day for which no numerically
corresponding Business Day in the calendar month at the end of the Interest
Period exists, then the Interest Period ends on the last Business Day of that
calendar month; (c) no Interest Period for any portion of Principal Debt may
extend beyond the scheduled repayment date for that portion of Principal Debt;
and (d) no more than ten Interest Periods may be in effect at one time.
3.10 CONVERSIONS. Subject to the dollar limits and denominations of
SECTION 2.1(b), Borrower may (a) convert a LIBOR-Rate Borrowing on the last day
of the applicable Interest Period to a Base-Rate Borrowing or a CD-Rate
Borrowing, (b) convert a CD-Rate Borrowing on the last day of an Interest Period
to a Base-Rate Borrowing or a LIBOR-Rate Borrowing, (c) convert a Base-Rate
Borrowing at any time to a CD-Rate Borrowing or a LIBOR-Rate Borrowing, and
(d) elect a new Interest Period for a CD-Rate Borrowing or a LIBOR-Rate
Borrowing, by telephonic request to Agent no later than 11:00 a.m. on the third
Business Day before the conversion date or the last day of the Interest Period,
as the case may be (for conversion to a CD-Rate Borrowing or a LIBOR-Rate
Borrowing or election of a new Interest Period), and no later than 11:00 a.m.
one Business Day before the last day of the Interest Period (for conversion to a
Base-Rate Borrowing). Borrower shall provide a Notice of Conversion to Agent no
later than two days after the date of the conversion. Absent Borrower's
telephonic request for conversion or election of a new Interest Period, a CD-
Rate Borrowing and a LIBOR-Rate Borrowing shall be deemed converted to a Base-
Rate Borrowing effective when the applicable Interest Period expires.
3.11 ORDER OF APPLICATION.
(a) NO DEFAULT. If no Default or Potential Default exists, any
payment shall be applied to the Obligations -- EXCEPT as otherwise
specifically provided in the Loan Documents -- in the order and manner as
Borrower directs.
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(b) DEFAULT. If a Default or Potential Default exists or if Borrower
fails to give direction, any payment (including proceeds from the exercise
of any Rights) shall be applied in the following order: (i) To all fees
and expenses for which Agent or Lenders have not been paid or reimbursed in
accordance with the Loan Documents (and if such payment is less than all
unpaid or unreimbursed fees and expenses, then the payment shall be paid
against unpaid and unreimbursed fees and expenses in the order of
incurrence or due date); (ii) to accrued interest on the Principal Debt;
(iii) to the Principal Debt outstanding under the Swing-Line Subfacility;
(iv) to any LC reimbursement obligations that are due and payable and that
remain unfunded by any Borrowing; (v) to the remaining Principal Debt in
the order as Determining Lenders may elect (but Determining Lenders agree
to apply proceeds in an order that will minimize any Funding Loss); (vi) to
the remaining Obligations in the order and manner Determining Lenders deem
appropriate; and (vii) as a deposit with Agent, for the benefit of Lenders,
as security for and payment of any subsequent LC reimbursement obligations.
(c) PRO RATA. Payments of the Principal Debt and accrued interest
due as of the Termination Date for those Lenders whose Commitments have not
been extended under SECTION 2.6 shall, if no Default or Potential Default
then exists, be paid to each of them in the proportion for each of those
Lenders that such Principal Debt and interest owed to it bears to such
Principal Debt and interest owed to all of those Lenders at that time.
Otherwise, each payment or prepayment shall be distributed to each Lender
in accordance with its Pro Rata Part of that payment or prepayment.
3.12 SHARING OF PAYMENTS, ETC.. If any Lender obtains any payment or
prepayment with respect to the Obligations (whether voluntary, involuntary,
or otherwise, including, without limitation, as a result of exercising its
Rights under SECTION 3.13) that exceeds the part of that payment or
prepayment that it is then entitled to receive under the Loan Documents, then
that Lender shall purchase from the other Lenders participations that will
cause the purchasing Lender to share the excess payment or prepayment ratably
with each other Lender. If all or any portion of any excess payment or
prepayment is subsequently recovered from the purchasing Lender, then the
purchase shall be rescinded and the purchase price restored to the extent of
the recovery. Borrower agrees that any Lender purchasing a participation
from another Lender under this section may, to the fullest extent permitted
by Law, exercise all of its Rights of payment (including the Right of offset)
with respect to that participation as fully as if that Lender were the direct
creditor of Borrower in the amount of that participation.
3.13 OFFSET. If a Default exists, each Lender is entitled to exercise (for
the benefit of all Lenders in accordance with SECTION 3.12) the Rights of offset
and banker's Lien against each and every account and other property, or any
interest therein, that any Company may now or hereafter have with, or which is
now or hereafter in the possession of, that Lender to the extent of the full
amount of the Obligations owed (directly or participated) to it.
3.14 BOOKING BORROWINGS. To the extent permitted by Law, any Lender may
make, carry, or transfer its Borrowings at, to, or for the account of any of its
branch offices or the office of any of its Affiliates. However, no Affiliate is
entitled to receive any greater payment under SECTION 3.16 than the transferor
Lender would have been entitled to receive with respect to those Borrowings.
3.15 BASIS UNAVAILABLE OR INADEQUATE FOR CD RATE, SWING RATE, OR LIBOR
RATE. If, on or before any date when a CD Rate, Swing Rate, or a LIBOR Rate is
to be determined for a Borrowing,
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Agent or any Lender determines (and Determining Lenders agree with that
determination) that the basis for determining the applicable rate is not
available or that the resulting rate does not accurately reflect the cost to
Lenders of making or converting Borrowings at that rate for the applicable
Interest Period, then Agent shall promptly notify Borrower and Lenders of
that determination (which is conclusive and binding on Borrower absent
manifest error) and the applicable Borrowing shall bear interest at the SUM
of the Base Rate PLUS the Applicable Margin. Until Agent notifies Borrower
that those circumstances no longer exist, Lenders' commitments under this
agreement to make, or to convert to, CD-Rate Borrowings, Swing Borrowings,
and LIBOR-Rate Borrowings, as the case may be, are suspended.
3.16 ADDITIONAL COSTS. Each Lender severally and not jointly agrees to
notify Agent, the other Lenders, and Borrower within one year after it has
actual knowledge that any circumstances exist that would give rise to any
payment obligation by Borrower under CLAUSES (a) through (c) below. Although no
Lender shall have any liability to Agent, any other Lender, or any Company for
its failure to give that notice, Borrower is not obligated to pay any amounts
under those clauses that arise, accrue, or are imposed more than one year before
that notice to the extent it is applicable to those amounts.
(a) RESERVES. With respect to any CD-Rate Borrowing, Swing
Borrowing, or LIBOR-Rate Borrowing (i) if any present or future Law
imposes, modifies, or deems applicable (or if compliance by any Lender with
any requirement of any Tribunal results in) any requirement that any
reserves (including, without limitation, any marginal, emergency,
supplemental, or special reserves) be maintained, and if (ii) those
reserves reduce any sums receivable by that Lender under this agreement or
increase the costs incurred by that Lender in advancing or maintaining any
portion of any CD-Rate Borrowing, Swing Borrowing, or LIBOR-Rate Borrowing,
then (iii) that Lender (through Agent) shall deliver to Borrower a
certificate setting forth in reasonable detail the calculation of the
amount necessary to compensate it for its reduction or increase (which
certificate is conclusive and binding absent manifest error), and
(iv) Borrower shall promptly pay that amount to that Lender upon demand.
The provisions of and undertakings and indemnification set forth in this
paragraph shall survive the satisfaction and payment of the Obligations and
termination of this agreement.
(b) CAPITAL ADEQUACY. With respect to any Borrowing or LC if any
present or future Law regarding capital adequacy or compliance by Agent (as
issuer of LCs) or any Lender with any request, directive, or requirement
now existing or hereafter imposed by any Tribunal regarding capital
adequacy, or any change in its written policies or in the risk category of
this transaction, reduces the rate of return on its capital as a
consequence of its obligations under this agreement to a level below that
which it otherwise could have achieved (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by it to be
material (and it may, in determining the amount, utilize reasonable
assumptions and allocations of costs and expenses and use any reasonable
averaging or attribution method), then (unless the effect is already
reflected in the rate of interest then applicable under this agreement)
Agent or that Lender (through Agent) shall notify Borrower and deliver to
Borrower a certificate setting forth in reasonable detail the calculation
of the amount necessary to compensate it (which certificate is conclusive
and binding absent manifest error), and Borrower shall promptly pay that
amount to Agent or that Lender upon demand. The provisions of and
undertakings and indemnification set forth in this paragraph shall survive
the satisfaction and payment of the Obligations and termination of this
agreement.
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(c) TAXES. Any Taxes payable by Agent or any Lender or ruled (by a
Tribunal) payable by Agent or any Lender in respect of this agreement or
any other Loan Document shall, if permitted by Law, be paid by Borrower,
together with interest and penalties, if any (except for Taxes payable on
the overall net income of Agent or that Lender and except for interest and
penalties incurred as a result of the gross negligence or willful
misconduct of Agent or any Lender). Agent or that Lender (through Agent)
shall notify Borrower and deliver to Borrower a certificate setting forth
in reasonable detail the calculation of the amount of payable Taxes, which
certificate is conclusive and binding (absent manifest error), and Borrower
shall promptly pay that amount to Agent for its account or the account of
that Lender, as the case may be. If Agent or that Lender subsequently
receives a refund of the Taxes paid to it by Borrower, then the recipient
shall promptly pay the refund to Borrower.
3.17 CHANGE IN LAWS. If any Law makes it unlawful for any Lender to make
or maintain CD-Rate Borrowings, Swing Borrowings, or LIBOR-Rate Borrowings, then
that Lender shall promptly notify Borrower and Agent, and (a) as to undisbursed
funds, that requested Borrowing shall be made as a Base-Rate Borrowing, and
(b) as to any outstanding Borrowing (i) if maintaining the Borrowing until the
last day of the applicable Interest Period is unlawful, the Borrowing shall be
converted to a Base-Rate Borrowing as of the date of notice, in which event
Borrower will not be required to pay any related Funding Loss, or (ii) if not
prohibited by Law, the Borrowing shall be converted to a Base-Rate Borrowing as
of the last day of the applicable Interest Period, or (iii) if any conversion
will not resolve the unlawfulness, Borrower shall promptly prepay the Borrowing,
without penalty or any related Funding Loss.
3.18 FUNDING LOSS. EXCEPT when excused under SECTION 3.17, Borrower agrees
to indemnify each Lender against, and pay to it upon demand, any Funding Loss of
that Lender. When any Lender demands that Borrower pay any Funding Loss, that
Lender shall deliver to Borrower and Agent a certificate setting forth in
reasonable detail the basis for imposing Funding Loss and the calculation of the
amount, which calculation is conclusive and binding absent manifest error. The
provisions of and undertakings and indemnification set forth in this paragraph
shall survive the satisfaction and payment of the Obligations and termination of
this agreement.
3.19 FOREIGN LENDERS, PARTICIPANTS, AND ASSIGNEES. Each Lender,
Participant (by accepting a participation interest under this agreement), and
Assignee (by executing an Assignment and Assumption Agreement) that is not
organized under the Laws of the United States of America or one of its states
(a) represents to Agent and Borrower that (i) no Taxes are required to be
withheld by Agent or Borrower with respect to any payments to be made to it in
respect of the Obligations and (ii) it has furnished to Agent and Borrower two
duly completed copies of either U.S. Internal Revenue Service FORM 4224, FORM
1001, FORM W-8, or any other form acceptable to Agent that entitles it to
exemption from U.S. federal withholding Tax on all interest payments under the
Loan Documents, and (b) covenants to (i) provide Agent and Borrower a new FORM
4224, FORM 1001, FORM W-8, or other form acceptable to Agent upon the expiration
or obsolescence of any previously delivered form according to Law, duly executed
and completed by it, and (ii) comply from time to time with all Laws with regard
to the withholding Tax exemption. If any of the foregoing is not true or the
applicable forms are not provided, then Borrower and Agent (without duplication)
may deduct and withhold from interest payments under the Loan Documents any
United States federal-income Tax at the maximum rate under the Code.
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SECTION 4 FEES.
4.1 TREATMENT OF FEES. The fees described in this SECTION 4 (a) are not
compensation for the use, detention, or forbearance of money, (b) are in
addition to, and not in lieu of, interest and expenses otherwise described in
this agreement, (c) are payable in accordance with SECTION 3.1(b) and (c),
(d) are non-refundable, (e) to the fullest extent permitted by Law, bear
interest, if not paid when due, at the Default Rate, and (f) with respect to the
fees referenced in SECTION 4.3 and 4.4, are calculated on the basis of actual
number of days (including the first day but excluding the last day) elapsed, as
if each calendar year consisted of 360 days, unless computation would result in
an interest rate to be deemed to exist (notwithstanding the foregoing) in excess
of the Maximum Rate in which event the computation is made on the basis of a
year of 365 or 366 days, as the case may be.
4.2 FEES TO AGENT AND AFFILIATES. Borrower shall pay to Agent and its
Affiliates that Agent may designate the arrangement/structuring fee and annual
administrative fee described in the letter agreement (as it may be renewed,
extended, or modified) dated as of September 19, 1996, between Borrower, Agent,
and NationsBanc Capital Markets, Inc. Those fees are solely for the account of
Agent and its Affiliates EXCEPT to the extent that Agent may agree in writing
with any Lender in respect of that arrangement/structuring fee.
4.3 LC FEES. As a condition precedent to the issuance (including, without
limitation, the extension) of each LC, Borrower shall pay to Agent:
(a) For the account of each Lender according to each Lender's
Commitment Percentage on the day the fee is payable: (i) for a documentary
LC (or any BA into which a documentary LC is converted), an issuance fee of
0.625% per annum of the face amount of the LC (or BA, as the case may be)
payable on the date of issuance; (ii) for standby LCs under either of the
Reimbursement Agreements referred to as ITEMS 2 and 3 on SCHEDULE 9.2, the
LC fees required by and payable in accordance with those agreements; and
(iii) for any other standby LC, an issuance fee payable on the date of
issuance (and on each anniversary date of issuance if it has a tenor of
more than one year) equal to a percentage per annum of the face amount of
that LC equal to the Applicable Margin in effect for LIBOR-Rate Borrowings
on the date of issuance (or anniversary date, as the case may be); and
(b) For the account of Agent and Issuing Lender only (i) on the day
of each issuance of any LC, a fronting fee of 0.125% per annum of the face
amount of the LC, and (ii) all normal and customary out of pocket expenses
and miscellaneous charges of Agent which are subject to change at any time
without notice to Borrower EXCEPT any notice given generally to Agent's
similarly-situated customers.
On the Closing Date, Agent shall pay to each Lender that Lender's Pro Rata Part
of that portion of any LC fees Agent has received from Borrower under the
Reimbursement Agreements referred to in CLAUSE (a)(ii) above for the period from
the Closing Date through December 28, 1996. Otherwise, all LC and other fees
paid to Agent or any other parties before the date of this agreement in respect
of any Existing LCs are solely for the account of those parties without any
accounting for them or sharing of them with Agent or Lenders notwithstanding any
contrary provision in this agreement.
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4.4 COMMITMENT FEE. From and after the Closing Date, Borrower shall pay
to Agent a commitment fee for Lenders according to each Lender's Commitment
Percentage. The fee is payable as it accrues on the last Business Day of each of
the fiscal months of March, June, September, and December -- commencing on the
first of those dates that follows the date of this agreement -- and on the
Termination Date. Each payment of the fee is equal to the following, determined
for the fiscal quarter (or portion of a fiscal quarter commencing on the date
of this agreement or ending on the Termination Date) preceding and including the
date it is due: from the Closing Date until the Termination Date, the product of
the Applicable Percentage multiplied by the amount by which (i) the total
Commitments exceed (ii) the sum of the average-daily Principal Debt under the
Notes (less the sum of the average daily amount of Swing Borrowings outstanding)
plus the average-daily LC Exposure for standby LCs.
4.5 RESTATEMENT FEE. As a condition precedent to the effectiveness of
this restatement, Borrower shall pay to each Lender on its Pro-Rata Part of the
Commitment if such Commitment is $20,000,000, or greater, 15 basis points, and
if such Commitment is between $10,000,000 and $20,000,000, 10 basis points.
SECTION 5 SECURITY.
5.1 GUARANTY. Borrower shall cause each of its present and future
(whether under SECTIONS 9.8 or 9.11 or otherwise) Subsidiaries to
unconditionally guarantee the full payment and performance of the Obligations by
execution of a Guaranty (OTHER THAN any foreign Subsidiary the execution of a
Guaranty by which would create a material Tax obligation for the Companies that
would not otherwise exist).
5.2 COLLATERAL. Borrower shall cause full payment and performance of the
Obligations to be secured by Lender Liens on all of the items and types of
property (TOGETHER WITH its proceeds, the "COLLATERAL") described in the present
and future Loan Documents creating Lender Liens, including, without limitation:
(a) Present and future accounts receivable and inventory of each
present and future (whether under SECTIONS 9.8 or 9.11 or otherwise)
Company (OTHER THAN any foreign Company the granting of Lender Liens by
which would create a material Tax obligation for the Companies that would
not otherwise exist);
(b) (i) 100% of the present and future capital stock of all of
Borrower's present and future (whether under SECTIONS 9.8 or 9.11 or
otherwise) domestic Subsidiaries and (ii) approximately all (but not less
than 65%) of the present and future (whether under SECTIONS 9.8 or 9.11 or
otherwise) capital stock of all of Borrower's present and future (whether
under SECTIONS 9.8 or 9.11 or otherwise) foreign Subsidiaries the pledge of
which would not create a material Tax obligation for the Companies that
would not otherwise exist.
5.3 CREATION OF LIENS AND FURTHER ASSURANCES. Borrower covenants and
agrees that the Lender Liens described in SECTION 5.2 shall be created and
perfected as a condition to funding any Borrowings or issuance of any LC.
Furthermore, Borrower shall -- and shall cause each other appropriate Company
to -- perform the acts, duly authorize, execute, acknowledge, deliver, file, and
record any additional writings, and pay all filings fees and costs as Agent or
Determining Lenders may reasonably deem appropriate or necessary to perfect and
maintain the Lender Liens and preserve and protect the Rights of Agent and
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Lenders under any Loan Document, including, without limitation, furnishing the
items in PART B on SCHEDULE 6 by the deadlines specified in SCHEDULE 6 or
elsewhere in the Loan Documents.
5.4 COLLATERAL RELEASE. Agent shall release the Lender Liens on the
Collateral described in SECTIONS 5.2(a)and (b)(i) -- but not in SECTION
5.2(b)(ii) (unless the foreign Tax Laws change to permit execution of a security
agreement and guaranty by each such foreign Subsidiary pursuant to SECTION 5.6)
or the Liens described as ITEMS 9 and 10 on SCHEDULE 9.5 -- if no Default or
Potential Default exists and if the Release Rating is satisfied for Borrower,
Borrower requests the release, and Borrower delivers to Agent properly completed
(but for Agent's execution and, if necessary, acknowledgment) release documents
in form and substance satisfactory to Agent.
5.5 ADDITIONAL COMPANIES.
(a) ADDITIONAL GUARANTIES AND LENDER LIENS. As required by SECTION
5.1, 5.2, 8.11, and 9.8 and possible other provisions in the Loan Documents
(i) Pillowtex, Inc., PHC, and PMSC have all unconditionally guaranteed the
full payment and performance of the Obligations, (ii) Borrower has created
Lender Liens upon all of the issued and outstanding capital stock of
Pillowtex, Inc. and PHC, (iii) PHC has created Lender Liens on all of the
beneficial ownership of PMSC (which Agent and Lenders agree was not subject
to Lender Liens at any time when owned by Borrower), and (iv) Beacon,
Tennessee Woolen Mills, Inc., Manetta Home Fashions, Inc., Pillowtex, Inc.,
PHC, and PMSC have (A) acknowledged in writing that all assets -- limited,
in the case of PMSC, as provided in SECTION 5.5(b) below (and capital stock
transferred to them) continue to be subject to pre-existing Lender Liens
(to the extent of those Lender Liens) already encumbering those assets and
stock and (B) have created Lender Liens upon all of their respective
present and future accounts receivable and inventory.
(b) LIEN LIMITATION. SCHEDULE 5.5 is a list of inventory transferred
by Borrower to PMSC. Notwithstanding any contrary provision in any Loan
Document other than SECTION 5.5(c), the Lender Liens on the inventory
listed on SCHEDULE 5.5 are limited -- effective as of March 30, 1996,
immediately before those transfers to PMSC by Borrower -- so that they only
secure an amount of the Obligations equal to the amount corresponding to
Borrower's tax basis, which tax basis is reflected on SCHEDULE 5.5. The
limitation in this SECTION 5.5(b) applies only to the inventory on hand as
of March 30, 1996, and not to any other present or future assets now or in
the future created or owned by PMSC.
(c) NO LIEN LIMITATION. Notwithstanding SECTION 5.5(b) or any amounts
described on SCHEDULE 5.5, if at any time the ratio of the Companies'
consolidated Funded Debt to EBITDA ever exceeds 4.50 to 1.00 or if a
Default exists that has resulted in a termination of the commitments of
Lenders to extend credit under this agreement, then -- in any of those
events and automatically without further action by any Person -- the
limitation of the Lender Liens in SECTION 5.5(b) no longer is effective and
the Lender Liens on the assets and groups of assets described on SCHEDULE
5.5 secure the full payment and performance of the full Obligations.
5.6 CHANGE IN TAX LAWS. Notwithstanding anything to the contrary set
forth in this SECTION 5, in the event the Tax Laws regarding foreign
Subsidiaries are changed to remove the creation of a material Tax Obligation
against the foreign Subsidiary, each such foreign Subsidiary may, at Borrower's
and Subsidiary's discretion execute a Guaranty and Security Agreement to provide
Lender with a security
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interest in all of its present and future accounts receivable and inventory
in exchange for a release of its pledge of securities.
SECTION 6 CONDITIONS PRECEDENT AND SUBSEQUENT.
6.1 CONDITIONS PRECEDENT. No Lender is obligated to fund the initial
Borrowing and Agent is not obligated to issue any LC unless Agent has received
all of the items described in PART A on SCHEDULE 6. In addition, no Lender is
obligated to fund (as opposed to continue or convert) any Borrowing and Agent is
not obligated to issue any LC or Fund any Swing Borrowing, as the case may be,
unless on the applicable Borrowing Date, issue date, or creation date (and after
giving effect to the requested Borrowing or LC), as the case may be: (a) Agent
timely receives a Borrowing Request or LC Request (together with the applicable
LC Agreement), as the case may be; (b) Agent receives any applicable LC fee;
(c) all of the representations and warranties of the Companies in the Loan
Documents are true and correct in all material respects (unless they speak to a
specific date or are based on facts which have changed by transactions
contemplated or expressly permitted by this agreement); (d) no Material Adverse
Event, Default, or Potential Default exists; (e) the funding of the Borrowing or
issuance of the LC, as the case may be, is permitted by Law; (f) no limitation
in SECTION 2.1, 2.3, or 2.4 is exceeded; and (g) completion by Borrower of the
issuance of the Senior Subordinated Debt. Each Borrowing Request and LC
Request, however delivered, constitutes Borrower's representation and warranty
that the conditions in CLAUSES (c) through (g) above are satisfied. Upon
Agent's or any Lender's reasonable request, Borrower shall deliver to Agent or
such Lender evidence substantiating any of the matters in the Loan Documents
that are necessary to enable Borrower to qualify for the Borrowing or LC, as the
case may be. Each condition precedent in this agreement (including, without
limitation, those on SCHEDULE 6) is material to the transactions contemplated by
this agreement, and time is of the essence with respect to each condition
precedent.
6.2 CONDITIONS SUBSEQUENT. Not later than 45 days after the Closing Date,
Borrower will cause Pillowtex de Mexico S. de R.L. de C.V. to execute a Security
Agreement. Additionally, in connection with the delivery of such Security
Agreement, Borrower will obtain a legal opinion from Mexico counsel as to those
items set forth on EXHIBIT E-2.
SECTION 7 REPRESENTATIONS AND WARRANTIES.** Borrower represents and warrants to
Agent and Lenders as follows:
7.1 PURPOSE. Borrower will use proceeds (which includes the LC
Subfacility) and Swing-Line Subfacility for (i) refinancing certain existing
Debt, (ii) the Companies' working capital and general corporate purposes, (iii)
issuance of standby or documentary LCs, (iv) capital expenditures in the
ordinary course of business, (v) financing a portion of the Fieldcrest Asset
Acquisition, and (vi) investments, purchase prices, payment of certain Funded
Debt, or any combination of them in connection with Permitted Acquisitions. No
Company is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying any
"MARGIN STOCK" within the meaning of
** All references in Sections 7, 8, and 9 to each Company's corporate
existence, qualification, good standing, corporate charter, and bylaws are
modified in respect of PMSC to apply (to the extent applicable) to its
trust existence, certificate of trust, and declaration of trust.
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REGULATION U of the Board of Governors of the Federal Reserve System, as
amended. No part of the proceeds of any LC draft or drawing or Borrowing will
be used, directly or indirectly, for a purpose that violates any Law, including,
without limitation, REGULATION U.
7.2 CORPORATE EXISTENCE, GOOD STANDING, AND AUTHORITY. Each Company is
duly organized, validly existing, and in good standing under the Laws of its
jurisdiction of incorporation. Except where not a Material Adverse Event, each
Company (a) is (and after the Fieldcrest Asset Acquisition will be) duly
qualified to transact business and is in good standing as a foreign corporation
in each jurisdiction where the nature and extent of its business and properties
require due qualification and good standing (each of which jurisdictions is
identified on SCHEDULE 6), and (b) possesses (and after the Acquisition will
possess) all requisite authority and power to conduct its business as is now
being, or is contemplated by this agreement to be, conducted.
7.3 SUBSIDIARIES AND NAMES. Borrower has no Subsidiaries except as
disclosed on SCHEDULE 7.3 and as otherwise disclosed in writing to Agent and
Lenders from time to time after the date of this agreement to reflect any
changes to the schedule as a result of transactions permitted by this agreement.
All of the outstanding shares of capital stock (or similar voting interests) of
Borrower's Subsidiaries are (a) duly authorized, validly issued, fully paid, and
nonassessable, (b) owned of record and beneficially as described in that
schedule or those writings, free and clear of any Liens, restrictions, claims,
or Rights of another Person EXCEPT Permitted Liens, and (c) not subject to any
warrant, option, or other acquisition Right of any Person or subject to any
transfer restriction EXCEPT restrictions imposed by securities Laws and general
corporate Laws. Except as disclosed on SCHEDULE 7.3, no Company has changed its
corporate name within the four-month period before the Closing Date.
7.4 AUTHORIZATION AND CONTRAVENTION. The execution and delivery by each
Company of each Loan Document to which it is a party, the performance by it of
its obligations under those Loan Documents, and, to the extent applicable, its
completion of the Fieldcrest Asset Acquisition (a) are within its corporate
power, (b) have been duly authorized by all necessary corporate action,
(c) require no action by or filing with any Tribunal (EXCEPT any action or
filing that has been taken or made on or before the Closing Date), (d) do not
violate any provision of its charter or bylaws, (e) do not violate any provision
of Law applicable to it EXCEPT violations that individually or collectively are
not a Material Adverse Event, and (f) do not violate any material agreements to
which it is a party EXCEPT violations that are not a Material Adverse Event.
7.5 BINDING EFFECT. Upon execution and delivery by all parties to it,
each Loan Document will constitute a legal and binding obligation of each
Company party to it, enforceable against it in accordance with that Loan
Document's terms EXCEPT as that enforceability may be limited by Debtor Relief
Laws and general principles of equity.
7.6 FINANCIAL STATEMENTS. The Current Financials were prepared in
accordance with GAAP and present fairly, in all material respects, the
Companies' consolidated financial condition, results of operations, and cash
flows as of, and for the portion of the fiscal year ending on their dates
(subject only to normal year-end adjustments for interim statements). All
material liabilities of the Companies as of those dates are reflected in those
Current Financials or in the notes to them or have otherwise been disclosed to
Lenders in writing. Except for transactions directly related to, specifically
contemplated by, or expressly permitted by the Loan Documents and the Fieldcrest
Asset Acquisition, (a) no material adverse changes have occurred in the
Companies' consolidated financial condition from that shown in the Current
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Financials, and (b) no Company has incurred any material liability EXCEPT Debt
that is not prohibited by the Loan Documents.
7.7 LITIGATION. EXCEPT where not a Material Adverse Event (a) no Company
is subject to, or aware of the threat of, any Litigation that is reasonably
likely to be determined adversely to any Company and (b) no outstanding or
unpaid judgments against any Company exist.
7.8 TAXES. EXCEPT where not a Material Adverse Event (a) all Tax returns
of each Company required to be filed have been filed (or extensions have been
granted) before delinquency, and (b) all Taxes imposed (including after the
Fieldcrest Asset Acquisition) upon each Company that are due and payable have
been paid before delinquency.
7.9 ENVIRONMENTAL MATTERS. EXCEPT where not a Material Adverse Event, no
Company (a) knows of any environmental condition or circumstance adversely
affecting any Company's properties or operations, (b) has received any report of
any Company's violation (or, to Borrower's knowledge, any Predecessor's
violation) of any Environmental Law, or (c) knows that any Company is under any
obligation to remedy any violation of any Environmental Law. Each Company has
taken prudent steps to determine that its properties and operations doe not
violate any Environmental Law, except violations that are not a Material Adverse
Event.
7.10 EMPLOYEE PLANS. EXCEPT where not a Material Adverse Event (a) no
Employee Plan has incurred an "ACCUMULATED FUNDING DEFICIENCY" (as defined in
SECTION 302 of ERISA or SECTION 412 of the Code), (b) no Company has incurred
liability -- EXCEPT for liabilities for premiums that have been paid or that are
not past due -- under ERISA to the PBGC in connection with any Employee Plan,
(c) no Company has withdrawn in whole or in part from participation in a
Multiemployer Plan, (d) no Company has engaged in any "PROHIBITED TRANSACTION"
(as defined in SECTION 406 of ERISA or SECTION 4975 of the Code), (e) no
"REPORTABLE EVENT" (AS DEFINED IN SECTION 4043 of ERISA) has occurred, excluding
events for which the notice requirement is waived under applicable PBGC
regulations, (f) no Company or Affiliate of any Company has any liability under
or is subject to any Lien under ERISA, the Code, or any similar provisions of
any Law of Canada or any of its provinces to or on account of any employee
benefit plan, program, scheme, or arrangement established or maintained by any
Company or Affiliate of any Company or to which any Company or any Affiliate of
any Company contributes or had an obligation to contribute, (g) each Employee
Plan complies in all material respects, both in form and operation, with ERISA
and the Code, and (h) no Multiemployer Plan is in reorganization within the
meaning of Section 418 of the Code.
7.11 PROPERTIES; LIENS. Each Company has indefeasible title to all its
property reflected on the Current Financials EXCEPT for property that is
obsolete or that has been disposed of in the ordinary course of business between
the date of the Current Financials and the date of this agreement or, after the
date of this agreement, as permitted by SECTION 9.10 or SECTION 9.11. The
Companies will acquire indefeasible title to all of the property proposed to be
conveyed to the Companies under the Asset Purchase Agreement. No Lien exists on
any property of any Company EXCEPT Permitted Liens. No Company is party or
subject to any agreement, instrument, or order which in any way restricts any
Company's ability to allow Liens to exist upon any of its assets EXCEPT relating
to Permitted Liens.
7.12 GOVERNMENT REGULATIONS. No Company is subject to regulation under the
INVESTMENT COMPANY ACT OF 1940, as amended, or the PUBLIC UTILITY HOLDING
COMPANY ACT OF 1935, as amended.
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7.13 TRANSACTIONS WITH AFFILIATES. No Company is a party to a material
transaction with any of its Affiliates (excluding other Obligated Companies)
EXCEPT transactions in the ordinary course of business and upon fair and
reasonable terms not materially less favorable than it could obtain or could
become entitled to in an arm's-length transaction with a Person that was not its
Affiliate.
7.14 DEBT. No Company has any Debt EXCEPT Permitted Debt.
7.15 LEASES. EXCEPT where not a Material Adverse Event (a) each Company
enjoys peaceful and undisturbed possession of all leases necessary for the
operation of its properties and assets, none of which contains any unusual or
burdensome provisions which might materially affect or impair the operation of
those properties and assets, and (b) all material leases under which any Company
is a lessee are in full force and effect, and to the knowledge of Borrower, no
default -- or event that, with notice, time lapse, or both, would become a
default -- exists.
7.16 INSURANCE. Each Company maintains with financially sound,
responsible, and reputable insurance companies or associations -- or, as to
workers' compensation or similar insurance, with an insurance fund or by
self-insurance authorized by the jurisdictions in which it operates -- insurance
concerning its properties and businesses against casualties and contingencies
and of types and in amounts (and with co-insurance and deductibles) as is
customary in the case of similar businesses.
7.17 LABOR MATTERS. EXCEPT where not a Material Adverse Event (a) no
actual or threatened strikes, labor disputes, slow downs, walkouts, work
stoppages, or other concerted interruptions of operations that involve any
employees employed at any time in connection with the business activities or
operations at the Real Property exist, (b) hours worked by and payment made to
the employees of any Company or (to Borrower's knowledge) any Predecessor have
not been in violation of the FAIR LABOR STANDARDS ACT or any other applicable
Laws pertaining to labor matters, (c) all payments due from any Company for
employee health and welfare insurance, including, without limitation, workers
compensation insurance, have been paid or accrued as a liability on its books,
(d) the business activities and operations of each Company are in compliance
with OSHA and other applicable health and safety Laws.
7.18 INTELLECTUAL PROPERTY. Each Company owns or has the right to use
all material licenses, patents, patent applications, copyrights, service marks,
trademarks, trademark applications and trade names necessary to continue to
conduct its businesses as presently conducted by it and proposed to be conducted
by it immediately after the date of this agreement. Each Company is conducting
its business without infringement or claim of infringement of any license,
patent, copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of others, OTHER THAN any infringements or claims
that, if successfully asserted against or determined adversely to any Company,
would not, individually or collectively, constitute a Material Adverse Event.
To the knowledge of any Company, no infringement or claim of infringement by
others of any material license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property of any Company exists.
7.19 SOLVENCY. On each Borrowing Date and the date any LC is issued, each
Company is -- and after giving effect to the requested Borrowing or LC and the
Fieldcrest Asset Acquisition will be -- Solvent.
7.20 FULL DISCLOSURE. Each fact or condition relating to the Loan
Documents, any Company's financial condition, business, or property, or the
Fieldcrest Asset Acquisition that is a Material Adverse
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Event has been disclosed in writing to Agent. All information previously
furnished by any Company to Agent in connection with the Loan Documents was
- -- and all information furnished in the future by any Company to Agent will
be -- true and accurate in all material respects or based on reasonable
estimates on the date the information is stated or certified.
7.21 FIELDCREST ASSET ACQUISITION. Borrower shall use its best efforts
to consummate the Fieldcrest Asset Acquisition on or before 45 days after the
Closing Date.
SECTION 8 AFFIRMATIVE COVENANTS.** From the Closing Date -- for purposes of
SECTIONS 8.2 and 8.11 -- or from the date of this agreement -- for all other
provisions in this SECTION 8 -- and for so long as any Lender is committed to
lend or issue LCs under this agreement and until the Obligations have been paid
in full, Borrower covenants and agrees with Agent and Lenders that, without
first obtaining Agent's written notice of Determining Lenders' consent to the
contrary:
8.1 CERTAIN ITEMS FURNISHED. Borrower shall furnish the following to
each Lender:
(a) ANNUAL FINANCIALS, ETC. Promptly after preparation but no later
than 90 days after the last day of each fiscal year of Borrower, Financial
Statements showing the Companies' consolidated financial condition and
results of operations as of, and for the year ended on, that last day,
accompanied by:
(i) the unqualified opinion of KPMG Peat Marwick or other firm of
nationally-recognized independent certified public accountants
reasonably acceptable to Determining Lenders, based on an audit using
generally accepted auditing standards, that the consolidated portion
of those Financial Statements were prepared in accordance with GAAP
and present fairly, in all material respects, the Companies'
consolidated financial condition and results of operations; and
(ii) a certificate from a Responsible Officer of Borrower certifying
that those Financial Statements were prepared in accordance with GAAP
and present fairly the Companies' consolidated financial condition and
results of operations.
(b) QUARTERLY FINANCIALS, ETC. Promptly after preparation but no
later than 45 days after the last day of each fiscal quarter of Borrower,
Financial Statements showing the Companies' consolidated financial
condition and results of operations for that fiscal quarter and for the
period from the beginning of the current fiscal year to the last day of
that fiscal quarter, accompanied by (i) a Compliance Certificate and (ii) a
summary form, reasonably acceptable to Agent, of the Companies'
consolidated-accounts-receivable aging.
(c) FINANCIAL PROJECTIONS. No later than 120 days after the end of
each fiscal year of the Companies, financial projections of the Companies
for the next succeeding three-year period, in the form reasonably
satisfactory to Agent, setting forth management's projections for each
fiscal quarter of the next-succeeding-fiscal year and on a yearly basis
thereafter.
** All references in Sections 7, 8, and 9 to each Company's corporate
existence, qualification, good standing, corporate charter, and bylaws are
modified in respect of PMSC to apply (to the extent applicable) to its
trust existence, certificate of trust, and declaration of trust.
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(d) OTHER REPORTS. Promptly after preparation and distribution,
accurate and complete copies of all reports and other material
communications about material financial matters or material corporate plans
or projections by or for any Company for distribution to any Tribunal or
any existing or potential creditor (i) including, without limitation, each
FORM 10-K, 10-Q, and S-8 filed with the Securities and Exchange Commission
but (ii) excluding (A) credit, trade, and other reports prepared and
distributed in the ordinary course of business, and (B) information
otherwise furnished to Agent and Lenders under this agreement.
(e) EMPLOYEE PLANS. As soon as possible and within 30 days after
Borrower knows or has reason to know that any event which would constitute
a reportable event under SECTION 4043(b) of TITLE IV of ERISA with respect
to any Company's employee pension or other benefit plan subject to ERISA
has occurred, or that the PBGC has instituted or will institute proceedings
under ERISA to terminate that plan, deliver a certificate of a Responsible
Officer of Borrower setting forth details as to that reportable event and
the action which the Companies propose to take with respect to it, together
with a copy of any notice of that reportable event which may be required to
be filed with the PBGC, or any notice delivered by the PBGC evidencing its
intent to institute those proceedings or any notice to the PBGC that the
plan is to be terminated, as the case may be. For all purposes of this
section, Borrower is deemed to have all knowledge or knowledge of all
facts attributable to the plan administrator under ERISA.
(f) OTHER NOTICES. Notice -- promptly after Borrower knows -- of
(i) the existence and status of any Litigation that, if determined
adversely to any Company, would be a Material Adverse Event, (ii) any
change in any material fact or circumstance represented or warranted by any
Company in any Loan Document, (iii) a Default or Potential Default,
specifying the nature thereof and what action the Companies have taken, are
taking, or propose to take.
(g) APPRAISALS. Promptly after any Companies obtains them, any
appraisals of any of the assets acquired under the Asset Purchase
Agreement.
(h) OTHER INFORMATION. Promptly when reasonably requested by Agent
or any Lender, such information (not otherwise required to be furnished
under this agreement) about any Company's business affairs, assets, and
liabilities.
8.2 USE OF PROCEEDS. Borrower shall use the proceeds of Borrowings only
for the purposes represented in this agreement.
8.3 BOOKS AND RECORDS. Each Company shall maintain books, records, and
accounts necessary to prepare financial statements in accordance with GAAP.
8.4 INSPECTIONS. Upon reasonable request, each Company shall allow Agent
or any Lender (or their respective Representatives) to inspect any of its
properties, to review reports, files, and other records and to make and take
away copies, to conduct tests or investigations, and to discuss any of its
affairs, conditions, and finances with its other creditors, directors, officers,
employees, or representatives from time to time, during reasonable business
hours. Any reviews and investigations shall be limited to matters relevant to
the present or future financial condition of the Companies and their compliance
with -- or ability to comply with -- the Loan Documents.
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8.5 TAXES. Each Company shall promptly pay when due any and all Taxes
EXCEPT Taxes that are being contested in good faith by lawful proceedings
diligently conducted, against which reserve or other provision required by GAAP
has been made, and in respect of which levy and execution of any Lien has been
and continues to be stayed.
8.6 PAYMENT OF OBLIGATIONS. Each Company shall promptly pay (or renew and
extend) all of its material obligations as they become due (unless the
obligations are being contested in good faith by appropriate proceedings).
8.7 EXPENSES. Borrower shall promptly pay upon demand (a) all costs,
fees, and expenses paid or incurred by Agent incident to any Loan Document
(including, without limitation, the reasonable fees and expenses of Agent's
counsel in connection with the negotiation, preparation, delivery, and execution
of the Loan Documents and any related amendment, waiver, or consent) and (b) all
reasonable costs and expenses incurred by Agent or any Lender in connection with
the enforcement of the obligations of any Company under the Loan Documents or
the exercise of any Rights under the Loan Documents (including, without
limitation, reasonable allocated costs of in-house counsel, other reasonable
attorneys' fees, and court costs), all of which are part of the Obligations,
bearing interest, if not paid upon demand, at the Default Rate until paid.
8.8 MAINTENANCE OF EXISTENCE, ASSETS, AND BUSINESS. Each Company shall
(a) EXCEPT in connection with mergers and consolidations permitted under
SECTION 9.11, maintain its corporate existence and good standing in its state of
incorporation, and (b) EXCEPT where not a Material Adverse Event (i) maintain
its authority to transact business and good standing in all other states, (ii)
maintain all licenses, permits, and franchises necessary for its business, and
(iii) keep all of its assets that are useful in and necessary to its business in
good working order and condition (ordinary wear and tear excepted) and make all
necessary repairs and replacements.
8.9 INSURANCE. Each Company shall, at its cost and expense, maintain the
insurance described in SECTION 7.16.
8.10 ENVIRONMENTAL MATTERS.
(a) Borrower shall furnish to Agent and Lenders (i) a copy of all
future Environmental Reports, if any, and reports or notices to any
Tribunal about any Release of Hazardous Substances, if any, in any
Company's possession or prepared by or on behalf of any Company in respect
of any Real Property, and (ii) a report within five Business Days after any
Company first has knowledge or reason to believe that any unreported
Release of a Hazardous Substance has occurred at any Real Property that (A)
requires or has resulted in any report or other notice to any Tribunal
under any Environmental Law or (B) results or threatens to result in the
presence of any Hazardous Substance in the environment in a quantity,
concentration, state, or other condition that substantially exceeds any
applicable standard for the protection of human health or the environment
under any Environmental Law.
(b) Borrower shall -- and shall cause each other Company to -- (i)
obtain and keep in effect all Environmental Permits in substantial
compliance with all Environmental Laws, (ii) operate and manage its
businesses, processes, and other activities in substantial compliance with
all Environmental Laws, Environmental Permits, and Environmental Indemnity
Agreements and
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in a manner to avoid incurring Environmental Liabilities, to prevent any
Release of Hazardous Substances in any material amounts or in substantial
violation of any Environmental Law, and to minimize the risk of loss or
damage in the event of any Release of Hazardous Substances, (iii) keep each
Environmental Indemnity Agreement in full force and effect according to its
terms, take all steps that may be necessary or appropriate to timely assert
and receive payment or all claims under it, and (to the extent that the
material remediation or indemnity protections or benefits provided by it
would be jeopardized) not consent to any modification or amendment of any
Environmental Indemnity Agreement or waive, compromise, settle, or
otherwise release or discharge any obligation or indemnity of any
indemnitor or other obligor under it, and (iv) continuously and diligently
carry out such removal, remedial, or other response actions as may be
necessary or appropriate (A) in respect of each matter that constitutes
substantial non-compliance with any Environmental Law and (B) to prevent or
minimize potential Environmental Liabilities from any of those matters or
any Release of Hazardous Substances.
8.11 SUBSIDIARIES. Borrower shall cause each present and future Subsidiary
of Borrower (whether as a result of acquisition, creation, or otherwise) to
become an Obligated Company.
8.12 INDEMNIFICATION.
(a) THE COMPANIES SHALL, JOINTLY AND SEVERALLY INDEMNIFY AGENT AND
LENDERS AND THEIR RESPECTIVE PARENTS, SUBSIDIARIES, DIRECTORS, OFFICERS,
EMPLOYEES, REPRESENTATIVES, AGENTS, SUCCESSORS, ASSIGNS, AND ATTORNEYS
(COLLECTIVELY, THE "INDEMNIFIED PARTIES"), PROTECT AND DEFEND (WITH COUNSEL
REASONABLY ACCEPTABLE TO DETERMINING LENDERS) AGAINST, HOLD THEM HARMLESS
FROM AND AGAINST, AND ON DEMAND PAY OR REIMBURSE THEM FOR ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, CLAIMS, AND PROCEEDINGS AND ALL COSTS, EXPENSES (INCLUDING, WITHOUT
LIMITATION, ALL REASONABLE ATTORNEYS' FEES AND LEGAL EXPENSES WHETHER OR
NOT SUIT IS BROUGHT), AND DISBURSEMENTS OF ANY KIND OR NATURE (THE
"INDEMNIFIED LIABILITIES") THAT MAY AT ANY TIME BE IMPOSED ON, INCURRED BY,
OR ASSERTED AGAINST THE INDEMNIFIED PARTIES, IN ANY WAY RELATING TO OR
ARISING OUT OF (i) ANY LOAN DOCUMENT, (ii) THE FIELDCREST ASSET ACQUISITION
OR ANY OTHER TRANSACTION CONTEMPLATED BY ANY LOAN DOCUMENT, (iii) ANY
COLLATERAL, (iv) ANY REAL PROPERTY, (v) ANY ENVIRONMENTAL LIABILITY IN ANY
WAY RELATED TO ANY COMPANY, PREDECESSOR, COLLATERAL, REAL PROPERTY, OR ANY
ACT, OMISSION, STATUS, OWNERSHIP, OR OTHER RELATIONSHIP, CONDITION, OR
CIRCUMSTANCE CONTEMPLATED BY, CREATED UNDER, OR ARISING PURSUANT TO OR IN
CONNECTION WITH ANY LOAN DOCUMENT OR THE FIELDCREST ASSET ACQUISITION, OR
(vi) ANY INDEMNIFIED PARTY'S SOLE OR CONCURRENT ORDINARY NEGLIGENCE.
(b) THE FOREGOING PROVISIONS (i) ARE NOT LIMITED IN AMOUNT, EVEN IF
THAT AMOUNT EXCEEDS THE AMOUNT OF THE OBLIGATIONS, (ii) INCLUDE, WITHOUT
LIMITATION, REASONABLE FEES AND EXPENSES OF ATTORNEYS AND OTHER COSTS OR
EXPENSES OF LITIGATION OR OF PREPARING FOR LITIGATION, DAMAGES OR INJURY TO
PERSONS, PROPERTY, OR NATURAL RESOURCES ARISING UNDER ANY STATUTORY OR
COMMON LAW, PUNITIVE DAMAGES, FINES, AND OTHER PENALTIES, AND LOSS OF VALUE
OF ANY REAL PROPERTY OR COLLATERAL, (iii) ARE NOT AFFECTED BY ANY ACT OR
OMISSION OF ANY TRIBUNAL OR OTHER THIRD PARTY, OR THE SOURCE OR ORIGIN OF
ANY HAZARDOUS SUBSTANCE, AND (iv) ARE NOT
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AFFECTED BY ANY INDEMNIFIED PARTY'S INVESTIGATION, ACTUAL OR CONSTRUCTIVE
KNOWLEDGE, COURSE OF DEALING, OR WAIVER.
(c) HOWEVER, NO INDEMNIFIED PARTY HAS THE RIGHT TO BE INDEMNIFIED
UNDER THE LOAN DOCUMENTS FOR ITS OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL
MISCONDUCT OR FOR ANY ENVIRONMENTAL LIABILITY CAUSED SOLELY BY ITS
VIOLATION OF AN ENVIRONMENTAL LAW.
(d) THE PROVISIONS OF AND UNDERTAKINGS AND INDEMNIFICATION IN THIS
SECTION SURVIVE THE FORECLOSURE OF ANY LENDER LIEN OR ANY TRANSFER IN LIEU
OF THAT FORECLOSURE, THE SALE OR OTHER TRANSFER OF ANY COLLATERAL OR REAL
PROPERTY TO ANY PERSON, THE SATISFACTION OF THE OBLIGATIONS, THE
TERMINATION OF THE LOAN DOCUMENTS, AND THE RELEASE OF ANY OR ALL LENDER
LIENS.
SECTION 9 NEGATIVE COVENANTS.** From the Closing Date -- for purposes of
SECTION 9.5 -- or from the date of this agreement -- for all other provisions
in this SECTION 9 -- and for so long as any Lender is committed to lend or
issue LCs under this agreement and until the Obligations have been paid in
full, Borrower covenants and agrees with Agent and Lenders that, without
first obtaining Agent's written notice of Determining Lenders' consent to the
contrary:
9.1 PAYROLL TAXES. No Company may use any proceeds of any Borrowing to
pay the wages of employees unless a timely payment to or deposit with the United
States of America of all amounts of Tax required to be deducted and withheld
with respect to such wages is also made.
9.2 DEBT. No Company may (a) have any Debt EXCEPT Permitted Debt or (b)
voluntarily prepay or cause to be prepaid any principal of, or interest on, any
of its Debt EXCEPT the Obligations and (while no Default or Potential Default
exists) other Debt.
9.3 EMPLOYEE PLANS. EXCEPT where not a Material Adverse Event, no Company
may permit any of the events or circumstances described in SECTION 7.10 to exist
or occur.
9.4 LETTERS OF CREDIT. No Company may have issued for its account -- or
otherwise become obligated for any reimbursement obligations for -- any letter
of credit EXCEPT (a) LCs, (b) letters of credit for which the reimbursement
obligations are assumed by Borrower in connection with a Permitted Acquisition,
and (c) letters of credit issued in connection with the Reimbursement Agreements
described in ITEM 2 and 3 on SCHEDULE 9.2.
9.5 LIENS. No Company may (a) create, incur, or suffer or permit to be
created or incurred or to exist any Lien upon any of its assets except Permitted
Liens or (b) enter into or permit to exist any arrangement or agreement that
directly or indirectly prohibits any Company from creating or incurring any Lien
on any of its assets EXCEPT the Loan Documents and leases that place a Lien
prohibition on only the leased property.
** All references in Sections 7, 8, and 9 to each Company's corporate
existence, qualification, good standing, corporate charter, and bylaws are
modified in respect of PMSC to apply (to the extent applicable) to its trust
existence, certificate of trust, and declaration of trust.
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9.6 TRANSACTIONS WITH AFFILIATES. No Company may enter into any material
transaction with any of its Affiliates (excluding other Companies) EXCEPT
transactions in the ordinary course of business and upon fair and reasonable
terms not materially less favorable than it could obtain or could become
entitled to in an arm's-length transaction with a Person that was not its
Affiliate.
9.7 COMPLIANCE WITH LAWS AND DOCUMENTS. No Company may (a) violate the
provisions of any Laws applicable to it or of any material agreement to which it
is a party if that violation alone, or when aggregated with all other
violations, would be a Material Adverse Event, (b) violate the provisions of its
charter or bylaws, or (c) repeal, replace, or amend any provision of its charter
or bylaws if that action would be a Material Adverse Event.
9.8 LOANS, ADVANCES, AND INVESTMENTS. No Company may make any loan,
advance, extension of credit, or capital contribution to, make any investment
in, or purchase or commit to purchase any stocks or other securities or
evidences of Debt of, or interests in, any other Person EXCEPT those described
on SCHEDULE 9.8.
9.9 DISTRIBUTIONS. No Company may declare, make, or pay any Distribution
EXCEPT:
(a) Distributions paid in the form of additional common stock;
(b) Distributions to any Obligated Company; and
(c) Distributions by Borrower if (i) no Default or Potential Default
exists or would exist after giving effect to the Distribution and (ii) the
total (without duplication) of all of those Distributions declared or paid
during any fiscal year do not exceed the SUM of (A) 50% of the Companies'
consolidated Net Income for that fiscal year, PLUS (B) if paid by April 30
during that year, the portion of the then-preceding-fiscal year's
Distributions that would have been permitted under CLAUSE (A) above that
did not represent any carryover from earlier years and was not declared and
paid during that preceding-fiscal year.
9.10 DISPOSITION OF ASSETS. No Company may make or permit to be made an
Asset Sale other than a Permitted Asset Sale.
9.11 MERGERS, CONSOLIDATIONS, AND DISSOLUTIONS. No Company may merge or
consolidate with any other Person or dissolve EXCEPT:
(a) if no Default or Potential Default exists or will exist as a
result of it, any merger or consolidation (i) between Obligated Companies
if Borrower -- if it is involved -- is the survivor or (ii) in connection
with any Permitted Acquisition if the survivor is, or concurrently with
that Permitted Acquisition becomes, an Obligated Company; and
(b) dissolution of any Subsidiary if substantially all of its assets
have been conveyed to any Obligated Company.
9.12 ASSIGNMENT. No Company may assign or transfer any of its Rights,
duties, or obligations under any of the Loan Documents.
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9.13 FISCAL YEAR AND ACCOUNTING METHODS. No Company may change its fiscal
year for accounting purposes or any material aspect of its method of accounting
except to conform any new Subsidiary's accounting methods to Borrower's
accounting methods.
9.14 NEW BUSINESSES. No Company may engage in any business EXCEPT the
businesses in which it is presently engaged and any other reasonably related
business.
9.15 GOVERNMENT REGULATIONS. No Company may conduct its business in a way
that it becomes regulated under the INVESTMENT COMPANY ACT OF 1940, as amended,
or the PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, as amended.
9.16 CONTINGENT LIABILITIES. No Company may endorse, guarantee, or
otherwise become surety for, or contingently liable upon, the obligations of any
Person except (a) endorsements of negotiable instruments in the ordinary course
of business, (b) with respect to any LCs, (c) guaranties of any Company of Debt
or Operating Leases of any Obligated Company, (d) contingent liabilities that
exist on the Closing Date and are fully described on SCHEDULE 9.2, and
(e) contingent liabilities permitted in connection with a Permitted Acquisition.
9.17 OPERATING LEASES. No Company may become obligated under any Operating
Lease that would cause the total-Operating-Lease-payment obligations of all of
the Companies -- without duplication for guaranties by any Company of another
Company's Operating-Lease-payment obligations --to exceed $12,000,000 during any
fiscal year.
9.18 CAPITAL EXPENDITURES. No Company may make expenditures for the
acquisition, construction, improvement, or replacement of land, buildings,
equipment, or other fixed or capital assets or leaseholds (excluding
expenditures properly chargeable to repairs or maintenance) EXCEPT capital
expenditures in the ordinary course of business.
9.19 ASSET PURCHASE AGREEMENT. No Company may make or permit to be made
any material amendment or material modification to or waiver of compliance under
the Asset Purchase Agreement or any schedules to it unless Borrower first
notifies Agent of the amendment, modification, or waiver and obtains Agent's
written approval of it.
9.20 STRICT COMPLIANCE. No Company may indirectly do anything that it may
not directly do under any covenant in any Loan Document.
9.21 LEGAL DEFEASANCE AND COVENANT DEFEASANCE. No Company may exercise its
right of Legal Defeasance or Covenant Defeasance (as those terms are defined in
the Senior Subordinated Debt).
SECTION 10 FINANCIAL COVENANTS. From the Closing Date and for so long as
any Lender is committed to lend or issue LCs under this agreement and until the
Obligations have been paid in full, Borrower covenants and agrees with Agent and
Lenders that, without first obtaining Agent's written notice of Determining
Lenders' consent to the contrary, it may not directly or indirectly permit:
10.1 MINIMUM NET WORTH. The Companies' consolidated Minimum Net Worth --
determined on the last day of each fiscal quarter of Borrower -- to ever be LESS
than the SUM of (a) 90% of the
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Companies' consolidated Net Worth at December 30, 1995, PLUS (b) 50% of the
Companies' cumulative, consolidated Net Income (without deduction for losses)
after December 30, 1995.
10.2 CURRENT RATIO. The Current Ratio determined at the end of each fiscal
quarter of Borrower to ever be LESS than 1.30 to 1.00.
10.3 FUNDED DEBT/EBITDA. The ratio, after giving effect to any Permitted
Acquisition if audited financials are available or, if audited financials are
not available, based on Determining Lender approval, of (a) the Companies'
consolidated Funded Debt on the last day of any fiscal quarter to (b) their
consolidated EBITDA for the 12-fiscal month period ending on that last day to
ever exceed:
===============================================================================
Period(s) Ratio
===============================================================================
Each fiscal quarter from 9/28/96 through 1/2/99 4.00 to 1.00
- -------------------------------------------------------------------------------
Each subsequent fiscal quarter 3.50 to 1.00
===============================================================================
10.4 MINIMUM INTEREST COVERAGE RATIO. The ratio, after giving effect to
any Permitted Acquisition, if audited financials are available or, if audited
financials are not available, based on Determining Lender approval, of (a) the
Company's consolidated EBITDA for the 12-fiscal month period ending on the last
day of the previous fiscal year to (b) the interest expense during that period
on the Company's Debt (including, without limitation, the interest component
under Capital Leases) to ever be less than 2.50 to 1.00.
SECTION 11 DEFAULT. The term "DEFAULT" means the occurrence of any one or more
of the following:
11.1 PAYMENT OF OBLIGATIONS. Borrower's failure or refusal to pay
(a) principal of any Note or any LC Exposure or any part thereof on or before
the date due or (b) any other part of the Obligations on or before three
Business Days after the date due.
11.2 COVENANTS. Any Company's failure or refusal to punctually and
properly perform, observe, and comply with any covenant (OTHER THAN covenants to
pay the Obligations):
(a) In SECTIONS 8.2, 8.8(a), 8.12, 9.1 through 9.6, 9.8 through 9.12,
9.15 through 9.20, or 10.4; or
(b) In SECTIONS 8.1, 8.10(a), (b), or (d), 10.1, 10.2, or 10.3, and
that failure or refusal continues for ten days after the earlier of EITHER
any Company knows of it OR any Company is notified of it by Agent or any
Lender; or
(c) In any other provision of any Loan Document, and that failure or
refusal continues for 30 days after the earlier of EITHER any Company knows
of it OR any Company is notified of it by Agent or any Lender; or
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11.3 DEBTOR RELIEF. Any Company (a) is not Solvent, (b) fails to pay its
Debts generally as they become due, (c) voluntarily seeks, consents to, or
acquiesces in the benefit of any Debtor Relief Law, or (d) becomes a party to or
is made the subject of any proceeding provided for by any Debtor Relief Law --
EXCEPT as a creditor or claimant -- that could suspend or otherwise adversely
affect the Rights of Agent or any Lender granted in the Loan Documents (UNLESS,
if the proceeding is involuntary, the applicable petition is dismissed within 60
days after its filing).
11.4 JUDGMENTS AND ATTACHMENTS. Where the amounts in controversy or of any
judgments, as the case may be, exceed -- from and after the Closing Date and
individually or collectively for all of the Companies -- $5,000,000, the
Companies fail (a) to have discharged, within 60 days after its commencement,
any attachment, sequestration, or similar proceeding against any assets of any
Company or (b) to pay any money judgment against any Company within ten days
before the date on which any Company's assets may be lawfully sold to satisfy
that judgment.
11.5 GOVERNMENT ACTION. Where EITHER it is a Material Adverse Event OR the
fair value of the assets involved exceed -- from and after the Closing Date and
individually or collectively for all of the Companies -- $5,000,000 (a) a final
non-appealable order is issued by any Tribunal (including, but not limited to,
the United States Justice Department) seeking to cause any Company to divest a
significant portion of its assets under any antitrust, restraint of trade,
unfair competition, industry regulation, or similar Laws, or (b) any Tribunal
condemns, seizes, or otherwise appropriates, or takes custody or control of all
or any substantial portion of any Company's assets.
11.6 MISREPRESENTATION. Any material representation or warranty made by
any Company in any Loan Document at any time proves to have been materially
incorrect when made.
11.7 OWNERSHIP OF OTHER COMPANIES. EXCEPT as a result of transactions
permitted by this agreement, one or more Obligated Companies fail to own,
beneficially and of record, with power to vote, 100% of the issued and
outstanding shares of capital stock of each other Obligated Company OTHER THAN
Borrower.
11.8 CHANGE OF CONTROL OF BORROWER.
(a) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Borrower and
its Subsidiaries taken as a whole to any Person;
(b) the adoption of a plan relating to the liquidation or dissolution
of Borrower;
(c) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
Person becomes the beneficial owner (as defined in RULE 13d-3 and 13d-5 of
the SECURITIES EXCHANGE ACT OF 1934) directly or indirectly, of more than
50% of the voting stock of Borrower; and
(d) The individuals who, as of the date of this agreement, constitute
the members of Borrower's board of directors (for purposes of this SECTION
11.8, the "INCUMBENT BOARD") do not constitute or cease for any reason to
constitute at least 66 2/3% of:
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(i) Borrower's board of directors; or
(ii) The surviving corporation's board of directors in the event
of any merger or consolidation (if permitted by SECTION 9.11)
involving Borrower; or
(iii) The controlling entity's board of directors, comparable
body if there is no board of directors, or voting control if there is
no comparable body, in the event that the surviving corporation under
CLAUSE (ii) above is directly or indirectly controlled by that entity.
For purposes of this SECTION 11.8(d), any individual who becomes a member of the
board of directors or comparable body or who obtains a voting interest, as
applicable under CLAUSES (i), (ii), or (iii) above, after the date of this
agreement and whose election, or nomination for election, was approved by a vote
of the individuals comprising at least 66 2/3% of the incumbent board -- OTHER
THAN an election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election contest, as those
terms are used in RULE 14a-11 of REGULATION 14A under the SECURITIES AND
EXCHANGE ACT OF 1934) -- shall be deemed to be a member of the incumbent board.
11.9 OTHER FUNDED DEBT. In respect of any Funded Debt (OTHER THAN the
Obligations) individually or collectively of at least $5,000,000 (a) any Company
fails to make any payment when due, or (b) any default or other event or
condition occurs or exists beyond the applicable grace or cure period, the
effect of which is to cause or to permit any holder of that Funded Debt to
cause -- whether or not it elects to cause -- any of that Funded Debt to become
due before its stated maturity or regularly scheduled payment dates, or (c) any
of that Funded Debt is declared to be due and payable or required to be prepaid
by any Company before its stated maturity.
11.10 SEC REPORTING REQUIREMENTS. Borrower fails to comply with any
reporting requirements of the SECURITIES EXCHANGE ACT OF 1934, as amended, for
which the failure to report would constitute a Material Adverse Event.
11.11 VALIDITY AND ENFORCEABILITY. Once executed, this agreement, any
Note, any LC Agreement, any Guaranty, or any pledge of Subsidiary stock ceases
to be in full force and effect in any material respect or is declared to be null
and void or its validity or enforceability is contested in writing by any
Company party to it or any Company party to it denies in writing that it has any
further liability or obligations under it EXCEPT in accordance with that
document's express provisions or as the appropriate parties under SECTION 14.8
below may otherwise agree in writing.
11.12 LCS. Agent or Issuing Lender is served with, or becomes subject to,
a court order, injunction, or other process or decree restraining or seeking to
restrain it from paying any amount under any LC and EITHER (a) a drawing has
occurred under the LC, and Borrower has refused to reimburse Agent or Issuing
Lender for payment, OR (b) the expiration date of the LC has occurred, but the
Right of the beneficiary to draw under the LC has been extended past the
expiration date in connection with the pendency of the related court action or
proceeding, and Borrower has failed to deposit with Agent or Issuing Lender cash
collateral in an amount equal to Agent's or Issuing Lender's maximum exposure
under the LC.
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SECTION 12 RIGHTS AND REMEDIES.
12.1 REMEDIES UPON DEFAULT.
(a) DEBTOR RELIEF. If a Default exists under SECTION 11.3, the
commitment to extend credit under this agreement automatically terminates,
the entire unpaid balance of the Obligations automatically becomes due and
payable without any action of any kind whatsoever.
(b) OTHER DEFAULTS. If any Default exists, subject to the terms of
SECTION 13.5(b), Agent may (with the consent of, and must, upon the request
of, Determining Lenders), do any one or more of the following: (i) If the
maturity of the Obligations has not already been accelerated under
SECTION 12.1(a), declare the entire unpaid balance of all or any part of
the Obligations immediately due and payable, whereupon it is due and
payable; (ii) terminate the commitments of Lenders to extend credit under
this agreement; (iii) reduce any claim to judgment; (iv) demand payment of
an amount equal to the LC Exposure then existing and retain as collateral
for the LC Exposure any amounts received from any Company, from any
property of any Company, from any Obligated Company, through offset, or
otherwise; and (v) exercise any and all other legal or equitable Rights
afforded by the Loan Documents, by applicable Laws, or in equity.
(c) OFFSET. If a Default exists, to the extent permitted by
applicable Law, each Lender may exercise the Rights of offset and banker's
lien against each and every account and other property, or any interest
therein, which any Company may now or hereafter have with, or which is now
or hereafter in the possession of, that Lender to the extent of the full
amount of the Obligations owed to that Lender.
12.2 COMPANY WAIVERS. To the extent permitted by Law, each Company waives
presentment and demand for payment, protest, notice of intention to accelerate,
notice of acceleration, and notice of protest and nonpayment, and agrees that
its liability with respect to all or any part of the Obligations is not affected
by any renewal or extension in the time of payment of all or any part of the
Obligations, by any indulgence, or by any release or change in any security for
the payment of all or any part of the Obligations.
12.3 PERFORMANCE BY AGENT. If any Company's covenant, duty, or agreement
is not performed in accordance with the terms of the Loan Documents, Agent may,
while a Default exists, at its option (but subject to the approval of
Determining Lenders), perform or attempt to perform that covenant, duty, or
agreement on behalf of that Company (and any amount expended by Agent in its
performance or attempted performance is payable by the Companies, jointly and
severally, to Agent on demand, becomes part of the Obligations, and bears
interest at the Default Rate from the date of Agent's expenditure until paid).
However, Agent does not assume and shall never have, except by its express
written consent, any liability or responsibility for the performance of any
Company's covenants, duties, or agreements.
12.4 NOT IN CONTROL. Nothing in any Loan Documents gives or may be deemed
to give to Agent or any Lender the Right to exercise control over any Company's
Real Property, other assets, affairs, or management or to preclude or interfere
with any Company's compliance with any Law or require any act or omission by any
Company that may be harmful to Persons or property. Any "MATERIAL ADVERSE
EVENT" or other materiality or substantiality qualifier of any representation,
warranty, covenant, agreement, or other provision of any Loan Document is
included for credit documentation purposes only and does not
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imply or be deemed to mean that Agent or any Lender acquiesces in any
non-compliance by any Company with any Law, document, or otherwise or does
not expect the Companies to promptly, diligently, and continuously carry out
all appropriate removal, remediation, compliance, closure, or other
activities required or appropriate in accordance with all Environmental Laws.
Agent's and Lenders' power is limited to the Rights provided in the Loan
Documents. All of those Rights exist solely -- and may be exercised in
manner calculated by Agent or Lenders in their respective good faith business
judgment -- to preserve and protect the Collateral and to assure payment and
performance of the Obligations.
12.5 COURSE OF DEALING. The acceptance by Agent or Lenders of any partial
payment on the Obligations is not a waiver of any Default then existing. No
waiver by Agent, Determining Lenders, or Lenders of any Default is a waiver of
any other then-existing or subsequent Default. No delay or omission by Agent,
Determining Lenders, or Lenders in exercising any Right under the Loan Documents
impairs that Right or is a waiver thereof or any acquiescence therein, nor will
any single or partial exercise of any Right preclude other or further exercise
thereof or the exercise of any other Right under the Loan Documents or
otherwise.
12.6 CUMULATIVE RIGHTS. All Rights available to Agent, Determining
Lenders, and Lenders under the Loan Documents are cumulative of and in addition
to all other Rights granted to Agent, Determining Lenders, and Lenders at law or
in equity, whether or not the Obligations are due and payable and whether or not
Agent, Determining Lenders, or Lenders have instituted any suit for collection,
foreclosure, or other action in connection with the Loan Documents.
12.7 APPLICATION OF PROCEEDS. Any and all proceeds ever received by Agent
or Lenders from the exercise of any Rights pertaining to the Obligations shall
be applied to the Obligations according to SECTION 3.
12.8 CERTAIN PROCEEDINGS. Borrower shall promptly execute and deliver, or
cause the execution and delivery of, all applications, certificates,
instruments, registration statements, and all other documents and papers Agent
or Determining Lenders reasonably request in connection with the obtaining of
any consent, approval, registration, qualification, permit, license, or
authorization of any Tribunal or other Person necessary or appropriate for the
effective exercise of any Rights under the Loan Documents. Because Borrower
agrees that Agent's and Determining Lenders' remedies at Law for failure of
Borrower to comply with the provisions of this section would be inadequate and
that failure would not be adequately compensable in damages, Borrower agrees
that the covenants of this section may be specifically enforced.
12.9 EXPENDITURES BY LENDERS. Any sums spent by Agent or any Lender in
the exercise of any Right under any Loan Document is payable by the Companies to
Agent on demand, becomes part of the Obligations, and bears interest at the
Default Rate from the date spent until the date repaid.
12.10 DIMINUTION IN VALUE OF COLLATERAL. Neither Agent nor any Lender has
any liability or responsibility whatsoever for any diminution in or loss of
value of any collateral now or in the future securing payment or performance of
any of the Obligations (OTHER THAN diminution in or loss of value caused by its
own gross negligence or willful misconduct).
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SECTION 13 AGENT AND LENDERS.
13.1 AGENT.
(a) APPOINTMENT. Each Lender appoints Agent (and Agent accepts
appointment) as its nominee and agent, in its name and on its behalf:
(i) To act as its nominee and on its behalf in and under all Loan
Documents; (ii) to arrange the means whereby its funds are to be made
available to Borrower under the Loan Documents; (iii) to take any action
that it properly requests under the Loan Documents (subject to the
concurrence of other Lenders as may be required under the Loan Documents);
(iv) to receive all documents and items to be furnished to it under the
Loan Documents; (v) to be the secured party, mortgagee, beneficiary,
recipient, and similar party in respect of any collateral for the benefit
of Lenders; (vi) to promptly distribute to it all material information,
requests, documents, and items received from Borrower under the Loan
Documents; (vii) to promptly distribute to it its ratable part of each
payment or prepayment (whether voluntary, as proceeds of collateral upon or
after foreclosure, as proceeds of insurance thereon, or otherwise) in
accordance with the terms of the Loan Documents; and (viii) to deliver to
the appropriate Persons requests, demands, approvals, and consents received
from it. However, Agent may not be required to take any action that
exposes it to personal liability or that is contrary to any Loan Document
or applicable Law.
(b) SUCCESSOR. Agent may voluntarily resign and shall resign upon
the request of Determining Lenders for cause (I.E., Agent is continuing to
fail to perform its responsibilities as Agent under the Loan Documents).
If the initial or any successor Agent ever ceases to be a party to this
agreement or if the initial or any successor Agent ever resigns (whether
voluntarily or at the request of Determining Lenders), then Determining
Lenders shall (which, if no Default or Potential Default exists, is subject
to Borrower's approval that may not be unreasonably withheld) appoint the
successor Agent from among Lenders (OTHER THAN the resigning Agent). If
Determining Lenders fail to appoint a successor Agent within 30 days after
the resigning Agent has given notice of resignation or Determining Lenders
have removed the resigning Agent, then the resigning Agent may, on behalf
of Lenders, appoint a successor Agent, which must be a commercial bank
having a combined capital and surplus of at least $1,000,000,000 (as shown
on its most recently published statement of condition). Upon its
acceptance of appointment as successor Agent, the successor Agent succeeds
to and becomes vested with all of the Rights of the prior Agent, and the
prior Agent is discharged from its duties and obligations of Agent under
the Loan Documents (but, when used in connection with LCs issued and
outstanding before the appointment of the successor Agent, "AGENT" shall
continue to refer solely to the prior Agent -- but, any LCs issued or
renewed after the appointment of any successor Agent shall be issued or
renewed by the successor Agent), and each Lender shall execute the
documents that any Lender, the resigning or removed Agent, or the successor
Agent reasonably request to reflect the change. After any Agent's
resignation or removal as Agent under the Loan Documents, the provisions of
this section inure to its benefit as to any actions taken or not taken by
it while it was Agent under the Loan Documents.
(c) RIGHTS AS LENDER. Agent, in its capacity as a Lender, has the
same Rights under the Loan Documents as any other Lender and may exercise
those Rights as if it were not acting as Agent. The term "LENDER", unless
the context otherwise indicates, includes Agent. Agent's resignation or
removal does not impair or otherwise affect any Rights that it has or may
have in its capacity as an individual Lender. Each Lender and Borrower
agree that Agent is not a fiduciary
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for Lenders or for Borrower but is simply acting in the capacity
described in this agreement to alleviate administrative burdens for
Borrower and Lenders, that Agent has no duties or responsibilities to
Lenders or Borrower except those expressly set forth in the Loan
Documents, and that Agent in its capacity as a Lender has the same
Rights as any other Lender.
(d) OTHER ACTIVITIES. Agent or any Lender may now or in the future
be engaged in one or more loan, letter of credit, leasing, or other
financing transactions with Borrower, act as trustee or depositary for
Borrower, or otherwise be engaged in other transactions with Borrower
(collectively, the "OTHER ACTIVITIES") not the subject of the Loan
Documents. Without limiting the Rights of Lenders specifically set forth
in the Loan Documents, neither Agent nor any Lender is responsible to
account to the other Lenders for those other activities, and no Lender
shall have any interest in any other Lender's activities, any present or
future guaranties by or for the account of Borrower that are not
contemplated by or included in the Loan Documents, any present or future
offset exercised by Agent or any Lender in respect of those other
activities, any present or future property taken as security for any of
those other activities, or any property now or hereafter in Agent's or any
other Lender's possession or control that may be or become security for the
obligations of Borrower arising under the Loan Documents by reason of the
general description of indebtedness secured or of property contained in any
other agreements, documents, or instruments related to any of those other
activities (but, if any payments in respect of those guaranties or that
property or the proceeds thereof is applied by Agent or any Lender to
reduce the Obligations, then each Lender is entitled to share ratably in
the application as provided in the Loan Documents).
13.2 EXPENSES. Each Lender shall pay its Pro Rata Part of any reasonable
expenses (including, without limitation, court costs, reasonable attorneys' fees
and other costs of collection) incurred by Agent (while acting in such capacity)
in connection with any of the Loan Documents if Agent is not reimbursed from
other sources within 30 days after incurrence. Each Lender is entitled to
receive its Pro Rata Part of any reimbursement that it makes to Agent if Agent
is subsequently reimbursed from other sources.
13.3 PROPORTIONATE ABSORPTION OF LOSSES. Except as otherwise provided in
the Loan Documents, nothing in the Loan Documents gives any Lender any advantage
over any other Lender insofar as the Obligations is concerned or relieves any
Lender from ratably absorbing any losses sustained with respect to the
Obligations (except to the extent unilateral actions or inactions by any Lender
result in Borrower or any other obligor on the Obligations having any credit,
allowance, setoff, defense, or counterclaim solely with respect to all or any
part of that Lender's Pro Rata Part of the Obligations).
13.4 DELEGATION OF DUTIES; RELIANCE. Lenders may perform any of their
duties or exercise any of their Rights under the Loan Documents by or through
Agent, and Lenders and Agent may perform any of their duties or exercise any of
their Rights under the Loan Documents by or through their respective
Representatives. Agent, Lenders, and their respective Representatives (a) are
entitled to rely upon (and shall be protected in relying upon) any written or
oral statement believed by it or them to be genuine and correct and to have been
signed or made by the proper Person and, with respect to legal matters, upon
opinion of counsel selected by Agent or that Lender (but nothing in this
CLAUSE (a) permits Agent to rely on (i) oral statements if a writing is required
by this agreement or (ii) any other writing if a specific writing is required by
this agreement), (b) are entitled to deem and treat each Lender as the owner and
holder of its portion of the Obligations for all purposes until, written notice
of the assignment or transfer is given to and received by Agent (and any
request, authorization, consent, or approval of any Lender is conclusive
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and binding on each subsequent holder, assignee, or transferee of or
Participant in that Lender's portion of the Obligations until that notice is
given and received), (c) are not deemed to have notice of the occurrence of a
Default unless a responsible officer of Agent, who handles matters associated
with the Loan Documents and transactions thereunder, has actual knowledge or
Agent has been notified by a Lender or Borrower, and (d) are entitled to
consult with legal counsel (including counsel for Borrower), independent
accountants, and other experts selected by Agent and are not liable for any
action taken or not taken in good faith by it in accordance with the advice
of counsel, accountants, or experts.
13.5 LIMITATION OF AGENT'S LIABILITY.
(a) EXCULPATION. Neither Agent nor any of its representatives will
be liable for any action taken or omitted to be taken by it or them under
the Loan Documents in good faith and believed by it or them to be within
the discretion or power conferred upon it or them by the Loan Documents or
be responsible for the consequences of any error of judgment (except for
fraud, gross negligence, or willful misconduct), and neither Agent nor any
of its representatives has a fiduciary relationship with any Lender by
virtue of the Loan Documents (but nothing in this agreement negates the
obligation of Agent to account for funds received by it for the account of
any Lender).
(b) INDEMNITY. Unless indemnified to its satisfaction against loss,
cost, liability, and expense, Agent may not be compelled to do any act
under the Loan Documents or to take any action toward the execution or
enforcement of the powers thereby created or to prosecute or defend any
suit in respect of the Loan Documents. If Agent requests instructions from
Lenders, or Determining Lenders, as the case may be, with respect to any
act or action in connection with any Loan Document, Agent is entitled to
refrain (without incurring any liability to any Person by so refraining)
from that act or action unless and until it has received instructions. In
no event, however, may Agent or any of its Representatives be required to
take any action that it or they determine could incur for it or them
criminal or onerous civil liability. Without limiting the generality of
the foregoing, no Lender has any right of action against Agent as a result
of Agent's acting or refraining from acting under this agreement in
accordance with instructions of Determining Lenders.
(c) RELIANCE. Agent is not responsible to any Lender or any
Participant for, and each Lender represents and warrants that it has not
relied upon Agent in respect of, (i) the creditworthiness of any Company
and the risks involved to that Lender, (ii) the effectiveness,
enforceability, genuineness, validity, or the due execution of any Loan
Document (EXCEPT by Agent), (iii) any representation, warranty, document,
certificate, report, or statement made therein (EXCEPT by Agent) or
furnished thereunder or in connection therewith, (iv) the adequacy of any
collateral now or hereafter securing the Obligations or the existence,
priority, or perfection of any Lien now or hereafter granted or purported
to be granted on the collateral under any Loan Document, or (v) observation
of or compliance with any of the terms, covenants, or conditions of any
Loan Document on the part of any Company. EACH LENDER AGREES TO INDEMNIFY
AGENT AND ITS REPRESENTATIVES AND HOLD THEM HARMLESS FROM AND AGAINST (BUT
LIMITED TO SUCH LENDER'S COMMITMENT PERCENTAGE OF) ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
REASONABLE EXPENSES, AND REASONABLE DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER THAT MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY THEM IN
ANY WAY RELATING TO OR ARISING OUT OF THE
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LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THE LOAN
DOCUMENTS IF AGENT AND ITS REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH
AMOUNTS BY ANY COMPANY. ALTHOUGH AGENT AND ITS REPRESENTATIVES HAVE THE
RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN
ORDINARY NEGLIGENCE, AGENT AND ITS REPRESENTATIVES DO NOT HAVE THE
RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN
FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT.
13.6 DEFAULT. While a Default exists, Lenders agree to promptly confer in
order that Determining Lenders or Lenders, as the case may be, may agree upon a
course of action for the enforcement of the Rights of Lenders. Agent is
entitled to refrain from taking any action (without incurring any liability to
any Person for so refraining) unless and until it has received instructions from
Determining Lenders. In actions with respect to any Company's property, Agent
is acting for the ratable benefit of each Lender.
13.7 COLLATERAL MATTERS.
(a) Each Lender authorizes and directs Agent to enter into the Loan
Documents for the Lender Liens and agrees that any action taken by Agent
concerning any Collateral (with the consent or at the request of
Determining Lenders) in accordance with any Loan Document, that Agent's
exercise (with the consent or at the request of Determining Lenders) of
powers concerning the Collateral in any Loan Document, and that all other
reasonably incidental powers are authorized and binding upon all Lenders.
(b) Agent is authorized on behalf of all Lenders, without the
necessity of any notice to or further consent from any Lender, from time to
time before a Default or Potential Default, to take any action with respect
to any Collateral or Loan Documents related to Collateral that may be
necessary to perfect and maintain perfected the Lender Liens upon the
Collateral.
(c) Except to use the same standard of care that it ordinarily uses
for collateral for its sole benefit, Agent has no obligation whatsoever to
any Lender or to any other Person to assure that the Collateral exists or
is owned by any Company or is cared for, protected, or insured or has been
encumbered or that the Lender Liens have been properly or sufficiently or
lawfully created, perfected, protected, or enforced or are entitled to any
particular priority.
(d) Agent shall exercise the same care and prudent judgment with
respect to the Collateral and the Loan Documents as it normally and
customarily exercises in respect of similar collateral and security
documents.
(e) Lenders irrevocably authorize Agent, at its option and in its
discretion, to release any Lender Lien upon any Collateral (i) upon full
payment of the Obligations, (ii) constituting property being disposed of as
permitted under any Loan Document, (iii) constituting property in which no
Company owned any interest at the time the Lender Lien was granted or at
any time after that, (iv) constituting property leased to any Company under
a lease that has expired or been terminated in a transaction permitted
under the Loan Documents or is about to expire and that has not been, and
is not intended by that Company to be, renewed, (v) consisting of an
instrument evidencing Debt pledged to Agent (for the benefit of Lenders),
if the underlying Debt has been paid in full, or (vi) if approved,
authorized, or ratified in writing by Lenders. Upon request by
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Agent at any time, Lenders shall confirm in writing Agent's authority
to release particular types or items of Collateral under this CLAUSE
(e).
13.8 LIMITATION OF LIABILITY. No Lender or any Participant will incur any
liability to any other Lender or Participant except for acts or omissions in bad
faith, and neither Agent nor any Lender or Participant will incur any liability
to any other Person for any act or omission of any other Lender or any
Participant.
13.9 RELATIONSHIP OF LENDERS. The Loan Documents do not create a
partnership or joint venture among Agent and Lenders or among Lenders.
13.10 BENEFITS OF AGREEMENT. None of the provisions of this section inure
to the benefit of any Company or any other Person EXCEPT Agent and Lenders;
consequently, no Company or any other Person is entitled to rely upon, or to
raise as a defense, in any manner whatsoever, the failure of Agent or any Lender
to comply with these provisions.
SECTION 14 MISCELLANEOUS.
14.1 NONBUSINESS DAYS. Any payment or action that is due under any Loan
Document on a non-Business Day may be delayed until the next-succeeding Business
Day (but interest shall continue to accrue on any applicable payment until
payment is in fact made) unless the payment concerns a CD-Rate Borrowing or a
LIBOR-Rate Borrowing, in which case if the next-succeeding Business Day is in
the next calendar month, then such payment shall be made on the next-preceding
Business Day.
14.2 COMMUNICATIONS. Unless otherwise specifically provided, whenever any
Loan Document requires or permits any consent, approval, notice, request, or
demand from one party to another, communication must be in writing (which may be
by telex or telecopy) to be effective and shall be deemed to have been given
(a) if by telex, when transmitted to the appropriate telex number and the
appropriate answer back is received, (b) if by telecopy, when transmitted to the
appropriate telecopy number (and all communications sent by telecopy must be
confirmed promptly thereafter by telephone; but any requirement in this
parenthetical shall not affect the date when the telecopy shall be deemed to
have been delivered), (c) if by mail, on the third Business Day after it is
enclosed in an envelope and properly addressed, stamped, sealed, and deposited
in the appropriate official postal service, or (d) if by any other means, when
actually delivered. Until changed by notice pursuant to this agreement, the
address (and telecopy number) for each party to a Loan Document is set forth on
SCHEDULE 1.1(a).
14.3 FORM AND NUMBER OF DOCUMENTS. The form, substance, and number of
counterparts of each writing to be furnished under this agreement must be
satisfactory to Agent and its counsel.
14.4 EXCEPTIONS TO COVENANTS. No Company may take or fail to take any
action that is permitted as an exception to any of the covenants contained in
any Loan Document if that action or omission would result in the breach of any
other covenant contained in any Loan Document.
14.5 SURVIVAL. All covenants, agreements, undertakings, representations,
and warranties made in any of the Loan Documents survive all closings under the
Loan Documents and, except as otherwise indicated, are not affected by any
investigation made by any party.
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<PAGE>
14.6 GOVERNING LAW. Unless otherwise stated in any Loan Document, the
laws of the State of Texas and of the United States of America govern the Rights
and duties of the parties to the Loan Documents and the validity, construction,
enforcement, and interpretation of the Loan Documents.
14.7 INVALID PROVISIONS. Any provision in any Loan Document held to be
illegal, invalid, or unenforceable is fully severable; the appropriate Loan
Document shall be construed and enforced as if that provision had never been
included; and the remaining provisions shall remain in full force and effect and
shall not be affected by the severed provision. Agent, Lenders, and each
Company party to the affected Loan Document agree to negotiate, in good faith,
the terms of a replacement provision as similar to the severed provision as may
be possible and be legal, valid, and enforceable.
14.8 AMENDMENTS, CONSENTS, CONFLICTS, AND WAIVERS.
(a) DETERMINING LENDERS. Unless otherwise specifically provided
(i) the provisions of this agreement may be amended, modified, or waived,
only by an instrument in writing executed by Borrower, Agent, and
Determining Lenders and supplemented only by documents delivered or to be
delivered in accordance with the express terms of this agreement, and
(ii) the other Loan Documents may only be the subject of an amendment,
modification, or waiver that has been approved by Determining Lenders and
Borrower.
(b) ALL LENDERS. Any amendment to or consent or waiver under this
agreement or any Loan Document that purports to accomplish any of the
following must be by an instrument in writing executed by Borrower and
Agent and executed (or approved, as the case may be) by each Lender:
(i) Extends the due date or decreases the amount of any scheduled payment
or amortization of the Obligations beyond the date specified in the Loan
Documents; (ii) decreases any rate or amount of interest, fees, or other
sums payable to Agent or Lenders under this agreement (except such
reductions as are contemplated by this agreement); (iii) changes the
definition of "APPLICABLE MARGIN," "APPLICABLE PERCENTAGE," "COMMITMENT,"
"COMMITMENT PERCENTAGE," "DETERMINING LENDERS," "PRO RATA PART," and
(except as provided in SECTION 2.7) "TERMINATION DATE"; (iv) increases any
one or more Lenders' Commitment; (v) waives compliance with, amends, or
fully or partially releases -- EXCEPT as expressly provided by the Loan
Documents or for when a Company merges into another Person or dissolves
when specifically permitted in the Loan Documents -- any Guaranty or
Collateral; or (vi) changes this CLAUSE (b) or any other matter
specifically requiring the consent of all Lenders under this agreement.
(c) AGENCY FEES. Any amendment or consent or waiver with respect to
fees payable solely to Agent under a separate letter agreement must be
executed in writing only by Agent and Borrower.
(d) CONFLICTS. Any conflict or ambiguity between the terms and
provisions of this agreement and terms and provisions in any other Loan
Document is controlled by the terms and provisions of this agreement.
(e) WAIVERS. No course of dealing or any failure or delay by Agent,
any Lender, or any of their respective Representatives with respect to
exercising any Right of Agent or any Lender under this agreement operates
as a waiver thereof. A waiver must be in writing and signed by Agent and
Lenders (or Determining Lenders, if permitted under this agreement) to be
effective,
52
<PAGE>
and a waiver will be effective only in the specific instance and for the
specific purpose for which it is given.
14.9 MULTIPLE COUNTERPARTS. Any Loan Document may be executed in a number
of identical counterparts with the same effect as if all signatories had signed
the same document. All counterparts must be construed together to constitute
one and the same instrument.
14.10 PARTIES.
(a) PARTIES BOUND. Each Loan Document binds and inures to the
parties to it, any intended beneficiary of it, and each of their respective
successors and permitted assigns. No Company may assign or transfer any
Rights or obligations under any Loan Document without first obtaining all
Lenders' consent, and any purported assignment or transfer without Lenders'
consent is void. No Lender may transfer, pledge, assign, sell any
participation in, or otherwise encumber its portion of the Obligations
EXCEPT as permitted by CLAUSES (b) or (c) below.
(b) PARTICIPATIONS. Any Lender may (subject to the provisions of
this section, in accordance with applicable Law, in the ordinary course of
its business, and at any time) sell to one or more Persons (each a
"PARTICIPANT") participating interests in its portion of the Obligations.
The selling Lender remains a "LENDER" under the Loan Documents, the
Participant does not become a "LENDER" under the Loan Documents, and the
selling Lender's obligations under the Loan Documents remain unchanged.
The selling Lender remains solely responsible for the performance of its
obligations and remains the holder of its share of the Principal Debt for
all purposes under the Loan Documents. Borrower and Agent shall continue
to deal solely and directly with the selling Lender in connection with that
Lender's Rights and obligations under the Loan Documents, and each Lender
must retain the sole right and responsibility to enforce due obligations of
the Companies. Participants have no Rights under the Loan Documents EXCEPT
certain voting Rights as provided below. Subject to the following, each
Lender may obtain (on behalf of its Participants) the benefits of SECTION 3
with respect to all participations in its part of the Obligations
outstanding from time to time so long as Borrower is not obligated to pay
any amount in excess of the amount that would be due to that Lender under
SECTION 3 calculated as though no participations have been made. No Lender
may sell any participating interest under which the Participant has any
Rights to approve any amendment, modification, or waiver of any Loan
Document EXCEPT as to matters in SECTION 14.8(b).
(c) ASSIGNMENTS. Each Lender may make assignments to the Federal
Reserve Bank. Each Lender may also assign to one or more assignees (each
an "ASSIGNEE") all or any part of its Rights and obligations under the Loan
Documents SO LONG AS (i) the assignor Lender and Assignee execute and
deliver to Agent and Borrower for their consent and acceptance (that may
not be unreasonably withheld) an assignment and assumption agreement in
substantially the form of EXHIBIT F (an "ASSIGNMENT AND ASSUMPTION
AGREEMENT") and pay to Agent a processing fee of $2,500, (ii) the
assignment is for an identical percentage of the assignor Lender's Rights
and obligations, and (iii) the conditions (including, without limitation,
minimum amounts of Commitment that may be assigned or that must be
retained) for that assignment set forth in the applicable Assignment and
Assumption Agreement are satisfied. The EFFECTIVE DATE in each Assignment
and Assumption Agreement must (unless a shorter period is agreeable to
Borrower and Agent) be at least five Business Days after it is executed and
delivered by the assignor Lender and
53
<PAGE>
the Assignee to Agent and Borrower for acceptance. Once that
Assignment and Assumption Agreement is accepted by Agent and Borrower,
then, from and after the EFFECTIVE DATE stated in it (i) the Assignee
automatically becomes a party to this agreement and, to the extent
provided in that Assignment and Assumption Agreement, has the Rights
and obligations of a Lender under the Loan Documents, (ii) the assignor
Lender, to the extent provided in that Assignment and Assumption
Agreement, is released from its obligations to fund Borrowings under
this agreement and its reimbursement obligations under this agreement
and, in the case of an Assignment and Assumption Agreement covering all
of the remaining portion of the assignor Lender's Rights and
obligations under the Loan Documents, that Lender ceases to be a party
to the Loan Documents, (iii) Borrower shall execute and deliver to the
assignor Lender and the Assignee the appropriate Notes in accordance
with this agreement following the transfer, (iv) upon delivery of the
Notes under CLAUSE (iii) preceding, the assignor Lender shall return to
Borrower all Notes previously delivered to that Lender under this
agreement, and (v) SCHEDULE 1.1(a) is automatically deemed to be
amended to reflect the name, address, telecopy number, and Commitment
of the Assignee and the remaining Commitment (if any) of the assignor
Lender, and Agent shall prepare and circulate to Borrower and Lenders
an amended SCHEDULE 1.1(a) reflecting those changes.
14.11 CONFIDENTIALITY. With respect to any non-public information or
material furnished to Agent, Lenders, or their Representatives by any Company
about its financial condition or business prospects that is clearly marked
confidential when furnished but that is not otherwise available, disclosed, or
furnished to Agent, any Lender, or any of their Representatives (the "SUBJECT
INFORMATION"), Agent, Lender, and their Representatives (a) may use the subject
information in any way any of them may deem appropriate in connection with the
transactions contemplated in the Loan Documents, (b) may disclose or furnish the
subject information to Agent, any Lender, any prospective or actual Participant
or Assignee, any Tribunal, or the Representatives of any of the foregoing or in
response to interrogatories, depositions, requests for information or documents,
subpoenas, civil investigation demands, or similar process under applicable Law,
(c) may disclose or furnish the subject information to any one or more Persons
without restriction while a Default or Potential Default exists or any time in
connection with the exercise of Agent's any Lender's, or any of their
Representatives' Rights under the Loan Documents, but (d) may not otherwise
disclose or distribute the subject information.
14.12 ENTIRETY.
(a) Until the Closing Date and payment in full of all amounts owing
under the Credit Agreement (as renewed, extended, or amended) dated as of
December 1, 1994, between Borrower, certain lenders, and Agent (in its
capacity as agent for those lenders), that Credit Agreement may remain in
full force and effect and is not terminated, canceled, or nullified by this
agreement.
(b) OTHERWISE, THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN BORROWER, LENDERS, AND AGENT AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
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EXECUTED as of the date first stated above.
4111 Mint Way PILLOWTEX CORPORATION, as
Dallas, TX 75237 BORROWER
Attn: Mr. Jeffrey D. Cordes
Executive Vice President
Telecopy: (214) 339-8565 By /s/ JEFFREY D. CORDES
-------------------------------
Jeffrey D. Cordes,
Executive Vice President
and Chief Financial
Officer
NATIONSBANK OF TEXAS, N.A.,
as AGENT and a LENDER
By /s/ SHARON M. ELLIS
-------------------------------
Sharon M. Ellis, Vice President
BANK OF AMERICA ILLINOIS, as a COMERICA BANK - TEXAS, as a LENDER
LENDER
By /s/ CLAIRE LIU By /s/ CHRISTOPHER JONES
------------------------------- -------------------------------
Claire Liu, Vice President Christopher Jones, SVP
WELLS FARGO BANK (TEXAS), N.A., as THE BANK OF TOKYO-MITSUBISHI,
a LENDER LTD., HOUSTON AGENCY, as a LENDER
By /s/ MARY JO HOCH By /s/ JOHN M. MEARNS
------------------------------- -------------------------------
Mary Jo Hoch, Vice President J. Mearns, VP & Manager
SIGNATURE PAGE 1 OF 2 TO RESTATED CREDIT AGREEMENT
<PAGE>
BANK ONE, TEXAS, N.A., as a THE BANK OF NOVA SCOTIA, as a
LENDER LENDER
By /s/ SCOTT RHEA By /s/ A.S. NORSWORTHY
------------------------------- -------------------------------
Scott Rhea, Assistant A.S. Norsworthy, Sr.
Vice President Team Leader-Loan
Operations
NBD BANK, as a LENDER FIRST AMERICAN NATIONAL BANK, as
a LENDER
By /s/ WILLIAM J. MCCAFFREY By /s/ COREY NAPIER
------------------------------- -------------------------------
William J. McCaffrey, Corey Napier, Vice President
Vice President
CREDIT LYONNAIS NEW YORK
BRANCH, as a LENDER
By /s/ JACQUES-YVES MULLIEZ
-------------------------------
Jacques-Yves Mulliez,
Senior Vice President
SIGNATURE PAGE 2 OF 2 TO RESTATED CREDIT AGREEMENT
<PAGE>
EXHIBIT A-1
SWING-LINE NOTE
$5,000,000 Dallas, Texas November 12, 1996
FOR VALUE RECEIVED, the undersigned, PILLOWTEX CORPORATION, a Texas
corporation (the "COMPANY"), hereby promises to pay to the order of NATIONSBANK
OF TEXAS, N.A. ("NATIONSBANK"), on or before the Termination Date, the principal
sum of $5,000,000, or so much thereof as may be advanced and outstanding under
this note, TOGETHER WITH interest.
This note has been executed and delivered under, and is subject to the
terms of, the Restated Credit Agreement (as renewed, extended, amended, or
restated, the "CREDIT AGREEMENT") dated as of November 12, 1996, between the
Company, certain Lenders, and NationsBank, as Agent, and is the "SWING-LINE
NOTE" referred to therein. All of the terms defined in the Credit Agreement
have the same meaning when used in this note.
This note incorporates by reference the principal and interest payment
terms in the Credit Agreement for this note including, without limitation, the
final maturity indicated as the Termination Date and all other provisions in the
Credit Agreement applicable to this note -- such as provisions regarding the
obligations of the holder of this note to advance funds under this note,
applicable interest rates before and after a Default, voluntary and mandatory
prepayments, acceleration of maturity, exercise of rights and remedies, payment
of attorneys' fees, court costs, and other costs of collection, certain waivers
by the Company and others now or hereafter obligated for payment of any sums due
under this note, and security for the payment of this note.
PILLOWTEX CORPORATION, as the COMPANY
By
--------------------------------------------
Jeffrey D. Cordes, Executive Vice
President and Chief Financial Officer
EXHIBIT A-1
<PAGE>
EXHIBIT A-2
REVOLVING NOTE
$___________ Dallas, Texas _______________, 1996
FOR VALUE RECEIVED, PILLOWTEX CORPORATION, a Texas corporation ("MAKER"),
promises to pay to the order of __________________________ ("PAYEE"), that
portion of the principal amount of $___________ that may from time to time be
disbursed and outstanding under this note, TOGETHER WITH interest.
This note is a "REVOLVING NOTE" under the Credit Agreement (as renewed,
extended, amended, or restated, the "CREDIT AGREEMENT") dated as of November __,
1996, between Maker as BORROWER, Payee, certain other "LENDERS," and NationsBank
of Texas, N.A., as "AGENT" for Lenders. All of the terms defined in the Credit
Agreement have the same meanings when used -- unless otherwise defined -- in
this note.
This note incorporates by reference the principal and interest payment
terms in the Credit Agreement for this note, including, without limitation, the
final maturity date for this note, which is the Termination Date. Principal and
interest are payable to the holder of this note through Agent at its offices at
901 Main Street, Dallas, Texas 75202, or at any other address of which Agent may
notify Maker in writing.
This note also incorporates by reference all other provisions in the Credit
Agreement applicable to this note -- such as provisions for disbursement of
principal, applicable-interest rates before and after Default, voluntary and
mandatory prepayments, acceleration of maturity, exercise of Rights, payment of
attorney's fees, courts costs, and other costs of collection, certain waivers by
Maker and other obligors, assurances and security, choice of Texas and United
States federal Law, usury savings, and other matters applicable to Loan
Documents under the Credit Agreement.
PILLOWTEX CORPORATION, as MAKER
By
--------------------------------------------
Jeffrey D. Cordes, Executive Vice
President and Chief Financial Officer
EXHIBIT A-2
2
<PAGE>
EXHIBIT B
RESTATED GUARANTY
THIS GUARANTY is executed as of _____________________________, 1996, by:
- BEACON MANUFACTURING COMPANY, a North Carolina corporation; MANETTA
HOME FASHIONS, INC., a North Carolina corporation; TENNESSEE WOOLEN
MILLS, INC., a Tennessee corporation; PILLOWTEX, INC., a Delaware
corporation; PTEX HOLDING COMPANY, a Delaware corporation; and
PILLOWTEX MANAGEMENT SERVICES COMPANY, a Delaware business trust
("GUARANTORS"); for the benefit of
- NATIONSBANK OF TEXAS, N.A., a national banking association (in its
capacity as Agent for the Lenders now or in the future party to the
Credit Agreement described below, "AGENT").
PILLOWTEX CORPORATION, a Texas corporation ("BORROWER"), Agent, and certain
Lenders entered into the Credit Agreement (as renewed, extended, amended, or
restated, the "EXISTING CREDIT AGREEMENT") and other Loan Documents dated as of
December 1, 1994.
In connection with the Existing Credit Agreement, Guarantors, Agent, and
certain Lenders entered into the Guaranty dated as of December 1, 1994
("EXISTING GUARANTY").
Borrower, Agent, and certain Lenders have entered into the Restated Credit
Agreement (as renewed, extended, amended, or restated, the "CREDIT AGREEMENT")
and other Loan Documents dated as of the date first written above.
As a continuing inducement to Lender to extend credit to Debtor under the
Credit Agreement -- and as a condition precedent to that credit -- Guarantors
are executing and delivering this agreement to extend, renew, and entirely amend
and restate the Existing Guaranty.
ACCORDINGLY, for adequate and sufficient consideration, each Guarantor
jointly and severally guarantees to Agent and Lenders the prompt payment of the
Guaranteed Debt (defined below) at -- and at all times after -- its maturity (by
acceleration or otherwise) as follows:
1. DEFINITIONS. Terms defined in the Credit Agreement have the same
meanings when used -- unless otherwise defined -- in this guaranty. As used in
this guaranty:
AGENT is defined in the preamble to this guaranty and includes its
successor appointed under SECTION 13 of the Credit Agreement and acting as AGENT
for Lenders under the Loan Documents.
BORROWER is defined in the recitals to this guaranty and includes, without
limitation, Borrower, Borrower as a debtor-in-possession, and any receiver,
trustee, liquidator, conservator, custodian, or similar party appointed for
Borrower or for all or substantially all of Borrower's assets under any Debtor
Relief Law.
CREDIT AGREEMENT is defined in the recitals to this guaranty.
GUARANTEED DEBT means the Obligations, as defined in the Credit Agreement,
and all present and future costs, attorneys' fees, and expenses reasonably
incurred by Agent or any Lender to enforce Borrower's, any Guarantor's,
EXHIBIT B
<PAGE>
or any other obligor's payment of any of the Obligations, including,
without limitation (to the extent lawful), all present and future
amounts that would become due but for the operation of Sections 502 or
506 or any other provision of TITLE 11 of the UNITED STATES CODE and
all present and future accrued and unpaid interest (including, without
limitation, all post-petition interest if Borrower or any Subsidiary
voluntarily or involuntarily becomes subject to any Debtor Relief Law).
GUARANTORS is defined in the preamble to this guaranty.
SUBORDINATED DEBT means all present and future obligations of Borrower to
any Guarantor, whether those obligations are (a) direct, indirect, fixed,
contingent, liquidated, unliquidated, joint, several, or joint and several, (b)
due or to become due to any Guarantor, (c) held by or are to be held by any
Guarantor, (d) created directly or acquired by assignment or otherwise, or (e)
evidenced in writing.
2. GUARANTY. This is an absolute, irrevocable, and continuing guaranty,
and the circumstance that at any time or from time to time the Guaranteed Debt
may be paid in full does not affect the obligation of any Guarantor with respect
to the Guaranteed Debt incurred after that. This guaranty remains in effect
until the Guaranteed Debt is fully paid and performed and all commitments to
extend any credit under the Credit Agreement have terminated. No Guarantor may
rescind or revoke its obligations with respect to the Guaranteed Debt.
Notwithstanding any contrary provision in this guaranty, however, each
Guarantor's maximum liability under this guaranty is limited, to the extent, if
any, required so that its liability is not subject to avoidance under any Debtor
Relief Law.
3. CONSIDERATION. Each Guarantor represents and warrants that (a) the
value of the consideration received and to be received by it is reasonably worth
at least as much as its liability under this guaranty and (b) such liability may
reasonably be expected to directly or indirectly benefit it.
4. CUMULATIVE RIGHTS. If any Guarantor becomes liable for any
indebtedness owing by Borrower to Agent or any Lender, OTHER THAN under this
guaranty, that liability may not be in any manner impaired or affected by this
guaranty. The Rights of Agent or Lenders under this guaranty are cumulative of
any and all other Rights that Agent or Lenders may ever have against each
Guarantor. The exercise by Agent or Lenders of any Right under this guaranty or
otherwise does not preclude the concurrent or subsequent exercise of any other
Right.
5. PAYMENT UPON DEMAND. If a Default exists, each Guarantor shall -- on
demand and without further notice of dishonor and without any notice having been
given to any Guarantor previous to that demand of either the acceptance by Agent
or Lenders of this guaranty or the creation or incurrence of any Guaranteed
Debt -- pay the amount of the Guaranteed Debt then due and payable to Agent and
Lenders. It is not necessary for Agent or Lenders, in order to enforce that
payment by any Guarantor, first or contemporaneously to institute suit or
exhaust remedies against Borrower or others liable on any Guaranteed Debt or to
enforce Rights against any collateral securing any Guaranteed Debt.
6. SUBORDINATION. The Subordinated Debt is expressly subordinated to the
full and final payment of the Guaranteed Debt. Each Guarantor agrees not to
accept any payment of any Subordinated Debt from Borrower if a Default exists.
If any Guarantor receives any payment of any Subordinated Debt in violation of
the foregoing, that Guarantor shall hold that payment in trust for Agent and
Lenders and promptly turn it over to Agent, in the form received (with any
necessary endorsements), to be applied to the Guaranteed Debt.
7. SUBROGATION AND CONTRIBUTION. Until no Lender is obligated to lend or
issue LCs under the Credit Agreement and the Guaranteed Debt has been fully paid
and performed (a) no Guarantor may assert, enforce, or otherwise exercise any
Right of subrogation to any of the Rights or Liens of Agent or Lenders or any
other beneficiary against Borrower or any other obligor on the Guaranteed Debt
or any collateral or other security or any Right of
2 EXHIBIT B
<PAGE>
recourse, reimbursement, subrogation, contribution, indemnification, or
similar Right against Borrower or any other obligor on any Guaranteed
Debt or any guarantor of it, (b) each Guarantor defers all of the
foregoing Rights (whether they arise in equity, under contract, by
statute, under common Law, or otherwise), and (c) each Guarantor defers
the benefit of, and any Right to participate in, any collateral or
other security given to Agent or Lenders or any other beneficiary to
secure payment of any Guaranteed Debt.
8. NO RELEASE. No Guarantor's obligations under this guaranty may be
released, diminished, or affected by the occurrence of any one or more of the
following events: (a) Any taking or accepting of any other security or
assurance for any Guaranteed Debt; (b) any release, surrender, exchange,
subordination, impairment, or loss of any collateral securing any Guaranteed
Debt; (c) any full or partial release of the liability of any other obligor on
the Obligations; (d) the modification of, or waiver of compliance with, any
terms of any other Loan Document; (e) the insolvency, bankruptcy, or lack of
corporate or partnership power of any other obligor at any time liable for any
Guaranteed Debt, whether now existing or occurring in the future; (f) any
renewal, extension, or rearrangement of any Guaranteed Debt or any adjustment,
indulgence, forbearance, or compromise that may be granted or given by Agent or
any Lender to any other obligor on the Obligations; (g) any neglect, delay,
omission, failure, or refusal of Agent or any Lender to take or prosecute any
action in connection with the Guaranteed Debt; (h) any failure of Agent or any
Lender to notify any Guarantor of any renewal, extension, or assignment of any
Guaranteed Debt, or the release of any security or of any other action taken or
refrained from being taken by Agent or any Lender against Borrower or any new
agreement between Agent, any Lender, and Borrower, it being understood that
neither Agent nor any Lender is required to give any Guarantor any notice of any
kind under any circumstances whatsoever with respect to or in connection with
any Guaranteed Debt, OTHER THAN any notice required to be given to Guarantors by
Law or elsewhere in this guaranty; (i) the unenforceability of any Guaranteed
Debt against any other obligor because it exceeds the amount permitted by Law,
the act of creating it is ULTRA VIRES, the officers creating it exceeded their
authority or violated their fiduciary duties in connection with it, or
otherwise; or (j) any payment of the Obligations to Agent or Lenders is held to
constitute a preference under any Debtor Relief Law or for any other reason
Agent or any Lender is required to refund that payment or make payment to
someone else (and in each such instance this guaranty will be reinstated in an
amount equal to that payment).
9. WAIVERS. To the maximum extent lawful, each Guarantor waives all
Rights by which it might be entitled to require suit on an accrued Right of
action in respect of any Guaranteed Debt or require suit against Borrower or
others, whether arising under Section 34.02 of the TEXAS BUSINESS AND COMMERCE
CODE, as amended (regarding its Right to require Agent or Lenders to sue
Borrower on accrued Right of action following its written notice to Agent or
Lenders), Section 17.001 of the TEXAS CIVIL PRACTICE AND REMEDIES CODE, as
amended (allowing suit against it without suit against Borrower, but precluding
entry of judgment against it before entry of judgment against Borrower), RULE 31
of the TEXAS RULES OF CIVIL PROCEDURE, as amended (requiring Agent or Lenders to
join Borrower in any suit against it unless judgment has been previously entered
against Borrower), or otherwise.
10. CREDIT AGREEMENT PROVISIONS. Each Guarantor acknowledges that certain
(a) representations and warranties in the Credit Agreement are applicable to it
and confirms that each such representation and warranty is true and correct, and
(b) covenants and other provisions in the Credit Agreement are applicable to it
or are imposed upon it and agrees to promptly and properly comply with or be
bound by each of them.
11. RELIANCE AND DUTY TO REMAIN INFORMED. Each Guarantor confirms that it
has executed and delivered this guaranty after reviewing the terms and
conditions of the Loan Documents and such other information as it has deemed
appropriate in order to make its own credit analysis and decision to execute
and deliver this guaranty. Each Guarantor confirms that it has made its own
independent investigation with respect to Borrower's creditworthiness and is not
executing and delivering this guaranty in reliance on any representation or
warranty by Agent or any Lender as to that creditworthiness. Each Guarantor
expressly assumes all responsibilities to remain
3 EXHIBIT B
<PAGE>
informed of the financial condition of Borrower and any circumstances
affecting Borrower's ability to perform under the Loan Documents to
which it is a party or any collateral securing any Guaranteed Debt.
12. NO REDUCTION. The Guaranteed Debt may not be reduced, discharged, or
released because or by reason of any existing or future offset, claim, or
defense (except for the defense of complete and final payment of the Guaranteed
Debt) of Borrower or any other obligor against Agent or Lenders or against
payment of the Guaranteed Debt, whether that offset, claim, or defense arises in
connection with the Guaranteed Debt or otherwise. Those claims and defenses
include, without limitation, failure of consideration, breach of warranty,
fraud, bankruptcy, incapacity/infancy, statute of limitations, lender liability,
accord and satisfaction, usury, forged signatures, mistake, impossibility,
frustration of purpose, and unconscionability.
13. VENUE AND SERVICE OF PROCESS. EACH GUARANTOR (A) IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF ANY TEXAS STATE OR FEDERAL COURT,
(B) IRREVOCABLY WAIVES -- TO THE FULLEST EXTENT PERMITTED BY LAW -- ANY
OBJECTION THAT IT MAY NOW OR IN THE FUTURE HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION BROUGHT IN CONNECTION WITH ANY LOAN DOCUMENT OR THE GUARANTEED DEBT
BROUGHT IN DISTRICT COURTS OF DALLAS COUNTY, TEXAS, OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION,
(C) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY OF THOSE
COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (D) IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THOSE COURTS IN ANY LITIGATION BY THE
MAILING OF COPIES OF THAT LEGAL PROCESS BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID, BY HAND-DELIVERY, OR BY DELIVERY BY A NATIONALLY
RECOGNIZED COURIER SERVICE, AND SERVICE IS DEEMED COMPLETE UPON DELIVERY OF THE
LEGAL PROCESS AT ITS ADDRESS AS PROVIDED IN THIS GUARANTY, AND (E) IRREVOCABLY
AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY PARTY TO ANY LOAN DOCUMENT ARISING
OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE GUARANTEED DEBT MAY BE
BROUGHT IN ONE OF THOSE COURTS. The scope of each of these waivers is intended
to be all-encompassing of any and all disputes that may be filed in any court
and that relate to the subject matter of this transaction -- including, without
limitation, contract claims, tort claims, breach of duty claims, and all other
common Law and statutory claims. These waivers are a material inducement to the
agreement by Agent and each Lender to enter into the Loan Documents, and they
have each relied -- and may continue to rely -- on these waivers in its dealings
with Guarantors. Each Guarantor represents and warrants that it has reviewed
these waivers with its legal counsel, and that it knowingly and voluntarily
agrees to each waiver following consultation with legal counsel. These waivers
are irrevocable, may not be modified either orally or in writing, and apply to
any renewals, extensions, amendments, and replacements of any Loan Document.
14. LOAN DOCUMENT. This guaranty is a Loan Document and is subject to the
applicable provisions of SECTIONS 1 and 14 of the Credit Agreement, all of which
are incorporated into this guaranty by reference the same as if set forth in
this guaranty verbatim.
15. COMMUNICATIONS. Solely for purposes of SECTION 14.2 of the Credit
Agreement, communications to each Guarantor may be sent in care of Borrower at
Borrower's address and telecopy number.
16. AMENDMENTS, ETC. No amendment, waiver, or discharge to or under this
guaranty is valid unless it is in writing and is signed by the party against
whom it is sought to be enforced and is otherwise in conformity with the
requirements of SECTION 14.8 of the Credit Agreement.
17. ENTIRETY. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS TO WHICH ANY
GUARANTOR IS A PARTY REPRESENT THE FINAL AGREEMENT BETWEEN THAT GUARANTOR,
AGENT, AND LENDERS WITH RESPECT TO THE SUBJECT MATTER OF THIS GUARANTY AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF
4 EXHIBIT B
<PAGE>
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
18. AGENT AND LENDERS. Agent is the agent for each Lender under the
Credit Agreement. All Rights granted to Agent under or in connection with this
guaranty are for each Lender's ratable benefit. Agent may, without the joinder
of any Lender, exercise any Rights in Agent's or Lenders' favor under or in
connection with this guaranty. Agent's and each Lender's Rights and obligations
VIS-A-VIS each other may be subject to one or more separate agreements between
those parties. However, no Guarantor is required to inquire about any such
agreement or is subject to any terms of it unless that Guarantor specifically
joins it. Therefore, neither any Guarantor nor its successors or assigns is
entitled to any benefits or provisions of any such separate agreement or is
entitled to rely upon or raise as a defense any party's failure or refusal to
comply with the provisions of it.
19. PARTIES. This guaranty benefits Agent, Lenders, and their respective
successors and assigns and binds each Guarantor and its successors and assigns.
Upon appointment of any successor Agent under the Credit Agreement, all of the
Rights of Agent under this guaranty automatically vests in that new Agent as
successor Agent on behalf of Lenders without any further act, deed, conveyance,
or other formality OTHER THAN that appointment. The Rights of Agent and Lenders
under this guaranty may be transferred with any assignment of the Guaranteed
Debt. The Credit Agreement contains provisions governing assignments of the
Guaranteed Debt and of Rights and obligations under this guaranty.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES TO FOLLOW.]
5 EXHIBIT B
<PAGE>
EXECUTED as of the date first stated above.
PILLOWTEX, INC. and BEACON MANUFACTURING COMPANY,
PTEX HOLDING COMPANY MANETTA HOME FASHIONS, INC.,
TENNESSEE WOOLEN MILLS, INC.,
and PILLOWTEX MANAGEMENT SERVICES
COMPANY
By By
----------------------------- ----------------------------------
Norman J. Shuman, Secretary Jeffrey D. Cordes, Executive Vice
President of each Guarantor
Agent executes this guaranty in acknowledgment of PARAGRAPH 17 above.
NATIONSBANK OF TEXAS, N.A.,as AGENT
By
----------------------------------
Sharon M. Ellis, Vice President
SIGNATURE PAGE TO RESTATED GUARANTY
<PAGE>
EXHIBIT C-1
RESTATED SECURITY AGREEMENT
THIS AGREEMENT is executed as of ___________________________, 1996, by:
- PILLOWTEX CORPORATION, a Texas corporation ("BORROWER/DEBTOR");
- BEACON MANUFACTURING COMPANY, a North Carolina corporation; MANETTA
HOME FASHIONS, INC., a North Carolina corporation; TENNESSEE WOOLEN
MILLS, INC., a Tennessee corporation; PILLOWTEX, INC., a Delaware
corporation; PTEX HOLDING COMPANY, a Delaware corporation; and
PILLOWTEX MANAGEMENT SERVICES COMPANY, a Delaware business trust
("SUBSIDIARY/DEBTORS"); and
- NATIONSBANK OF TEXAS, N.A., a national banking association (in its
capacity as Agent for the Lenders now or in the future party to the
Credit Agreement described below "SECURED PARTY").
PILLOWTEX CORPORATION, a Texas corporation ("BORROWER"), Agent, and certain
Lenders entered into the Credit Agreement (as renewed, extended, amended, or
restated, the "EXISTING CREDIT AGREEMENT") and other Loan Documents dated as of
December 1, 1994.
In connection with the Existing Credit Agreement, Subsidiary/Debtors,
Agent, and certain Lenders entered into the Security Agreement dated as of
December 1, 1994 ("EXISTING SECURITY AGREEMENT").
Borrower, Agent, and certain Lenders have entered into the Restated Credit
Agreement (as renewed, extended, amended, or restated, the "CREDIT AGREEMENT")
and other Loan Documents dated as of the date first written above.
As a continuing inducement to Lender to extend credit to Debtor under the
Credit Agreement -- and as a condition precedent to that credit --
Subsidiary/Debtors are executing and delivering this agreement to extend, renew,
and entirely amend and restate the Existing Security Agreement.
ACCORDINGLY, for adequate and sufficient consideration, Borrower/Debtor,
and each Subsidiary/Debtor jointly and severally agree with Secured Party for
the benefit of Lenders as follows:
1. DEFINITIONS. Terms defined in the Credit Agreement or the UCC have
the same meanings when used -- unless otherwise defined -- in this agreement.
If the definition given a term in the Credit Agreement conflicts with the
definition given that term in the UCC, then the Credit Agreement definition
controls to the extent allowed by Law. If the definition given a term in
CHAPTER 9 of the UCC conflicts with the definition given that term in any other
chapter of the UCC, then the CHAPTER 9 definition controls. Furthermore, as
used in this agreement:
ACCOUNTS means, for each Debtor, all of its present and future accounts,
instruments, receivables, accounts receivable, chattel paper, documents, general
intangibles, and book debts arising from its sale or lease of goods or rendition
of services, including, without limitation, all present and future (a) amounts
due to it from a factor, (b) returned, reclaimed, refused, or repossessed goods,
and (c) books and records pertaining to, and security and guaranties for, any of
the foregoing.
BORROWER/DEBTOR is defined in the preamble to this agreement and includes,
without limitation, Borrower/Debtor, Borrower/Debtor as a debtor-in-possession,
and any receiver, trustee, liquidator, conservator, custodian, or similar party
appointed for Borrower or for all or substantially all of Borrower/Debtor's
assets under any Debtor Relief Law.
EXHIBIT C-1
<PAGE>
COLLATERAL is defined in PARAGRAPH 4 below.
CREDIT AGREEMENT is defined in the recitals to this agreement.
DEBTORS means Borrower/Debtor and Subsidiary/Debtors.
FINANCING STATEMENT means a financing statement executed by each Debtor and
Secured Party for filing in the jurisdictions listed in SCHEDULE 6 to the Credit
Agreement, and in substantially the form of ANNEX 2 to this agreement.
INVENTORY means, for each Debtor, all of its present and future inventory,
including, without limitation, all present and future (a) materials, goods and
work-in-process, finished goods, and other tangible property held for sale or
lease or being processed for sale or lease in its present or future business,
whether to be furnished under contracts or used or consumed in that Debtor's
business, (b) documents (including documents of title) covering any of the
foregoing, and (c) such property the sale or other disposition of which has
given rise to accounts and which has not been returned to or repossessed or
stopped in transit by that Debtor.
OBLIGOR means any Person obligated with respect to any of the Collateral,
whether as a party to a contract, an account debtor, issuer of any securities,
or otherwise.
OBLIGATIONS means the "OBLIGATIONS," as defined in the Credit Agreement,
including, without limitation, all present and future indebtedness, liabilities,
and obligations of each Debtor arising under this agreement, and all present and
future costs, attorneys' fees, and expenses reasonably incurred by Secured Party
or any Lender to enforce any Debtor's or any other obligor's payment of any of
the Obligations, including, without limitation (to the extent lawful), all
present and future amounts that would become due but for the operation of
Sections 502 or 506 or any other provision of TITLE 11 of the UNITED STATES CODE
and all present and future accrued and unpaid interest (including, without
limitation, all post-petition interest if any Debtor voluntarily or
involuntarily becomes subject to any Debtor Relief Law).
PLEDGED SECURITIES means, whether now owned or acquired in the future by
any Debtor, all present and future shares of capital stock issued by any of the
following subsidiaries, including, without limitation, all present and future
increases, profits, combinations, reclassifications, dividends, and substitutes
and replacements for any of the foregoing (SO LONG AS the Pledged Securities
does not include more than the number of voting shares required to be pledged
under the Credit Agreement):
Subsidiary/Debtors,
Torfeaco Industries Limited, an Ontario corporation, and
588747 Alberta Ltd., an Alberta corporation
Pillowtex de Mexico F. de R.L. de C.V., a Mexico corporation
SECURED PARTY is defined in the preamble to this agreement and includes its
successor appointed under SECTION 13 of the Credit Agreement and acting as AGENT
for Lenders under the Loan Documents.
SECURITY INTEREST means the security interests granted and the transfers,
pledges, and assignments made under PARAGRAPH 2 below, which is a "LENDER LIEN,"
as defined in the Credit Agreement.
SUBSIDIARY/DEBTORS is defined in the preamble to this agreement.
UCC means the UNIFORM COMMERCIAL CODE as adopted in Texas or any other
applicable jurisdiction.
2 EXHIBIT C-1
<PAGE>
2. SECURITY INTEREST. To secure the prompt, unconditional, and complete
payment and performance of the Obligations when due, each Debtor jointly and
severally grants to Secured Party a security interest in the Collateral
identified for it in PARAGRAPH 4 below and jointly and severally pledges and
collaterally transfers and assigns that Collateral to Secured Party, all upon
and subject to the terms and conditions of this agreement. If the grant,
pledge, or collateral transfer or assignment of any specific item of the
Collateral is expressly prohibited by any contract, then the Security Interest
nonetheless remains effective to the extent allowed by UCC Section 9.318 or
other applicable Law but is otherwise limited by that prohibition.
3. NO ASSUMPTION OR MODIFICATION. The Security Interest is given as
security only in order to secure the prompt, unconditional, and complete payment
and performance of the Obligations when due. Neither Secured Party nor any
Lender assumes or may become liable for any Debtors' liabilities, duties, or
obligations under or in connection with the Collateral. Neither Secured Party's
acceptance of this agreement nor its taking any action in carrying out this
agreement, constitutes Secured Party's approval of the Collateral or Secured
Party's assumption of any obligation under or in connection with the Collateral.
This agreement does not affect or modify any Debtors' obligations with respect
to any Collateral.
4. COLLATERAL. The term "COLLATERAL" means the following items and types
of property -- wherever located and now or in the future acquired or existing:
- For each Debtor, all of its Accounts, Inventory, and Pledged
Securities; and
- All cash and noncash proceeds of any other Collateral, including,
without limitation, all cash, accounts, general intangibles,
documents, instruments, chattel paper, goods, and any other property
received upon the sale or disposition of any other Collateral and all
insurance proceeds of any kind paid at any time in connection with any
other Collateral.
5. FRAUDULENT CONVEYANCE. Notwithstanding any contrary provision, each
Debtor agrees that, if -- but for the application of this paragraph -- any of
the Obligations or the Security Interest would constitute a preferential
transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C.
Section 548, or a fraudulent conveyance or transfer under any state fraudulent
conveyance, fraudulent transfer, or similar Law in effect from time to time
(each a "FRAUDULENT CONVEYANCE"), then the Obligations and Security Interest
remains enforceable to the maximum extent possible without causing any of the
Obligations or the Security Interest to be a fraudulent conveyance, and this
agreement is automatically amended to carry out the intent of this paragraph.
6. REPRESENTATIONS AND WARRANTIES. Debtors jointly and severally
represent and warrant to Secured Party on behalf of Lenders that:
(a) CREDIT AGREEMENT. All representations and warranties in the
Credit Agreement that are applicable to each Debtor or its assets or operations
are accurate and complete and are ratified and confirmed.
(b) BINDING OBLIGATION. This agreement creates a legal, valid, and
binding Lender Lien in and to the Collateral (subject to delivery to Secured
Party of the stock certificates for the Pledged Securities) in favor of Secured
Party and enforceable against the Debtor owning that Collateral. For Collateral
in which the Security Interest may be perfected by the filing of Financing
Statements, once those Financing Statements and Continuation Statements have
been properly filed in the jurisdictions described on SCHEDULE 6 to the Credit
Agreement, the Security Interest in that Collateral will be fully perfected.
For the Pledged Securities, the taking by Secured Party of physical possession
in Texas of the stock certificates representing the Pledged Securities will
perfect the Security Interest in that Collateral. Once perfected, the Security
Interest will constitute a first-priority Lender Lien on the Collateral, subject
only to Permitted Liens. The creation of the Security Interest does not require
the consent of any Person that has not been obtained.
3 EXHIBIT C-1
<PAGE>
(c) LOCATIONS. The attached ANNEX 1 accurately describes (i) the
location of each Debtor's principal place of business and chief executive
office, (ii) if different from CLAUSE (I) above, the one or more locations of
its books and records concerning its Accounts, (iii) the locations where any of
its Inventory (EXCEPT when temporarily in the hands of a third-party contractor
for processing and until sold in the ordinary course of business) is currently
and will -- SUBJECT TO PARAGRAPH 7(B) below -- in the future be maintained, and
(iv) none of the locations described on the attached ANNEX 1 have changed within
six months before the date of this agreement. EXCEPT as stated in CLAUSE (III)
above, each Debtor's Inventory is currently and will be in its possession.
(d) ACCOUNTS. Each Debtor's Accounts (i) arise from its sales or
rendition of services, (ii) are due to that Debtor, and (iii) are not subject to
any material setoff, counterclaim, defense, allowance, adjustment (OTHER THAN
discounts for prompt payment shown on the invoice), or material dispute,
objection, or complaint by any Obligor.
(e) SECURITIES. All Pledged Securities are duly authorized, validly
issued, fully paid, and non-assessable, and the transfer of them is not subject
to any restrictions OTHER THAN restrictions imposed by applicable Laws. The
Pledged Securities are approximately the maximum number of shares of each
Subsidiary that may be pledged without creating a material Tax obligation for
the Companies that would not otherwise exist.
(f) ADDITIONAL COLLATERAL. The foregoing representations and
warranties will be true and correct in all respects with respect to any
additional Collateral or additional specific descriptions of certain Collateral
delivered to Secured Party in the future by any Debtor.
The failure of any of these representations or warranties to be accurate and
complete does not impair the Security Interest in any Collateral.
7. COVENANTS. While any Lender is committed to lend or extend credit
under the Credit Agreement and until the Obligations are fully paid and
performed, each Debtor jointly and severally covenants and agrees with Secured
Party on behalf of Lenders that, without first obtaining Secured Party's written
notice of Determining Lenders' consent to the contrary:
(a) CREDIT AGREEMENT. Each Debtor shall promptly and fully comply
with and perform all covenants and agreements in the Credit Agreement that are
applicable to it or its assets or operations, each of which is ratified and
confirmed.
(b) CERTAIN RELOCATIONS AND CHANGES. Each Debtor shall give Secured
Party 30 days' written notice before any proposed (i) relocation of its
principal place of business or chief executive office, (ii) relocation of the
place where its books and records concerning its Accounts are kept, (iii) change
of its name, and (iv) relocation of any Collateral (OTHER THAN delivery of
Inventory in the ordinary course of business to third-party contractors for
processing and sales of Inventory in the ordinary course of business or as
permitted by the Credit Agreement) to a location not described on the attached
ANNEX 1.
(c) ESTOPPEL AND OTHER AGREEMENTS. Each Debtor shall:
(i) Within 30 days after the date of this agreement and at all
times after that time -- with respect to any of its Inventory having a
value of at least $1,500,000 that is from time to time delivered to any
third-party contractor for processing in the ordinary course of business --
deliver to Secured Party a bailee, estoppel, and subordination agreement
providing that such third-party contractor holds that Inventory as Secured
Party's bailee, subordinates to the Security Interest all right, title, and
interest it may have in and to that Inventory, and covenants to keep that
Inventory segregated and clearly marked as being owned by that Debtor,
which agreement must otherwise be in form and substance reasonably
acceptable to Secured Party and its special counsel; and
4 EXHIBIT C-1
<PAGE>
(ii) EITHER (A) cause the landlord or lessor for each location
where any of its Inventory is maintained (and for which a valid and
enforceable estoppel and subordination agreement has not previously been
delivered to Secured Party) to execute and deliver to Secured Party an
estoppel and subordination agreement in substantially the form of the
attached ANNEX 3 or such other form as may be reasonably acceptable to
Secured Party and its special counsel, OR (B) deliver to Secured Party a
legal opinion or other evidence (in each case that is reasonably
satisfactory to Secured Party and it special counsel) that neither the
applicable lease nor the Laws of the jurisdiction in which that location is
situated provide for contractual, common Law, or statutory landlord's Liens
(for those locations for which such legal opinion or other evidence has not
been previously delivered to Secured Party).
(d) OTHER NOTICES AND ACTIONS. Each Debtor shall promptly notify
Secured Party of (i) any change in any material fact or circumstance represented
or warranted by any Debtor with respect to any of the Collateral, (ii) any
claim, action, or proceeding challenging the Security Interest or affecting
title to all or any material portion of the Collateral or the Security Interest
(and, at Secured Party's request, that Debtor shall appear in and defend any
such action or proceeding at that Debtor's expense), (iii) any default or event
of default by that Debtor or any other party under or in connection with any
material portion (individually or collectively) of the Collateral (and it shall
immediately use reasonable efforts to remedy the same or immediately demand that
the same be remedied),
(e) RECORD OF COLLATERAL. Each Debtor shall maintain at its chief
executive office a current record of where all of its Collateral is located and
permit Secured Party or its representatives to inspect and make copies from
those records pursuant to the Credit Agreement and furnish to Secured Party,
from time to time, such documents, lists, descriptions, certificates, and other
information necessary or helpful to keep Secured Party informed with respect to
the identity, location, status, condition, terms of, parties to, and value of
the Collateral.
(f) COLLATERAL IN TRUST. While a Default or Potential Default
exists, each Debtor shall (i) hold in trust (and not commingle with its other
assets) for Secured Party all of its Collateral that is contracts, chattel
paper, instruments, or documents of title at any time received by it, (ii)
promptly deliver that Collateral to Secured Party unless Secured Party at its
option gives Debtor written permission to retain any of it, and (iii) cause each
contract, chattel paper, instrument, or document of title so retained to be
marked to state that it is assigned to Secured Party and each instrument to be
endorsed to the order of Secured Party (but failure to be so marked or endorsed
may not impair the Security Interest in any such Collateral).
(g) PERFORM OBLIGATIONS. Each Debtor shall perform all of its
material obligations under or in connection with all of its Collateral in
accordance with customary business practices.
(h) AMENDMENTS, ETC. No Debtor may amend, alter, or modify, or
permit the amendment, alteration, or modification of, any material portion
(individually or collectively) of any Collateral (OTHER THAN the processing of
Inventory in the ordinary course of business).
(i) IMPAIRMENT OF COLLATERAL. No Debtor may do or permit any act
that is reasonably likely to adversely impair the value or usefulness any
material portion of any Collateral.
8. REMEDIES UPON DEFAULT. While a Default exists, Secured Party is,
subject to Credit Agreement, entitled to exercise any one or more of the
following Rights.
(a) RIGHTS. Secured Party may exercise any and all Rights available
to a secured party under the UCC, in addition to any and all other Rights
afforded by this agreement and the other Loan Documents, at law, in equity, or
otherwise, including, without limitation (i) requiring Debtors to assemble
Collateral and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to the applicable Debtor and
Secured Party, (ii) applying by appropriate judicial proceedings for appointment
of a receiver for Collateral, (iii) applying to the Obligations any cash held by
Secured Party under this agreement, (iv) reducing any claim to judgment,
5 EXHIBIT C-1
<PAGE>
(v) exercising the Rights of offset or banker's Lien against the interest of
each Debtor in and to every account and other property of each Debtor in
Secured Party's possession to the extent of the full amount of the
Obligations, (vi) foreclosing the Security Interest and any other Liens
Secured Party may have or otherwise realize upon any and all of the Rights
Secured Party may have in and to Collateral, and (vii) bringing suit or other
proceedings before any Tribunal either for specific performance of any
covenant or condition contained in any of the Loan Documents or in aid of the
exercise of any Right granted to Secured Party in any Loan Document.
(b) NOTICE. If any Collateral threatens to decline speedily in value
or is of the type customarily sold on a recognized market, Secured Party may
sell or otherwise dispose of that Collateral without notification,
advertisement, or other notice of any kind. Otherwise, reasonable notice of the
time and place of any public sale of the Collateral -- or reasonable
notification of the time after which any private sale or other intended
disposition of the Collateral is to be made -- shall be sent to Debtor and to
any other Person entitled to notice under the UCC. Notice sent or given not
less than ten calendar days prior to the taking of the action to which the
notice relates is reasonable notice. It is not necessary that the Collateral be
at the location of the sale.
(c) SALES OF SECURITIES. In connection with the sale of any
Collateral that is securities, Secured Party is authorized, but not obligated,
to limit prospective purchasers to the extent deemed necessary or desirable by
Secured Party to render that sale exempt from the registration and similar
requirements under applicable Laws, and no sale so made in good faith by Secured
Party may be deemed not to be "COMMERCIALLY REASONABLE" because so made.
(d) OTHER SALES. Secured Party's sale of less than all Collateral
does not exhaust Secured Party's Rights under this agreement and Secured Party
is specifically empowered to make successive sales until all Collateral is sold.
If the proceeds of a sale of less than all Collateral is less than the
Obligations, then this agreement and the Security Interest remain in full force
and effect as to the unsold portion of the Collateral just as though no sale had
been made. In the event any sale under this agreement is not completed or is,
in Secured Party's opinion, defective, that sale does not exhaust Secured
Party's Rights under this agreement, and Secured Party is entitled to cause a
subsequent sale or sales to be made. All statements of fact or other recitals
made in any bill of sale or assignment or other instrument evidencing any
foreclosure sale under this agreement -- whether about nonpayment of the
Obligations, the occurrence of any Default, Secured Party's having declared all
of the Obligations to be due and payable, notice of time, place, and terms of
sale and the properties to be sold having been duly given, or any other act or
thing having been duly done by Secured Party -- shall be taken as PRIMA FACIE
evidence of the truth of the facts so stated and recited. Secured Party may
appoint or delegate any one or more Persons as agent to perform any act or acts
necessary or incident to any sale held by Secured Party, including the sending
of notices and the conduct of sale, but such acts must be done in the name and
on behalf of Secured Party.
(e) OBLIGORS. While a Default exists, Secured Party may notify or
require each Obligor to make payment directly to Secured Party, and Secured
Party may take control of the proceeds paid to Secured Party. Until Secured
Party elects to exercise these Rights, each Debtor is authorized to collect and
enforce the Collateral and to retain and expend all payments made on Collateral.
While Secured Party is entitled to and elects to exercise these Rights, Secured
Party has the Right in its own name or in the name of the applicable Debtor to
(i) compromise or extend time of payment with respect to Collateral for such
amounts and upon such terms as Secured Party may reasonably determine, (ii)
demand, collect, receive, receipt for, sue for, compound, and give acquittance
for any and all amounts due or to become due with respect to Collateral, (iii)
take control of cash and other proceeds of any Collateral, (iv) endorse the
applicable Debtor's name on any notes, acceptances, checks, drafts, money
orders, or other evidences of payment on Collateral that may come into Secured
Party's possession, (v) sign the applicable Debtor's name on any invoice or bill
of lading relating to any Collateral, on any drafts against Obligors or other
Persons making payment with respect to Collateral, on assignments and
verifications of accounts or other Collateral, and on notices to Obligors making
payment with respect to Collateral, (vi) send requests for verification of
obligations to any Obligor, and (vii) do all other acts and things reasonably
necessary to carry out the intent of this agreement. If any Obligor fails to
make payment on any Collateral when due, Secured Party is authorized, in its
sole discretion, either in its own name or in the applicable Debtor's name, to
take such action as Secured Party reasonably shall deem
6 EXHIBIT C-1
<PAGE>
appropriate for the collection of any amounts owed with respect to Collateral
or upon which a delinquency exists. However, Secured Party is NEITHER (x)
liable for its failure to collect, or for its failure to exercise diligence
in the collection of, any amounts owed with respect to Collateral (EXCEPT for
its own fraud, gross negligence, willful misconduct, or violation of any
Law), NOR (y) under any duty whatever to anyone except the applicable Debtor
and Lenders to account for funds that it shall actually receive under this
agreement. A receipt given by Secured Party to any Obligor is a full and
complete release, discharge, and acquittance to that Obligor, to the extent
of any amount so paid to Secured Party. Secured Party may apply or set off
amounts paid and the deposits against any liability of the applicable Debtor
to Secured Party. Regarding the existence of any Default for purposes of
this agreement, each Debtor agrees that the Obligors on any Collateral may
rely upon written certification from Secured Party that a Default exists.
(f) POWER-OF-ATTORNEY. Secured Party is deemed to be irrevocably
appointed as each Debtor's agent and attorney-in-fact with all Right to enforce
all of that Debtor's Rights under or in connection with the Collateral effective
and operable at all times while a Default exists. All reasonable costs,
expenses and liabilities incurred and all payments made by Secured Party as that
Debtor's agent and attorney-in-fact (including, without limitation, reasonable
attorney's fees and expenses) are considered a loan by Secured Party to that
Debtor that is repayable on demand, accrues interest at the Default Rate until
paid, and is part of the Obligations.
(g) APPLICATION OF PROCEEDS. While a Default exists, Secured Party
shall apply the proceeds of any sale or other disposition of Collateral in the
following order: (i) Payment of all its reasonable expenses incurred in
retaking, holding, and preparing any Collateral for disposition, in arranging
for such disposition, and in actually disposing of the same (all of which are
part of the Obligations); (ii) repayment of amounts reasonably expended by
Secured Party under PARAGRAPH 9 below; (iii) payment of the balance of the
Obligations in the order and manner specified in the Credit Agreement; and (iv)
delivery EITHER (A) to Borrower/Debtor for the account of all Debtors OR (B) as
a court of competent jurisdiction may direct.
9. OTHER RIGHTS.
(a) PERFORMANCE. If any Debtor fails to preserve the priority
(subject to Permitted Liens) of the Security Interest in any Collateral or
otherwise fails to perform any of its obligations under any Loan Document with
respect to any Collateral, then Secured Party may, at its option, but without
being required to do so, prosecute or defend any suits in relation to the
Collateral or take any other action that such Debtor is required -- but has
failed -- to take. Any amount that is reasonably expended or paid by Secured
Party in connection with the foregoing (including, without limitation, court
costs and reasonable attorneys' fees and expenses) bears interest at the Default
Rate from the date spent or incurred until repaid and is payable (with that
interest) by Debtors to Secured Party upon demand and is part of the
Obligations.
(b) COLLATERAL IN SECURED PARTY'S POSSESSION. If, while a Default
exists, any Collateral comes into Secured Party's possession, Secured Party may
use that Collateral for the purpose of preserving it or its value pursuant to
the order of a court of appropriate jurisdiction or in accordance with any other
Rights held by Secured Party in respect of that Collateral. Debtors jointly and
severally covenant to promptly reimburse and pay to Secured Party, at Secured
Party's request, the amount of all reasonable expenses, costs, Taxes, and other
charges incurred by Secured Party in connection with its custody and
preservation of that Collateral, all of which bear interest at the Default Rate
from the date spent or incurred until repaid and are (with that interest)
payable by Debtors to Secured Party upon demand and are part of the Obligations.
EXCEPT for Secured Party's own fraud, gross negligence, or willful misconduct
(i) the risk of accidental loss or damage to, or diminution in value of, any
Collateral is on Debtors, (ii) Secured Party has no liability for failure to
obtain or maintain insurance or to determine whether any insurance in effect is
adequate as to amount or risks insured, (iii) Secured Party has no duty to fix
or preserve Rights against any Obligors in respect of any Collateral and is
never liable for any failure to use diligence to collect any amount payable in
respect of any Collateral (OTHER THAN to account to Debtors and Lenders for what
Secured Party may actually collect or receive).
7 EXHIBIT C-1
<PAGE>
(c) RECORD OWNERSHIP OF SECURITIES. While a Default exists,
Secured Party may have any Collateral that is securities and that is in the
possession of Secured Party, or its nominee or nominees, registered in its
name, or in the name of its nominee or nominees, as pledgee.
(d) VOTING OF SECURITIES. As long as no Default exists, the
applicable Debtor may exercise all voting Rights pertaining to any Collateral
that is securities. While a Default exists, the Right to vote any Collateral
that is securities is vested exclusively in Secured Party. Accordingly, each
applicable Debtor irrevocably constitutes and appoints Secured Party as that
Debtor's proxy and attorney-in-fact -- effective only while a Default exists but
with full power of substitution -- to vote, and to act with respect to, any
Collateral that is securities standing in the name of that Debtor or with
respect to which that Debtor is entitled to vote and act. That proxy is coupled
with an interest, is irrevocable, and continues until the Obligations are fully
paid and performed.
(e) CERTAIN PROCEEDS. The provisions of this CLAUSE (E) are
applicable only while a Default exists. Notwithstanding any contrary provision,
all dividends or distributions of property in respect of, and all proceeds of,
any Collateral that is securities -- whether those dividends, distributions, or
proceeds result from a subdivision, combination, or reclassification of the
outstanding capital stock of any issuer or as a result of any merger,
consolidation, acquisition, or other exchange of assets to which any issuer may
be a party, or otherwise -- are part of the Collateral, shall, if received by
any Debtor, be held in trust for Secured Party's benefit, and shall immediately
be delivered to Secured Party (accompanied by proper instruments of assignment
or stock or bond powers executed by the applicable Debtor in accordance with
Secured Party's instructions) to be held subject to the terms of this agreement.
Any cash proceeds of any Collateral that come into Secured Party's possession
(including, without limitation, insurance proceeds) may, at Secured Party's
option, be applied in whole or in part to the Obligations (to the extent then
due), be fully or partially released to or under the written instructions of
that applicable Debtor for any general or specific purpose, or be fully or
partially retained by Secured Party as additional Collateral. Any cash
Collateral in Secured Party's possession may be invested by Secured Party in
certificates of deposit issued by Secured Party, any Lender, or any other state
or national bank having combined capital and surplus greater than $100,000,000
or in securities issued or guaranteed by the United States of America or any of
its agencies. Secured Party is never obligated to make any investment and never
has any liability to any Debtor or any Lender for any loss that may result from
any investment or non-investment. All interest and other amounts earned from
any investment may be dealt with by Secured Party in the same manner as other
cash Collateral.
(f) INDEMNIFICATION. DEBTORS JOINTLY AND SEVERALLY ASSUME ALL
LIABILITY FOR ALL COLLATERAL, FOR THE SECURITY INTEREST, AND FOR ANY USE,
POSSESSION, MAINTENANCE, AND MANAGEMENT OF, ALL COLLATERAL (INCLUDING, WITHOUT
LIMITATION, ANY TAXES ARISING AS A RESULT OF, OR IN CONNECTION WITH, THE
TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT) AND JOINTLY AND SEVERALLY AGREE TO
ASSUME LIABILITY FOR, AND TO INDEMNIFY AND HOLD SECURED PARTY, EACH LENDER, AND
THEIR RESPECTIVE REPRESENTATIVE (THE "INDEMNIFIED PARTIES") HARMLESS FROM AND
AGAINST, AND DEFEND EACH INDEMNIFIED PARTY AGAINST, ALL CLAIMS, CAUSES OF
ACTION, OR LIABILITY, FOR INJURIES TO OR DEATHS OF PERSONS AND DAMAGE TO
PROPERTY HOWSOEVER ARISING FROM OR INCIDENT TO SUCH USE, POSSESSION,
MAINTENANCE, AND MANAGEMENT (WHETHER SUCH PERSONS BE AGENTS OR EMPLOYEES OF
DEBTOR OR OF THIRD PARTIES, OR SUCH DAMAGE BE TO PROPERTY OF DEBTOR OR OF
OTHERS) AND ALL LOSSES, DAMAGES, CLAIMS, COSTS, PENALTIES, LIABILITIES, AND
EXPENSES, INCLUDING, WITHOUT LIMITATION, COURT COSTS AND ATTORNEYS' FEES,
HOWSOEVER ARISING OR INCURRED BECAUSE OF, INCIDENT TO, OR WITH RESPECT TO
COLLATERAL OR ANY USE, POSSESSION, MAINTENANCE, OR MANAGEMENT OF IT. (THE
"INDEMNIFIED LIABILITIES"). HOWEVER, NO INDEMNIFIED PARTY IS ENTITLED TO
INDEMNITY UNDER THIS PARAGRAPH FOR ITS OWN GROSS NEGLIGENCE, WILLFUL MISCONDUCT,
OR FRAUD OR FOR ANY INDEMNIFIED LIABILITY ARISING FROM ITS ACTIONS AFTER SECURED
PARTY HAS FORECLOSED THE SECURITY INTEREST OR ACCEPTED CONVEYANCE IN LIEU OF
FORECLOSURE OR (EXCEPT FOR THE PLEDGED SECURITIES) TAKEN POSSESSION OF ANY
COLLATERAL. The provisions of this paragraph survive the payment and
performance of the Obligations and the release of the Security Interest.
8 EXHIBIT C-1
<PAGE>
(g) SUBROGATION. If any of the Obligations is given in renewal or
extension or applied toward the payment of Debt secured by any Lien, Secured
Party is subrogated to all of the Rights, titles, interests, and Liens securing
that Debt.
10. MISCELLANEOUS.
(a) TERM. This agreement terminates when no Lender has any
commitment to lend or extend credit under the Credit Agreement and the
Obligations are fully paid and performed. No Obligor on any Collateral is
obligated to inquire about the termination of this agreement and is fully
protected in making payments directly to Secured Party, which payments Secured
Party shall pay to Borrower/Debtor on behalf of Debtors after termination of
this agreement.
(b) NO RELEASE. Neither the Security Interest, any Debtor's
obligations, nor Secured Party's or any Lenders' Rights under this agreement are
released, diminished, impaired, or adversely affected by the occurrence of any
one or more of the following events: (i) The taking or accepting of any other
security or assurance for any Obligations; (ii) any release, surrender,
exchange, subordination, or loss of any security or assurance at any time
existing in connection with any Obligations; (iii) the modification of,
amendment to, or waiver of compliance with any terms of any other Loan Document
without the consent of Debtors EXCEPT as required in that Loan Document; (iv)
any present or future insolvency, bankruptcy, or lack of corporate or trust
power of any party at any time liable for the payment of any Obligations; (v)
EXCEPT as specifically required by any other Loan Document, any renewal,
extension, or rearrangement of the payment of any Obligations (either with or
without notice to or consent of any Debtor) or any adjustment, indulgence,
forbearance, or compromise that may be granted or given by Secured Party or any
Lender to any Debtor; (vi) any neglect, delay, omission, failure, or refusal of
Secured Party or any Lender to take or prosecute any action in connection with
any agreement, document, guaranty, or instrument evidencing, securing, or
assuring the payment of any Obligations; (vii) any failure of Secured Party or
any Lender to notify any Debtor of any renewal, extension, or assignment of any
Obligations, or the release of any security under any other document or
instrument, or of any other action taken or refrained from being taken by
Secured Party or any Lender against any Debtor, or any new agreement between
Secured Party, any Lender, and any Debtor, it being understood that, except as
expressly required by the Credit Agreement, neither Secured Party nor any Lender
is required to give any Debtor any notice of any kind under any circumstances
whatsoever with respect to or in connection with the Obligations, including,
without limitation, notice of acceptance of this agreement or any Collateral
ever delivered to or for the account of Secured Party under this agreement;
(viii) the illegality, invalidity, or unenforceability of any Obligations
against any third party obligated with respect to it by reason of the fact that
the Obligations, or the interest paid or payable with respect to any of it,
exceeds the amount permitted by Law, the act of creating any of it is ULTRA
VIRES, or the officers, partners, or trustees creating any of it acted in excess
of their authority, or for any other reason; or (ix) if any payment by any party
obligated with respect to any Obligations is held to constitute a preference
under applicable Laws or for any other reason Secured Party or any Lender is
required to refund any payment on any Obligations or pay the amount of it to
someone else.
(c) WAIVERS. To the maximum extent lawful, except to the extent
expressly otherwise provided in this agreement or in any other Loan Document,
Debtors jointly and severally waive (i) any Right to require Secured Party or
any Lender to proceed against any other Person, to exhaust Rights in Collateral,
or to pursue any other Right that Secured Party or any Lender may have; (ii)
with respect to the Obligations, presentment and demand for payment, protest,
notice of protest and nonpayment, notice of acceleration, and notice of intent
to accelerate; and (iii) all Rights of marshaling in respect of any Collateral.
(d) FINANCING STATEMENT. Secured Party may at any time file this
agreement (or a carbon, photographic, or other reproduction of this agreement)
as a financing statement, but the failure of Secured Party to do so does not
impair the validity or enforceability of this agreement.
9 EXHIBIT C-1
<PAGE>
(e) INFORMATION. Except as otherwise provided by Law, Secured
Party's charge for furnishing each statement of account or each list of
Collateral is $10.00.
(f) VENUE AND SERVICE OF PROCESS. EACH DEBTOR (i) IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY TEXAS STATE OR FEDERAL COURT,
(ii) IRREVOCABLY WAIVES -- TO THE FULLEST EXTENT PERMITTED BY LAW -- ANY
OBJECTION THAT IT MAY NOW OR IN THE FUTURE HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION BROUGHT IN CONNECTION WITH ANY LOAN DOCUMENT OR THE OBLIGATIONS
BROUGHT IN DISTRICT COURTS OF DALLAS COUNTY, TEXAS, OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION,
(iii) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY OF THOSE
COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (iv) IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THOSE COURTS IN ANY LITIGATION BY THE
MAILING OF COPIES OF THAT LEGAL PROCESS BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID, BY HAND-DELIVERY, OR BY DELIVERY BY A NATIONALLY
RECOGNIZED COURIER SERVICE, AND SERVICE IS DEEMED COMPLETE UPON DELIVERY OF THE
LEGAL PROCESS AT ITS ADDRESS AS PROVIDED IN THIS AGREEMENT, AND (v) IRREVOCABLY
AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY PARTY TO ANY LOAN DOCUMENT ARISING
OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE OBLIGATIONS MAY BE
BROUGHT IN ONE OF THOSE COURTS. The scope of each of these waivers is intended
to be all-encompassing of any and all disputes that may be filed in any court
and that relate to the subject matter of this transaction -- including, without
limitation, contract claims, tort claims, breach of duty claims, and all other
common Law and statutory claims. These waivers are a material inducement to the
agreement by Secured Party and each Lender to enter into the Loan Documents, and
they have each relied -- and may continue to rely -- on these waivers in its
dealings with Debtors. Each Debtor represents and warrants that it has reviewed
these waivers with its legal counsel, and that it knowingly and voluntarily
agrees to each waiver following consultation with legal counsel. These waivers
are irrevocable, may not be modified either orally or in writing, and apply to
any renewals, extensions, amendments, and replacements of any Loan Document.
(g) LOAN DOCUMENT. This agreement is a Loan Document and is subject
to the applicable provisions of SECTIONS 1 and 14 of the Credit Agreement, all
of which are incorporated in this agreement by reference the same as if set
forth in this agreement verbatim.
(h) COMMUNICATIONS. Solely for purposes of SECTION 14.2 of the
Credit Agreement, communications to each Debtor may be sent in care of
Borrower/Debtor at Borrower/Debtor's address and telecopy number.
(i) AMENDMENTS, ETC. No amendment, waiver, or discharge to or under
this agreement is valid unless it is in writing and is signed by the party
against whom it is sought to be enforced and is otherwise in conformity with the
requirements of SECTION 14.8 of the Credit Agreement.
(j) ENTIRETY. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH
ANY DEBTOR IS PARTY REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
(k) SECURED PARTY AND LENDERS. Secured Party is the agent for each
Lender under the Credit Agreement. The Security Interest and all Rights granted
to Secured Party under or in connection with this agreement are for each
Lender's ratable benefit. Secured Party may, without the joinder of any Lender,
exercise any Rights in Secured Party's or Lenders' favor under or in connection
with this agreement, including, without limitation, conducting any foreclosure
sales and executing full or partial releases of, amendments or modifications to,
or consents or waivers under this agreement. Secured Party's and each Lender's
Rights and obligations VIS-A-VIS each other may be subject to one or more
separate agreements between those parties. However, no Debtor need inquire
about any such agreement or is subject to any terms of it unless that Debtor
specifically joins it. Therefore, neither any Debtor
10 EXHIBIT C-1
<PAGE>
nor its successors or assigns is entitled to any benefits or provisions of
any such separate agreement or is entitled to rely upon or raise as a defense
any party's failure or refusal to comply with the provisions of it.
(l) PARTIES. This agreement benefits Secured Party, Lenders, and
their respective successors and assigns and binds each Debtor and its successors
and assigns. Upon appointment of any successor AGENT under the Credit
Agreement, all of the Rights of Secured Party under this agreement automatically
vests in that new AGENT as successor Secured Party on behalf of Lenders without
any further act, deed, conveyance, or other formality OTHER THAN that
appointment. The Rights of Secured Party and Lenders under this agreement may
be transferred with any assignment of the Obligations. The Credit Agreement
contains provisions governing assignments of the Obligations and of Rights and
obligations under this agreement.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
11 EXHIBIT C-1
<PAGE>
EXECUTED as of the date first stated above.
PILLOWTEX, INC. and BEACON MANUFACTURING COMPANY,
PTEX HOLDING COMPANY MANETTA HOME FASHIONS, INC.,
TENNESSEE WOOLEN MILLS, INC., and
PILLOWTEX MANAGEMENT SERVICES
COMPANY
By By
------------------------------- ------------------------------
Norman J. Shuman, Secretary Jeffrey D. Cordes,
Executive Vice
President of each Debtor
Secured Party executes this agreement in acknowledgment of PARAGRAPH 10(j)
above.
NATIONSBANK OF TEXAS, N.A.,as AGENT
By
----------------------------------
Sharon M. Ellis, Vice President
SIGNATURE PAGE TO RESTATED SECURITY AGREEMENT
<PAGE>
ANNEX 1
LOCATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PLACE LOCATION OF BOOKS OWNER/MANAGER OF
OF BUSINESS AND AND RECORDS PREMISES WHERE
DEBTOR CHIEF EXECUTIVE OFFICE CONCERNING ACCOUNTS LOCATION(S) OF INVENTORY INVENTORY LOCATED
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pillowtex, Inc. 1071-79 Avenue of c/o Pillowtex 3820 Union Pacific Avenue Angel & Jean Echevarria
the Americas Management Services Los Angeles, CA 90071 c/o Ben Bohr
10th Floor Company 8383 Wilshire Blvd.
New York, NY 10016 4111 Mint Way Beverly Hills, CA 90211
Dallas, Dallas 203/260-7951
County, TX
-------------------------------------------------------
1801 South Davis St. Jimmie D. Smith
Rocky Mount,NC 651 Woodruff Rd.
P.O. Box 7626
Rocky Mount, NC 27804
919/937-7380
-------------------------------------------------------
1 Grove Street 7 Grove Street Realty
First Floor Trust
Watertown, MA 02172 1 Grove Street
Watertown, MA 02172
617/926-1111
- ------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C-1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PLACE LOCATION OF BOOKS OWNER/MANAGER OF
OF BUSINESS AND AND RECORDS PREMISES WHERE
DEBTOR CHIEF EXECUTIVE OFFICE CONCERNING ACCOUNTS LOCATION(S) OF INVENTORY INVENTORY LOCATED
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pillowtex, Inc. 1071-79 Avenue of c/o Pillowtex 1071-79 Avenue of the M.J. Fenton
the Americas Management Services Americas Adam's & Co. Real Estate
10th Floor Company 10th Floor 411 5th Avenue
New York, NY 10016 4111 Mint Way New York, NY 10016 New York, NY 10016
Dallas, Dallas 212/679-5500
County, TX
-------------------------------------------------------
New York Apartment Amelia Joyce Lee
235 E. 40th Street Republic Bank of New York
Apt. 30-A 452 Fifth Avenue
New York, NY 10016 New York, NY 10018
212/370-0283
-------------------------------------------------------
1112 Wesleyan Blvd. C. W. Heck
Rocky Mount, NC 1617 Pinecrest
Rocky Mount, NC
704/597-0010
-------------------------------------------------------
Franklin Cove Jeff Ganneway
Apt. #6 Franklin Rental
Tunica, MS Patricia Franklin Trust
P.O. Box 728
Tunica, MS 38676
- ------------------------------------------------------------------------------------------------------------------------------
2 EXHIBIT C-1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PLACE LOCATION OF BOOKS OWNER/MANAGER OF
OF BUSINESS AND AND RECORDS PREMISES WHERE
DEBTOR CHIEF EXECUTIVE OFFICE CONCERNING ACCOUNTS LOCATION(S) OF INVENTORY INVENTORY LOCATED
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pillowtex, Inc. 1071-79 Avenue of c/o Pillowtex 883 Sneath Lane Tom Robertson
the Americas Management Services Suite 217 Woodmont Companies
10th Floor Company San Bruno, CA 1350 Ralston Avenue
New York, NY 10016 4111 Mint Way Belmont, CA 94002
Dallas, Dallas 415/592-3960
County, TX
-------------------------------------------------------
Southeast Corner Parking David Maggs
Lot 14008 Dublin
4740 S. Whipple Street Lockport, IL 60441
Chicago, IL 60362 312/247-4777
-------------------------------------------------------
Chicago Parking Lot William Biederman
3010-3012 W. 47th Street Biederman & O'Keefe Ltd.
Chicago, IL 60632 30 N. LaSalle Street
Suite 1426
Chicago, IL 60602
-------------------------------------------------------
33 South Sixth Street Richard L. Keller
Minneapolis, MN 55402 4340 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402
612/372-1500
-------------------------------------------------------
1904 Third Avenue, George Riley
Suite 333 Clise Agency
Seattle, WA 98101 200 Securities Blvd.
Seattle, WA 98101
- ------------------------------------------------------------------------------------------------------------------------------
3 EXHIBIT C-1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PLACE LOCATION OF BOOKS OWNER/MANAGER OF
OF BUSINESS AND AND RECORDS PREMISES WHERE
DEBTOR CHIEF EXECUTIVE OFFICE CONCERNING ACCOUNTS LOCATION(S) OF INVENTORY INVENTORY LOCATED
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pillowtex, Inc. 1071-79 Avenue of c/o Pillowtex 8310 University Executive Pat Gavin
the Americas Management Services Park Pizzagalli Investment
10th Floor Company Suite 540 Company
New York, NY 10016 4111 Mint Way Charlotte, NC 28262 50 Joy Drive
Dallas, Dallas P.O. Box 2009
County, TX South Burlington, VT 05403
704/542-8886
-------------------------------------------------------
3025 West 47th Street Pillowtex Corporation
Chicago, IL 60632
-------------------------------------------------------
420-30 Mariny Street Pillowtex Corporation
Rocky Mount, NC 27801
-------------------------------------------------------
Rural Delivery Route Pillowtex Corporation
Number 3
Moulstown Road
Hanover, PA 17331
-------------------------------------------------------
c/o Pillowtex Highway 61 South, Pillowtex Corporation
Management Services Industrial Park
Company Tunica, MS 38676
4111 Mint Way
Dallas, Dallas
County, TX
- ------------------------------------------------------------------------------------------------------------------------------
Beacon Manufacturing 411 Mint Way 202 Whitson Avenue Girmes Property Asheville Property
Company Dallas, Dallas Swannanoa, NC 28778 Highway 74 Administration and
County, TX Asheville, NC Leasing, Inc.
f/k/a DeBall-Girmes of
America
-------------------------------------------------------
Factory Building Jantzen, Inc.
Westminster
Oconee County, SC
- ------------------------------------------------------------------------------------------------------------------------------
4 EXHIBIT C-1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PLACE LOCATION OF BOOKS OWNER/MANAGER OF
OF BUSINESS AND AND RECORDS PREMISES WHERE
DEBTOR CHIEF EXECUTIVE OFFICE CONCERNING ACCOUNTS LOCATION(S) OF INVENTORY INVENTORY LOCATED
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beacon Manufacturing 4111 Mint Way 202 Whitson Avenue Warehouse Building 996 Riverside Drive, Inc.
Company Dallas, Dallas Swannanoa, NC 28778 996 Riverside Drive
County, TX Asheville, NC
-------------------------------------------------------
Outlet Store Atlantic American
136 West Avenue Properties, Inc.
Kannapolis, North Carolina
-------------------------------------------------------
Bread Store BMC
Buncombe County,
North Carolina
- ------------------------------------------------------------------------------------------------------------------------------
5 EXHIBIT C-1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PLACE LOCATION OF BOOKS OWNER/MANAGER OF
OF BUSINESS AND AND RECORDS PREMISES WHERE
DEBTOR CHIEF EXECUTIVE OFFICE CONCERNING ACCOUNTS LOCATION(S) OF INVENTORY INVENTORY LOCATED
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Manetta Home Fashions, 4111 Mint Way 4111 Mint Way 505 Miller Street W.W. Heath
Inc. Dallas, Dallas Dallas, Dallas P.O. Box 508 Lando Land Co.
County, TX County, TX Monroe, NC 28110 1 Main St.
Lando, SC 29724
704/282-4382
-------------------------------------------------------
1 Main Street W.W. Heath
Lando, SC 29724 Lando Land Co.
1 Main St.
Lando, SC 29724
704/282-4382
- ------------------------------------------------------------------------------------------------------------------------------
Pillowtex Corporation 4111 Mint Way 4111 Mint Way
Dallas, Dallas Dallas, Dallas
County, TX County, TX
- ------------------------------------------------------------------------------------------------------------------------------
Ptex Holding Company 300 Delaware Ave, 300 Delaware Ave,
Suite 1704 Suite 1704
Wilmington, DE Wilmington, DE
19801-1612 19801-1612
- ------------------------------------------------------------------------------------------------------------------------------
Pillowtex Management 4111 Mint Way 4111 Mint Way 4666 Duncanville Rd. Jeff Greenberg
Services Company Dallas, Dallas Dallas, Dallas Dallas, TX 50 W. Ridgewood Ave.
County, TX County, TX [P.O. Box 927
_____wood, NJ 07451]
-------------------------------------------------------
4111 Mint Way Pillowtex Management
Dallas, TX 75237 Services Company
-------------------------------------------------------
3444 Morse Dr. Pillowtex Management
Dallas, TX 75236 Services Company
- ------------------------------------------------------------------------------------------------------------------------------
Tennessee Woolen Mills, 4111 Mint Way 4111 Mint Way 301 South Cumberland Carolyn Stone
Inc. Dallas, Dallas Dallas, Dallas Lebanon, TN 37087 416 Rome Pike
County, TX County, TX Lebanon, TN 37087
615/444-4889
-------------------------------------------------------
601 Space Park North Dr. Jim Brown
Goodlettesville, TN 37071 First Management Services
333 Union Street,
Suite 400
Nashville, TN 37201
-------------------------------------------------------
122 East Market Street Tennessee Woolen Mills,
Lebanon, TN 37087 Inc.
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
6 EXHIBIT C-1
</TABLE>
<PAGE>
ANNEX 2
THIS DOCUMENT Haynes and Boone, L.L.P.
PREPARED BY AND WHEN 3100 NationsBank Plaza
FILED RETURN TO: Dallas, Texas 75202-3789
Attention: Sheila L. White
FINANCING STATEMENT
THIS FINANCING STATEMENT IS PRESENTED TO A FILING OFFICER
FOR FILING UNDER THE UNIFORM COMMERCIAL CODE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEBTOR'S NAME AND MAILING ADDRESS: _______________________
4111 Mint Way
Dallas, Texas 75237
FED TAX ID NO. ____________________
- --------------------------------------------------------------------------------
SECURED PARTY'S NAME AND MAILING NationsBank of Texas, N.A., as Agent
ADDRESS: for Lenders*
901 Main Street
Dallas, Texas 75202
FED TAX ID NO. 75-2238693
- --------------------------------------------------------------------------------
FOR FILING OFFICER:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES OR
ITEMS OF PROPERTY AND INTERESTS (THE "COLLATERAL"):
All of the following items and types of property -- wherever located and
now or in the future acquired or existing:
[FOR THE FINANCING STATEMENTS FOR BORROWER/DEBTOR]
1. All of Debtor's present and future accounts, instruments,
receivables, accounts receivable, chattel paper, documents, general
intangibles, and book debts arising from its sale or lease of goods or
rendition of services, including, without limitation, all present and
future (a) amounts due to it from a factor, (b) returned, reclaimed,
refused, or repossessed goods, and (c) books and records pertaining to,
and security and guaranties for, any of the foregoing.
2. All of its present and future inventory, including, without
limitation, all present and future (a) materials, goods and work-in-
process, finished goods, and other tangible property held for sale or lease
or being processed for sale or lease in its present or future business,
whether to be furnished under contracts or used or consumed in that
Debtor's business, (b) documents (including documents of title) covering
any of the foregoing, and (c) such property the sale or other disposition
of which has given rise to accounts and which has not been returned to or
repossessed or stopped in transit by that Debtor.
3. Whether now owned or acquired in the future by Debtor, all
present and future shares of capital stock issued by any of the following
entities, including, without limitation, all present and future
- -----------------
* Secured Party is serving as AGENT under the Credit Agreement (as renewed,
extended, amended, or restated from time to time) dated as of December 1,
1994, between Pillowtex Corporation as BORROWER, Secured Party as AGENT,
and certain LENDERS from time to time party to it. The security interests
evidenced an perfected by this financing statement, as amended or continued
from time to time, is granted to Secured Party in that capacity on behalf
of those LENDERS.
EXHIBIT C-1
<PAGE>
increases, profits, combinations, reclassifications, investment property,
dividends, and substitutes and replacements for any of the foregoing
(subject to any limitations in the Security Agreement to which this
Financing Statement relates):
Beacon Manufacturing Company, a North Carolina corporation;
Manetta Home Fashions, Inc., a North Carolina corporation;
Pillowtex, Inc.;
Ptex Holding Company;
Pillowtex Management Services Company;
Tennessee Woolen Mills, Inc., a Tennessee corporation;
Torfeaco Industries Limited, an Ontario corporation;
588747 Alberta Ltd., an Alberta corporation; and
Pillowtex de Mexico S. De R.L. de C.V., a Mexico corporation
All cash and noncash proceeds of any other Collateral, including,
without limitation, all cash, accounts, general intangibles, documents,
instruments, chattel paper, goods, and any other property received upon the sale
or disposition of any other Collateral and all insurance proceeds of any kind
paid at any time in connection with any other Collateral.
- --------------------------------------------------------------------------------
______________________________, as DEBTOR NATIONSBANK OF TEXAS, N.A., as
Agent for Lenders as SECURED
PARTY*
By By
-------------------------------------- ---------------------------
Jeffrey D. Cordes, Executive Vice Sharon M. Ellis, Vice
President President
EXHIBIT C-1
2
<PAGE>
ANNEX 3
Dated as of _________________________
NationsBank of Texas, N.A., Agent
901 Main Street
Dallas, Texas 75202
Re: LESSEE: _______________________________________
PREMISES: _________________described on the attached EXHIBIT A
The undersigned is the landlord ("LANDLORD") under a lease (as renewed,
extended, amended, or substituted, the "LEASE") covering the Premises. Landlord
understands that Lessee is or will be party to, or a guarantor under, a Credit
Agreement (as renewed, extended, amended, or restated the "CREDIT AGREEMENT")
with you and certain lenders which requires (a) granting to you on behalf of
those lenders security interests in, among other things, all of Lessee's present
and future inventory now or in the future located at the Premises (together with
all cash and non-cash proceeds, the "COLLATERAL") and (b) subordinating in your
favor on behalf of those lenders any liens, security interests, and other rights
to which Landlord might be entitled in the Collateral.
To satisfy those requirements and induce you and those lenders to extend
credit under the Credit Agreement, Landlord agrees that, notwithstanding
anything to the contrary in the Lease, until all of Lessee's obligations to you
and those lenders have been paid and performed in full (a) all liens, security
interests, and other rights to which Landlord might be entitled in the
Collateral are subordinate and inferior to any present or future security
interests granted to you on behalf of those lenders in the Collateral,
regardless of the order in which any liens, security interests, and rights in
the Collateral were or will be created, attached, pledged, filed, recorded,
registered, or perfected, (b) Landlord intends that the Collateral will not
become fixtures and will be and remain personal property, notwithstanding the
manner of their annexation to the Premises, their adaptability to the uses and
purposes for which the Premises are used, and the intentions of the party making
the annexation, (c) Landlord will notify you in writing by Certified Mail,
Return Receipt Requested, at the above address, if Lessee defaults on its lease
obligations and grant to you the right but not the obligation to cure those one
or more defaults, (d) you and your representatives are entitled to enter upon
the Premises and assemble, appraise, display, sever, remove, maintain, prepare
for sale or lease, repair, lease, transfer, or sell at one or more public
auctions or private sales any Collateral, and (e) you may, without notice to
Landlord or Landlord's consent and without affecting the validity of this
agreement, increase, extend the times of payment of, or otherwise modify any of
Lessee's debts to you or the performance of any of the terms and conditions of
the Credit Agreement or related documents. This agreement inures to you, those
lenders, and the respective successors and assigns of each and binds Landlord
and Landlord's heirs, personal representatives, successors, and assigns.
Landlord waives notice of acceptance of this agreement.
Very truly yours,
- -------------------------------------- -----------------------------------
(address)
- -------------------------------------- By
- -------------------------------------- -----------------------------------
(telephone) (Name)
- -------------------------------------- -----------------------------
(telecopy) (Title)
-----------------------------
EXHIBIT C-1
<PAGE>
THIS DOCUMENT Haynes and Boone, L.L.P.
PREPARED BY AND WHEN 3100 NationsBank Plaza
RECORDED RETURN TO: Dallas, Texas 75202-3789
Attention: Sheila L. White
EXHIBIT C-2
RELEASE OF MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
AND FINANCING STATEMENT
from
REALMAC, INC.,
as GRANTOR,
in favor of
SHARON M. ELLIS,
as TRUSTEE,
for the benefit and in favor of
NATIONSBANK OF TEXAS, N.A.,
as AGENT for the benefit of the LENDERS described in this instrument,
covering property situated in
Buncombe County, North Carolina, and
Oconee County, South Carolina
November __, 1996
EXHIBIT C-2
<PAGE>
RELEASE OF MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
AND FINANCING STATEMENT
STATE OF ________
COUNTY OF ________
This RELEASE OF MORTGAGE is executed as of November __, 1996 by NATIONSBANK
OF TEXAS, N.A., as Beneficiary (in such capacity, "LENDER").
WHEREAS, on or about __________________, 19____, PILLOWTEX, a Texas
corporation ("GRANTOR"), executed that certain Mortgage, Deed of Trust, Security
Agreement, and Financing Statement (the "DEED OF TRUST"), recorded as File
No. ____________ of the Real Property Records of ________County, ________, and
covering the real and personal property more fully described therein, including,
without limitation, the land described on EXHIBIT A attached hereto and
incorporated herein for all purposes (collectively, the "PROPERTY").
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Lender, being the current owner and holder of the
Deed of Trust, has RELEASED and DISCHARGED, and by these presents hereby
RELEASES and DISCHARGES the property from the liens and security interests of
the Deed of Trust and any related UCC-1 Financing Statements connected
therewith.
EXECUTED as of the day and date first above written.
LENDER:
NATIONSBANK OF TEXAS, N.A.
By
---------------------------------------------
Sharon M. Ellis, Vice President
EXHIBIT C-2
<PAGE>
THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
On November __, 1996, personally came before me SHARON M. ELLIS who, being
by me duly sworn, says that she is a Vice President of NATIONSBANK OF TEXAS,
N.A., that the seal affixed to the foregoing instrument in writing is the
corporate seal of that corporation, and that such instrument was signed and
sealed by her, on behalf of that corporation, and acknowledges such instrument
to be the act and deed of that corporation.
[PERSONALIZED SEAL]
--------------------------------------------------
Notary Public in and for the State of Texas
(Name)
--------------------------------------------
My Commission expires:
- ----------------------------
THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
Personally appeared before me _______________________________ who, being
duly sworn, says that he/she was present and saw the corporate seal of the
within-named NATIONSBANK OF TEXAS, N.A. affixed to the foregoing Release of
Mortgage; and that he/she saw Sharon M. Ellis, as Vice President, and
________________, as ___________________, sign, attest and deliver the within
written instrument, and that he/she, with _______________________________,
witnessed the execution and delivery thereof as the act and deed of
NATIONSBANK OF TEXAS, N.A.
- -------------------------------------
Signature of First Witness
Sworn to and subscribed before me this ____ day of November, 1996.
(L.S.)
----------------------------------------
Notary Public for the State of Texas
My commission expires:
---------------
[NOTARY SEAL]
EXHIBIT C-2
2
<PAGE>
EXHIBIT A
LAND
[TO BE PROVIDED BY BORROWER.]
EXHIBIT C-2
<PAGE>
THIS DOCUMENT Haynes and Boone, L.L.P.
PREPARED BY AND WHEN 3100 NationsBank Plaza
RECORDED RETURN TO: Dallas, Texas 75202-3789
Attention: Sheila L. White
EXHIBIT C-3
RELEASE OF SECOND MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF LEASES AND RENTS, AND FINANCING STATEMENT
from
PILLOWTEX CORPORATION,
as MORTGAGOR,
in favor of
NATIONSBANK OF TEXAS, N.A.,
as AGENT for the LENDERS described in this instrument,
covering property situated in
York County, Pennsylvania
November __, 1996
EXHIBIT C-3
<PAGE>
RELEASE OF SECOND MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS, AND FINANCING STATEMENT
STATE OF ________
COUNTY OF ________
This RELEASE OF MORTGAGE is executed as of November __, 1996 by NATIONSBANK
OF TEXAS, N.A., as Beneficiary (in such capacity, "LENDER").
WHEREAS, on or about __________________, 19____, PILLOWTEX, a Texas
corporation ("GRANTOR"), executed that certain Second Mortgage, Deed of Trust,
Security Agreement, and Financing Statement (the "DEED OF TRUST"), recorded as
File No. ____________ of the Real Property Records of ________County, ________,
and covering the real and personal property more fully described therein,
including, without limitation, the land described on EXHIBIT A attached hereto
and incorporated herein for all purposes (collectively, the "PROPERTY").
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Lender, being the current owner and holder of the
Deed of Trust, has RELEASED and DISCHARGED, and by these presents hereby
RELEASES and DISCHARGES the property from the liens and security interests of
the Deed of Trust and any related UCC-1 Financing Statements connected
therewith.
EXECUTED as of the day and date first above written.
LENDER:
NATIONSBANK OF TEXAS, N.A.
By
--------------------------------------------
Sharon M. Ellis, Vice President
CERTIFICATE OF RESIDENCE
The undersigned certifies that the precise residence of Mortgagee is:
NationsBank of Texas, N.A.
901 Main Street
Dallas, Texas 75202
-------------------------------------------
Sharon M. Ellis, Vice President
of and on behalf of
NationsBank of Texas, N.A.
EXHIBIT C-3
<PAGE>
THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
On _______________________, 1996, before me, a notary public, the
undersigned officer personally appeared SHARON M. ELLIS and
__________________, who acknowledged themselves to be the Vice President, and
_____________________________________, respectively, of NATIONSBANK OF TEXAS,
N.A., and that they, as such officers, being authorized to do so, executed
the foregoing instrument for the purposes contained in it, by signing the
name of the corporation by themselves as such officers.
[PERSONALIZED SEAL]
-------------------------------------------------
Notary Public in and for the State of Texas
(Name)
-------------------------------------------
My Commission expires:
- --------------------------
EXHIBIT C-3
2
<PAGE>
EXHIBIT A
EXHIBIT C-3
<PAGE>
EXHIBIT D-1
NOTICE OF CONVERSION
AGENT: NationsBank of Texas, N.A. DATE: ____________________
BORROWER: Pillowtex Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This notice is delivered under SECTION 3.10 of the Credit Agreement (as
renewed, extended, amended, or restated, the "CREDIT AGREEMENT") dated as of
November __, 1996, between Borrower, Agent, and certain lenders. Terms defined
in the Credit Agreement have the same meanings when used -- unless otherwise
defined -- in this notice.
Borrower presently has a ____________________(1) Borrowing (the
"EXISTING BORROWING") under the Revolving Facility in the amount of
$____________________ -- which, if a ____________________(2) Rate Borrowing,
has an Interest Period of ____________________(3) ending on
____________________. On ________________________ (the "CONVERSION DATE"),
Borrower shall partially pay, continue in full or part as the same Type of
Borrowing, or convert in full or part to another Type of Borrowing and -- if
applicable -- with the Interest Period(s) designated below
[CHECK APPLICABLE BOXES]:
/ / Amount to be paid, if any, $_______________
/ / Balance to be in the following Types of Borrowings with -- if
applicable -- the following Interest Period(s):
---------------------------------------------------------------
---------------------------------------------------------------
Type(1) Amount(4) Interest Period(4)
---------------------------------------------------------------
---------------------------------------------------------------
$
---------------------------------------------------------------
$
---------------------------------------------------------------
$
---------------------------------------------------------------
$
---------------------------------------------------------------
---------------------------------------------------------------
Borrower certifies that on the Conversion Date -- and after giving effect
to the above action(s) -- (a) all of the representations and warranties in the
Loan Documents will be true and correct in all material respects -- UNLESS they
speak to a specific date or the facts on which they are based have been changed
by transactions contemplated or expressly permitted by the Credit Agreement --
and (b) no Material Adverse Event, Default, or Potential Default will exist.
PILLOWTEX CORPORATION
By
----------------------------------------
Name
----------------------------------------
Title(5)
----------------------------------------
________________
(1) Base-Rate, CD-Rate, or LIBOR-Rate
(2) LIBOR- or CD-
(3) 1, 2, 3, or 6 months for LIBOR-Rate Borrowings or 30, 60, 90, or 180 days
for CD-Rate Borrowings
(4) Must be $1,000,000 or $100,000 greater multiple for a Base-Rate Borrowing
or $4,000,000 or $100,000 multiple for any other Type of Borrowing
(5) Must be a Responsible Officer
EXHIBIT D-1
<PAGE>
EXHIBIT D-2
COMPLIANCE CERTIFICATE
FOR THE FISCAL QUARTER ENDED ____________________ (the "SUBJECT QUARTER")
AGENT: NationsBank of Texas, N.A. DATE: ____________________
BORROWER: Pillowtex Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This certificate is delivered under the Credit Agreement (as renewed,
extended, amended, or restated, the "CREDIT AGREEMENT") dated as of November __,
1996, between Borrower, Agent, and certain lenders, all defined terms in which
have the same meanings when used -- unless otherwise defined -- in this
certificate.
In my capacity as a Responsible Officer of -- and on behalf of -- Borrower,
I certify to Agent and Lenders on the date of this certificate that (a) I am a
Responsible Officer of Borrower, (b) Borrower's Financial Statements attached to
this certificate were prepared in accordance with GAAP and present fairly the
Companies' consolidated financial condition and results of operations as of, and
for the fiscal quarter ended on, the last day of the Subject Quarter, (c) a
review of the activities of the Companies during the Subject Quarter has been
made under my supervision with a view to determining whether, during the Subject
Quarter, the Companies performed and complied with all of their obligations
under the Loan Documents, and, during the Subject Quarter, to my knowledge
(i) the Companies performed, and complied with all of their obligations under
the Loan Documents (EXCEPT for the deviations, if any, described on a schedule
to this certificate) in all material respects, and (ii) no Default (nor any
Potential Default) has occurred which has not been cured or waived (EXCEPT the
Defaults or Potential Defaults, if any, described on the schedule to this
certificate), and (d) to my knowledge, the status of compliance by the Companies
with SECTIONS 9.9, 9.18, 10.1, 10.2, 10.3, and 10.4 of the Credit Agreement at
the end of the Subject Quarter is as described on the schedule to this
certificate.
By
------------------------------------------
Name
------------------------------------------
Title(1)
------------------------------------------
_______________
(1) Must be a Responsible Officer
EXHIBIT D-2
<PAGE>
SCHEDULE TO COMPLIANCE CERTIFICATE
(For Fiscal Quarter Ended ___________________________)
A. Describe deviations from performance or compliance with covenants, if
any, pursuant to CLAUSE (c)(i) of the attached certificate. If none, so state.
B. Describe Potential Defaults and Defaults, if any, pursuant to CLAUSE
(c)(ii) of the attached certificate. If none, so state.
C. Reflect compliance with SECTIONS 9.9, 9.17, 10.1, 10.2, 10.3, and 10.4
at the end of the Subject Period on a consolidated basis pursuant to CLAUSE (d)
of the attached certificate.
TABLE 1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COVENANT AT END OF SUBJECT PERIOD
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 9.9 DISTRIBUTIONS
- -------------------------------------------------------------------------------
(a) Net Income for previous fiscal year $
- -------------------------------------------------------------------------------
(b) 50% of LINE (a) $
- -------------------------------------------------------------------------------
(c) Distributions paid -- excluding carryovers from $
earlier years -- during previous fiscal year
and by April 30 of this fiscal year for
previous fiscal year -- MAY NOT EXCEED LINE (b)
- -------------------------------------------------------------------------------
(d) Net Income for this fiscal year $
- -------------------------------------------------------------------------------
(e) 50% of LINE (d) $
- -------------------------------------------------------------------------------
(f) Distributions paid -- excluding carryovers for $
previous fiscal year included in LINE (c) --
during this fiscal year -- MAY NOT EXCEED LINE
(e)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 9.17 OPERATING LEASES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Operating Lease obligations for most- $
recently ended fiscal year
- -------------------------------------------------------------------------------
MAXIMUM $12,000,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 10.1 MINIMUM NET WORTH
- -------------------------------------------------------------------------------
(a) Stockholder's equity (Net Worth) $
- -------------------------------------------------------------------------------
EXHIBIT D-2
<PAGE>
- -------------------------------------------------------------------------------
(b) 90% of Consolidated-Net Worth at December 30, $
1995
- -------------------------------------------------------------------------------
(c) 50% of Cumulative Net Income (without deduction $
for losses) after December 30, 1995
- -------------------------------------------------------------------------------
(d) MINIMUM NET WORTH -- TOTAL of LINES (b), AND $
(c)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 10.2 CURRENT RATIO
- -------------------------------------------------------------------------------
(a) Current assets $
- -------------------------------------------------------------------------------
(b) Current liabilities $
- -------------------------------------------------------------------------------
(c) RATIO of LINE (a) TO LINE (b) ____ to 1.00
- -------------------------------------------------------------------------------
(d) MINIMUM 1.3 to 1.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Section 10.3 FUNDED DEBT/EBITDA
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(a) Funded Debt $
- -------------------------------------------------------------------------------
(b) Net Income for last 12 fiscal months $
- -------------------------------------------------------------------------------
(c) Interest expense (including capitalized $
interest) for last 12 fiscal months
- -------------------------------------------------------------------------------
(d) Taxes for last 12 fiscal months $
- -------------------------------------------------------------------------------
(e) Depreciation for last 12 fiscal months $
- -------------------------------------------------------------------------------
(f) Amortization for last 12 fiscal months $
- -------------------------------------------------------------------------------
(g) EBITDA -- TOTAL of LINES (b), (c), (d), (e), $
PLUS (f)
- -------------------------------------------------------------------------------
(h) RATIO of LINE (a) TO LINE (g) ____ to 1.00
- -------------------------------------------------------------------------------
(i) MAXIMUM 4.0 to 1.00
through
1/2/99; 3.5
to 1.00
after 1/2/99
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Section 10.4 INTEREST COVERAGE RATIO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(a) Net Income for 1, 2, 3, or 4 fiscal quarters $
- -------------------------------------------------------------------------------
(b) Interest expense (including capitalized $
interest) for period in that applicable period
- -------------------------------------------------------------------------------
(c) Taxes for that applicable period $
- -------------------------------------------------------------------------------
(d) Depreciation for that applicable period $
- -------------------------------------------------------------------------------
(e) Amortization for that applicable period $
- -------------------------------------------------------------------------------
(f) EBITDA that applicable period -- TOTAL of LINES $
(a), (b), (c), (d), PLUS (e)
- -------------------------------------------------------------------------------
(g) Interest expense on the Company's Debt for that $
applicable period
- -------------------------------------------------------------------------------
(h) RATIO of LINE (f) TO LINE (g) ____ to 1.00
- -------------------------------------------------------------------------------
(i) MINIMUM RATIO 2.5 to 1.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXHIBIT D-2
2
<PAGE>
EXHIBIT D-3
CLOSING CERTIFICATE
AGENT: NationsBank of Texas, N.A. DATE: ________________, 1996
BORROWER: Pillowtex Corporation
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This certificate is delivered under the Credit Agreement (as renewed,
extended, amended, or restated, the "CREDIT AGREEMENT") dated as of November 8,
1996, between Borrower, Agent, and certain lenders, all defined terms in which
have the same meanings when used -- unless otherwise defined -- in this
certificate.
In my capacity as a Responsible Officer of -- and on behalf of -- Borrower,
I certify to Agent and Lenders on the date of this certificate that (a) I am a
Responsible Officer of Borrower, (b) except as disclosed in writing to Agent and
Lenders, there have been no amendments or modifications to or waivers of
compliance under the Fieldcrest Acquisition Agreement, and (c) upon completion
of the Fieldcrest Asset Acquisition (i) all of the representations and
warranties in the Loan Documents will be true and correct in all material
respects and (ii) no Material Adverse Event, Default, or Potential Default will
exist.
By
------------------------------------------
Name
------------------------------------------
Title(1)
------------------------------------------
_______________
(1) Must be a Responsible Officer
<PAGE>
EXHIBIT E-1
OPINION OF TEXAS COUNSEL
1. EXISTENCE AND AUTHORITY. Each Company is a corporation or partnership
duly organized, validly existing and (if a corporation, in good standing) under
the laws of its state of organization. Except where failure would not
reasonably be expected to be a Material Adverse Event, each Company (a) is duly
qualified to transact business as a foreign entity in each jurisdiction where
the nature and extent of its business and properties require the same, and (b)
possesses all requisite authority, power, licenses, permits, and franchises to
conduct its business as is now being conducted. Each Company possesses all
requisite corporate or partnership authority, power, licenses, permits, and
franchises to execute, deliver, and comply with the terms of the Loan Documents
to which it is a party, all which have been duly authorized and approved by all
necessary corporate or partnership action and, except where failure would not
reasonably be expected to be a Material Adverse Event, for which no approval or
consent of any Person or Tribunal is required which has not been obtained and no
filing or other notification to any Person or Tribunal is required which has not
been properly completed. Each Company has the power to own its respective
properties and to conduct its respective business as currently conducted. The
execution, delivery, and performance by each Company of the Loan Documents to
which it is a party do not violate or cause a default under the Certificate or
Articles of Incorporation or Articles of Organization, or Bylaws, or
Regulations, or Charter, or agreement of limited partnership, of such Company,
any law, any judgment, decree, or order of any court or any other agency of
government known to this firm that is applicable to such Company or its
property, or any material agreement know to this firm to which such Company is a
party or by which its property is bound, including, with respect to the Company
which is a party thereto, the Credit Agreement and will not result in the
creation or imposition of any Lien upon the property or assets of such Company,
other than as provided by the Loan Documents.
2. COMPLIANCE WITH LOAN DOCUMENTS. No Company is, nor will the
execution, delivery, performance, or observance of the Loan Documents cause any
Company to be (a) in violation of any laws or any material agreements to which
it is a party, or (b) in violation of its partnership agreement, articles of
organization, regulations, bylaws or charter.
3. LITIGATION. Except for Litigation that is not, individually or
collectively, a Material Adverse Event, no Company is aware of any pending or
threatened Litigation by, against, or affecting any Company or its assets or
real estate. Except for those that are not, individually or collectively, a
Material Adverse Event, there are no outstanding or unpaid judgments orders,
writs, injunctions or decrees against any Company or its assets.
4. GOVERNMENT REGULATION. No Company is (a) a "holding company," a
"subsidiary company" of a "holding company," an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," or a "public
utility" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, (b) a "public utility" within the meaning of the Federal Power Act,
as amended, (c) an "investment company" or "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or (d) an "investment advisor" within the meaning of the Investment Advisors Act
of 1940, as amended.
5. ENFORCEABILITY. Each of the Loan Documents has been duly executed and
delivered by each Company party thereto and constitutes a legal, valid and
binding obligation of each Company party thereto, enforceable against each such
Company in accordance with its terms.
6. EMPLOYEE BENEFIT PLANS. No (a) Company employee benefit plan (as
defined in the Internal Revenue Code of 1954, as amended, and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) has incurred an
accumulated funding deficiency in a material amount; (b) Company has incurred
material liability to the Pension Benefit Guaranty Corporation in connection
with any such plan; (c) Company has withdrawn in whole or in part from
participation in a multiemployer pension plan (as defined in ERISA); and
(d) prohibited transaction or
EXHIBIT E-1
1
<PAGE>
reportable event (as such terms are defined in ERISA) has occurred which
could have a material adverse effect on Borrower's financial condition.
7. TAXES. All tax returns of each Company required to be filed have been
filed and all taxes imposed upon each Company which are due and payable have
been paid.
8. USURY. The interest contracted for in the Loan Documents does not
exceed the rate of interest currently allowed to be contracted for under Texas
usury law. With respect to the Loan Documents, (a) no fees, sums or other
benefits, direct or indirect, including any compensating balance requirements or
fees in lieu thereof, have been paid to or received by or are, or may be,
payable to or receivable by the Agent (for the benefit of the Lenders), except
as set forth in the Loan Documents, (c) any expenses reimbursable to the Agent
(for the benefit of the Lenders) in connection with the Loans have been and will
be limited to the actual costs incurred and paid to third parties, (d) the
prepayment premiums or funding loss payments contained in the Credit Agreement
bear a reasonable relationship to the amount of loss or inconvenience which may
be suffered by the Agent (and the Lenders) as a result of any prepayment, and
(e) the fees required to be paid by SECTIONS 4.2, 4.3, and 4.4 of the Credit
Agreement do not constitute interest under Texas law.
9. NO DEFAULT. The execution, delivery, and performance by any Company
with respect to the Loan Documents to which it is a party do not and will not
contravene or constitute a default under, any provision of any law or regulation
of the State of Texas or the United States of America, and no authorization,
approval, consent, order, license, or other action by, and no notice to or
filing with, any individual, corporation, partnership, trust unincorporated
association or other legal entity or organization, or any government, court,
agency, or political subdivision, is required in connection with such execution,
delivery and performance under any law or regulation of the State of Texas or
the United States of America or any judgment, decree, or order of any court or
governmental or regulatory authority, which has not been obtained or given.
10. CONSENTS. No approval, authorization, or other action by, or filing
with, any governmental authority of the United States of America or any state,
or any court or arbitrator, is required in connection with the execution,
delivery and performance on the date hereof by each Company with respect to the
Loan Documents to which it is a party, except (a) such approvals,
authorizations, actions or filings as have been made or secured as of the date
hereof, and (b) the filing or recording of any Uniform Commercial Code financing
statements or amendments, and any other document or instrument required to be
filed in order to perfect a lien in any of the Collateral, and any continuation
statements or similar documents required to be filed to maintain the
effectiveness thereof.
11. SECURITY INTEREST. All right, title and interest of each Company in
respect of the Collateral has been effectively made subject to the security
interests of the Agent (for the benefit of the Lenders) pursuant to the Credit
Agreement. Assuming the due filing in proper form in the office of the
Secretary of State of the State of Texas of financing statements covering the
Collateral, the Agent (for the benefit of the Lenders) will have good and valid
perfected liens and security interests in the Collateral to the extent such
security interest is perfected by central filing under the Uniform Commercial
Code as in effect in the State of Texas (the "UCC").
12. PLEDGED SECURITIES. Based upon a review of the stock transfer records
of each issuer thereof, the Pledged Securities that are capital stock
collectively constitute all the issued and outstanding shares of capital stock
of each issuer, are owned by the Persons identified on SCHEDULE 2 to the
Security Agreement, and no other person owns any interest in any capital stock
of any Company and all of the Pledged Securities that are capital stock are duly
authorized, validly issued, fully paid and non-assessable, and, all of the
Pledged Securities are free and clear of any liens, encumbrances, or security
interests whatsoever other than the liens created by the pledge of the Security
Agreement pursuant to the Credit Agreement. There are no outstanding rights,
warrants, options, or agreements to purchase or otherwise acquire any shares of
stock or securities or obligations of any kind convertible into any share of
capital stock, of any class. There are also no restrictions on transfer of the
capital stock of any Company. No filings or recordings are required to perfect
or make valid and enforceable the pledge under the Security Agreement.
EXHIBIT E-1
2
<PAGE>
With the delivery to and possession by the Agent (for the benefit of the
Lenders) of the certificates representing the Pledged Securities, the Agent
(for the benefit of the Lenders) will have a valid, perfected, first priority
security interest in and pledge of all the Pledged Securities as security for
Obligations.
EXHIBIT E-1
3
<PAGE>
EXHIBIT E-2
OPINION OF MEXICO COUNSEL
1. ENFORCEABILITY OF SECURITY AGREEMENT. The Security Agreement
evidences a valid and binding obligation and agreement of ____________________,
and, assuming that it is enforceable under the applicable laws of the United
States of America, is enforceable in accordance with its terms under the laws of
Mexico.
2. EXISTENCE AND AUTHORITY. The Company is a corporation duly organized,
validy existing, and in good standing under the laws of its state of
jurisdiction of organization. Except where failure would not reasonably be
expected to be a Material Adverse Event, the Company (a) is duly qualified to
transact business as a foreign entity in each jurisdiction where the nature and
extent of its business and properties require the same, and (b) possesses all
requisite authority, power, licenses, permits, and franchises to conduct its
business as is now being conducted.
EXHIBIT E-2
1
<PAGE>
EXHIBIT F
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS AGREEMENT is entered into as of ______________________, between
________________________ ("ASSIGNOR") and ______________________ ("ASSIGNEE").
PILLOWTEX CORPORATION, a Texas corporation ("BORROWER"), certain lenders
("LENDERS"), and NATIONSBANK OF TEXAS, N.A., a national banking association (in
its capacity as Agent for Lenders, "AGENT"), are party to the Restated Credit
Agreement (as renewed, extended, amended, or restated, the "CREDIT AGREEMENT")
dated as of November __, 1996, all of the defined terms in which have the same
meanings when used -- unless otherwise defined -- in this agreement. This
agreement is entered into as required by SECTION 14.10(c) of the Credit
Agreement and is not effective until consented to by Borrower and Agent, which
consents may not under the Credit Agreement be unreasonably withheld.
ACCORDINGLY, for adequate and sufficient consideration, Assignor and
Assignee agree as follows:
1. ASSIGNMENT AND ASSUMPTION. By this agreement, and effective as of
_________________________ (which must be at least five Business Days after the
execution and delivery of this agreement to both Borrower and Agent for consent,
the "EFFECTIVE DATE"), Assignor sells and assigns to Assignee (without recourse
to Assignor) and Assignee purchases and assumes from Assignor a ___% interest
(the "ASSIGNED INTEREST") in and to all of Assignor's Rights and obligations
under the Credit Agreement as of the Effective Date, including, without
limitation, the Assigned Interest in (a) Assignor's Commitment as of the
Effective Date, (b) Notes held by Assignor as of the Effective Date, (c) all
Principal Debt owed to Assignor on the Effective Date, (d) all unpaid
reimbursement obligations under drawings or drafts under any LC on the Effective
Date, (e) all outstanding participations owned by Assignor under SECTION 2.4(c)
of the Credit Agreement on the Effective Date, (f) all interest accruing in
respect of the Assigned Interest after the Effective Date, (g) all LC fees paid
in advance before the Effective Date under SECTION 4.3(a) of the Credit
Agreement in respect of the Assigned Interest and in respect of any period or
periods after the Effective Date, and (h) all commitment fees accruing in
respect of the Assigned Interest under SECTION 4.4 of the Credit Agreement after
the Effective Date.
2. ASSIGNOR PROVISIONS. Assignor (a) represents and warrants to Assignee
that as of the Effective Date (i) the following principal amounts and LC
liabilities are owed to it without reduction for any assignments that have not
yet become effective:
--------------------------------------------------
--------------------------------------------------
ITEM AMOUNT
--------------------------------------------------
--------------------------------------------------
Principal Debt of Revolving Facility $
--------------------------------------------------
LC reimbursables $
--------------------------------------------------
Section 2.4(c) participations $
--------------------------------------------------
--------------------------------------------------
and (ii) Assignor is the legal and beneficial owner of the Assigned Interest,
which is free and clear of any adverse claim, and (b) makes no representation or
warranty to Assignee and assumes no responsibility to Assignee with respect to
(i) any statements, warranties, or representations made in or in connection with
any Loan Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency, or value of any Loan Document, or (iii) the financial
condition of any Company or the performance or observance by any Company of any
of its obligations under any Loan Document.
EXHIBIT F
<PAGE>
NationsBank of Texas, N.A., Agent
________________, 1994
Page 2
3. ASSIGNEE PROVISIONS. Assignee (a) represents and warrants to
Assignor, Borrower, and Agent that Assignee is legally authorized to enter
into this agreement, (b) confirms that it has received a copy of the Credit
Agreement, copies of the Current Financials, and such other documents and
information as it deems appropriate to make its own credit analysis and
decision to enter into this agreement, (c) agrees with Assignor, Borrower,
and Agent that Assignee shall -- independently and without reliance upon
Agent, Assignor, or any other Lender and based on such documents and
information as Assignee deems appropriate at the time -- continue to make its
own credit decisions in taking or not taking action under the Loan Documents,
(d) appoints and authorizes Agent to take such action as agent on its behalf
and to exercise such powers under the Loan Documents as are delegated to
Agent by the terms of the Loan Documents and all other reasonably-incidental
powers, (e) agrees with Assignor, Borrower, and Agent that Assignee shall
perform and comply with all provisions of the Loan Documents applicable to
Lenders in accordance with their respective terms, and (f) if Assignee is not
organized under the Laws of the United States of America or one of its
states, it (i) represents and warrants to Assignor, Agent, and Borrower that
no Taxes are required to be withheld by Assignor, Agent, or Borrower with
respect to any payments to be made to it in respect of the Obligations, and
it has furnished to Agent and Borrower two duly completed copies of either
U.S. Internal Revenue Service FORM 4224, FORM 1001, FORM W-8, or any other
form acceptable to Agent that entitles Assignee to exemption from U.S.
federal withholding Tax on all interest payments under the Loan Documents,
(ii) covenants to provide Agent and Borrower a new FORM 4224, FORM 1001, FORM
W-8, or other form acceptable to Agent upon the expiration or obsolescence of
any previously delivered form according to Law, duly executed and completed
by it, and to comply from time to time with all Laws with regard to the
withholding Tax exemption, and (iii) agrees with Agent and Borrower that, if
any of the foregoing is not true or the applicable forms are not provided,
then Agent and Borrower (without duplication) may deduct and withhold from
interest payments under the Loan Documents any United States federal-income
Tax at the full rate applicable under the Code.
4. CREDIT AGREEMENT AND COMMITMENTS. From and after the Effective
Date (a) Assignee shall be a party to the Credit Agreement and (to the extent
provided in this agreement) have the Rights and obligations of a Lender under
the Loan Documents and (b) Assignor shall (to the extent provided in this
agreement) relinquish its Rights and be released from its obligations under
the Loan Documents. On the Effective Date, after giving effect to this
agreement, but without giving effect to any other assignments that have not
yet become effective, Assignor's total Commitment (which, if positive, must
be at least $10,000,000) and Assignee's total Commitment (which must be at
least $10,000,000) will be as follows:
------------------------------------------------------
------------------------------------------------------
LENDER REVOLVING FACILITY TOTAL
------------------------------------------------------
------------------------------------------------------
Assignor $ $
------------------------------------------------------
Assignee $ $
------------------------------------------------------
------------------------------------------------------
5. NOTES. Assignor and Assignee request Borrower to issue new Notes to
Assignor and Assignee in the amounts of their respective Commitments under
PARAGRAPH 4 above and otherwise issued in accordance with the Credit Agreement.
Upon delivery of those Notes, Assignor shall return to Borrower all Notes
previously delivered to Assignor under the Credit Agreement.
6. PAYMENTS AND ADJUSTMENTS. From and after the Effective Date, Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees, and other amounts) to Assignee.
EXHIBIT F
2
<PAGE>
NationsBank of Texas, N.A., Agent
________________, 1994
Page 3
Assignor and Assignee shall make all appropriate adjustments in payments for
periods before the Effective Date by Agent or with respect to the making of
this assignment directly between themselves.
7. CONDITIONS PRECEDENT. PARAGRAPHS 1 through 5 above are not effective
until (a) counterparts of this agreement are executed and delivered by Assignor
and Assignee to -- and are executed in the spaces below by -- Borrower and Agent
and (b) Agent receives from Assignor or Assignee a $2,500 processing fee.
8. INCORPORATED PROVISIONS. Although this agreement is not a Loan
Document, the provisions of SECTIONS 1 and 14 of the Credit Agreement applicable
to Loan Documents are incorporated into this instrument by reference the same as
if this agreement were a Loan Document and those provisions were set forth in
this agreement verbatim.
9. COMMUNICATIONS. For purposes of SECTION 14.2 of the Credit Agreement,
Assignee's address and telecopy number -- until changed under that section --
are beside its signature below.
10. AMENDMENTS, ETC. No amendment, waiver, or discharge to or under this
agreement is valid unless in writing that is signed by the party against whom it
is sought to be enforced and is otherwise in conformity with the requirements of
the Credit Agreement.
11. ENTIRETY. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
ASSIGNOR AND ASSIGNEE ABOUT ITS SUBJECT MATTER AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF ASSIGNOR
AND ASSIGNEE. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN ASSIGNOR AND
ASSIGNEE.
12. PARTIES. This agreement binds and benefits Assignor, Assignee, and
their respective successors and assigns that are permitted under the Credit
Agreement.
EXECUTED as of the date first stated above.
[ASSIGNOR] [ASSIGNEE]
By By
------------------------------ ------------------------------
(Name) (Name)
------------------------------ ------------------------------
(Title) (Title)
------------------------------ ------------------------------
(Address)
------------------------------
------------------------------
------------------------------
(Telecopy No.)
EXHIBIT F
3
<PAGE>
NationsBank of Texas, N.A., Agent
________________, 1994
Page 4
As of the Effective Date, Borrower and Agent consent to this agreement and
the transactions contemplated in it.
PILLOWTEX CORPORATION, as BORROWER NATIONSBANK OF TEXAS, N.A., as AGENT
By By
------------------------------ ------------------------------
(Name) (Name)
------------------------------ ------------------------------
(Title) (Title)
------------------------------ ------------------------------
EXHIBIT F
4
<PAGE>
ASSET PURCHASE AGREEMENT
Dated as of October 3, 1996
By and Between
FIELDCREST CANNON, INC.
and
PILLOWTEX CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . 5
2.1 Purchase and Sale of Assets. . . . . . . . . . . . . . . . . . . 5
2.2 Nonassignable Contracts. . . . . . . . . . . . . . . . . . . . . 6
2.3 Assumption of Liabilities. . . . . . . . . . . . . . . . . . . . 7
2.4 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Adjustment to Purchase Price for Changes in
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Transfer Taxes; Certain Costs. . . . . . . . . . . . . . . . . . 9
ARTICLE III - CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . . 10
4.1 Organization of Seller . . . . . . . . . . . . . . . . . . . . . 10
4.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 10
4.4 No Conflict or Violation . . . . . . . . . . . . . . . . . . . . 10
4.5 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.7 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.8 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 12
4.9 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . 13
4.10 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 13
4.11 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . 13
4.12 Absence of Certain Changes or Events . . . . . . . . . . . . . . 14
4.13 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.14 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . . . . 15
5.1 Organization of Purchaser. . . . . . . . . . . . . . . . . . . . 15
5.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 15
(i)
<PAGE>
5.4 No Conflict or Violation . . . . . . . . . . . . . . . . . . . . 15
5.5 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.7 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI - CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Actions Prior to Closing . . . . . . . . . . . . . . . . . . . . 16
6.2 Investigation by Purchaser . . . . . . . . . . . . . . . . . . . 17
6.3 Accountants' Review. . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 18
6.5 Injunctions. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6 Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII - CONDITIONS TO SELLER'S OBLIGATIONS . . . . . . . . . . . . . . 19
7.1 Representations, Warranties and Covenants. . . . . . . . . . . . 19
7.2 Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Corporate Documents. . . . . . . . . . . . . . . . . . . . . . . 19
7.4 Licensing Agreement. . . . . . . . . . . . . . . . . . . . . . . 19
7.5 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . 19
7.6 Lease Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 19
7.7 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.8 No Governmental Proceedings or Litigation. . . . . . . . . . . . 20
ARTICLE VIII - CONDITIONS TO PURCHASER'S OBLIGATIONS . . . . . . . . . . . . 20
8.1 Representations, Warranties and Covenants. . . . . . . . . . . . 20
8.2 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.3 Corporate Documents. . . . . . . . . . . . . . . . . . . . . . . 20
8.4 Licensing Agreement. . . . . . . . . . . . . . . . . . . . . . . 20
8.5 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . 20
8.6 Lease Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 21
8.7 No Material Change . . . . . . . . . . . . . . . . . . . . . . . 21
8.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.9 No Governmental Proceedings or Litigation. . . . . . . . . . . . 21
ARTICLE IX - SURVIVAL AND INDEMNIFICATION. . . . . . . . . . . . . . . . . . 21
9.1 Survival of Representations, Warranties and
Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2 Indemnification by Seller. . . . . . . . . . . . . . . . . . . . 22
9.3 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . 22
9.4 Notice of Claim; Right to Participate in and
(ii)
<PAGE>
Defend Third Party Claim . . . . . . . . . . . . . . . . . . . . 22
9.5 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.6 Reduction by Insurance Proceeds. . . . . . . . . . . . . . . . . 23
ARTICLE X - OTHER COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Storage of Purchased Inventory and
Purchased Equipment. . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Post-Closing Access. . . . . . . . . . . . . . . . . . . . . . . 24
10.3 Backlog. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.4 Processing of Work-in-Process Inventory. . . . . . . . . . . . . 24
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.4 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.5 Entire Agreement; Amendments and Waivers . . . . . . . . . . . . 27
11.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.8 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.9 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.10 Passage of Title and Risk of Loss. . . . . . . . . . . . . . . . 28
11.11 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 28
11.13 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.14 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.15 Confidential Information . . . . . . . . . . . . . . . . . . . . 28
11.16 Multiple Counterparts. . . . . . . . . . . . . . . . . . . . . . 29
11.17 Tax Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
EXHIBITS
Exhibit A -- Assumed Equipment Leases
Exhibit B -- June 30, 1996 Statement
Exhibit C -- Lease Agreement
Exhibit D -- Licensing Agreement
Exhibit E -- Escrow Agreement
SCHEDULES
(iii)
<PAGE>
Schedule 4.3 -- Consents and Approvals of Seller
Schedule 4.4 -- Conflicts and Violations of Seller
Schedule 4.5(b) -- Condition of and Encumbrances on the
Inventory
Schedule 4.6(a) -- Listing of the Equipment
Schedule 4.6(b) -- Condition of and Encumbrances on the
Equipment
Schedule 4.7(a) -- Listing of the Contracts
Schedule 4.8(a) -- Listing of Owned and Licensed Blanket
Intellectual Property
Schedule 4.8(b) -- Listing of Owned Pillow Intellectual Property
Schedule 4.8(c) -- Title to and Encumbrances on the Owned
Intellectual Property
Schedule 4.8(d) -- Conflicts and Demands Relating to
Intellectual Property
Schedule 4.10 -- Legal Proceedings
Schedule 4.11 -- Compliance with Law
Schedule 4.12 -- Absence of Certain Changes or Events
Schedule 5.3 -- Consents and Approvals of Purchaser
Schedule 5.4 -- Conflicts and Violations of Purchaser
(iv)
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") dated as of October 3,
1996, is by and between FIELDCREST CANNON, INC., a Delaware corporation
("Seller"), and PILLOWTEX CORPORATION, a Texas corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is engaged through its Blanket Division located in Eden,
North Carolina (the "Division"), in the business of manufacturing, designing and
selling blankets and throws; and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, certain
assets used by the Division in the conduct of such business (the "Business"),
together with certain other assets of Seller, on the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. Unless otherwise defined herein, the following terms
as used herein shall have the following respective meanings:
"AGREEMENT" shall have the meaning set forth in the introductory paragraph
hereto.
"ASSETS" shall mean the Inventory, the Owned Equipment, the Contracts and
the Owned Intellectual Property.
"ASSUMED CONTRACTS" shall mean Assumed Equipment Leases and the Other
Assumed Contracts, exclusive of, prior to the time at which Seller shall have
received all consents, waivers and approvals applicable thereto, any Contract
referred to in Section 2.2(a) hereof.
"ASSUMED EQUIPMENT LEASES" shall mean all Contracts relating to the Leased
Equipment identified on EXHIBIT A hereto.
"ASSUMED LIABILITIES" shall mean all liabilities and obligations under the
terms of the Assumed Contracts, but only to the extent such liabilities and
obligations arise or are otherwise properly attributable to periods commencing
after the Closing Date under the terms of such Assumed Contracts, and exclusive
of any liabilities or obligations that arise as a result of any breach or
default by Seller or any of its predecessors-in-interest under any Assumed
Contract.
"ASSUMPTION DOCUMENTS" shall mean such instruments of assumption and other
instruments and documents, duly executed by Purchaser in such forms and covering
such matters as Seller may
<PAGE>
reasonably request, reflecting assumption of the Assumed Liabilities by
Purchaser in accordance with the terms of this Agreement.
"BLANKET INTELLECTUAL PROPERTY" shall mean the Owned Blanket Intellectual
Property and the Licensed Blanket Intellectual Property.
"BOOKS AND RECORDS" shall mean all books and records relating to the
Business or the Assets, including without limitation all customer and supplier
records.
"BUSINESS" shall have the meaning set forth in the recitals hereto.
"CLAIM NOTICE" shall have the meaning set forth in Section 9.1 hereof.
"CLOSING" shall have the meaning set forth in Section 3.1 hereof.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CLOSING STATEMENT" shall mean (i) a listing of the Inventory and the book
value thereof, as of the Closing Date in a form reasonably satisfactory to
Purchaser prepared using the same item costs used in the preparation of the
June 30, 1996 Statement and otherwise on a basis consistent with the June 30,
1996 Statement, except that the value of the Licensed Inventory included in the
Purchased Inventory shall be reflected as Purchased Inventory and (ii) a listing
of the Purchased Equipment as of the Closing Date.
"CONTRACTS" shall mean all agreements, contracts and contractual rights
relating to, or used by Seller in connection with the conduct of, the Business
or to which any of the Assets is subject.
"DISPUTE NOTICE" shall have the meaning set forth in Section 2.5(a) hereof.
"DISPUTE NOTICE PERIOD" shall have the meaning set forth in Section 2.5(a)
hereof.
"DIVISION" shall have the meaning set forth in the recitals hereto.
"EQUIPMENT" shall mean the Owned Equipment and the Leased Equipment.
"ERNST & YOUNG" shall mean Ernst & Young, LLP.
"ENCUMBRANCE" shall mean any lien, mortgage, pledge, security interest,
charge or encumbrance of any nature whatsoever or any right or interest
whatsoever of any third party.
"ESCROW AGREEMENT" shall have the meaning set forth in Section 2.4(c)
hereof.
"EXCLUDED INVENTORY" shall mean all Licensed Inventory other than
Licensed Inventory as to which Seller has obtained from the applicable
third-party licensor on or prior to the Closing Date a written consent or
other instrument, in form and substance reasonably satisfactory to Purchaser,
granting to Purchaser the right to sell such Licensed Inventory.
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"EXCLUDED OWNED EQUIPMENT" shall mean items included in the Owned
Equipment that are identified by Purchaser to Seller in writing not later
than the fifth business day prior to the Closing Date as items not to be
Transferred pursuant to the terms of Section 2.1 hereof.
"HOLDBACK ACCOUNT" shall have the meaning set forth in Section 2.4(c)
hereof.
"HOLDBACK AMOUNT" shall have the meaning set forth in Section 2.4(c)
hereof.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEPENDENT ACCOUNTING FIRM" shall mean Arthur Andersen LLP or, if such
firm is unwilling to act in the capacity contemplated by Section 2.5 hereof,
another nationally recognized firm of independent public accountants
designated jointly by Seller and Purchaser.
"INTELLECTUAL PROPERTY" shall mean trademarks, trade names, brand names
and other marks or trade rights, and patents, copyrights, designs, patterns,
know-how, formulae, treatments, processes and all other intellectual property
or proprietary rights, whether registered or unregistered, domestic or
foreign, and all applications thereof and goodwill associated therewith.
"INVENTORY" shall mean, collectively, (a) all of Seller's inventory held
for sale to customers in the ordinary course of the Business and (b) all of
the raw materials, work in process, finished product, wrapping, supplies and
packaging items, and all similar items relating to the Business.
"JUNE 30, 1996 STATEMENT" shall mean the statement of assets and
liabilities of the Division, including a listing of the Inventory, the
Equipment and the book value thereof, as of June 30, 1996, and the related
notes thereto, attached as EXHIBIT B hereto, prepared using valuation and
other accounting practices based on Seller's standard inventory costs
consistent with Seller's past practices, reflecting the name, description,
quantity and quality of each item included in the Inventory and the cost of
each item or group of items included in the Inventory.
"KNOWLEDGE" shall mean, with respect to a party, the actual knowledge of
an officer or director of such party.
"LAW" shall mean any law, statute, rule, regulation, ordinance, code,
arbitration award, order, judgment, writ, injunction, decree or other legal
requirement of any federal, state, local or foreign court or other
governmental authority.
"LEASE AGREEMENT" shall mean a lease agreement, dated as of the Closing
Date, by and between Seller and Purchaser in the form of EXHIBIT C hereto,
with such modifications thereto as Seller and Purchaser agree.
"LEASED EQUIPMENT" shall mean the items listed on SCHEDULE 4.6(a) hereto
under the caption "Leased Equipment."
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"LICENSED BLANKET INTELLECTUAL PROPERTY" shall mean the Intellectual
Property that is listed on SCHEDULE 4.8(a) hereto under the caption "Licensed
Blanket Intellectual Property."
"LICENSED INVENTORY" shall mean all Inventory bearing Intellectual
Property (including without limitation trademarks, trade names, brand names
or other marks, or copyrights, designs or patterns) licensed to Seller by
third parties.
"LICENSING AGREEMENT" shall mean a licensing agreement, dated as of the
Closing Date, by and between Seller and Purchaser in the form of EXHIBIT D
hereto, with such modifications thereto as Seller and Purchaser agree.
"LOSSES" shall mean all claims, actions, suits, demands, assessments,
judgments, losses, liabilities, damages and reasonable costs and expenses,
including without limitation interest, penalties, reasonable attorneys' fees,
reasonable accounting fees and reasonable investigation costs.
"MATERIAL ADVERSE CHANGE" shall mean a change that has resulted in a
Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean any events, circumstances or
conditions that have had a material adverse effect on (a) the Purchased
Assets, taken as a whole, or (b) the condition (financial or otherwise),
results of operations or prospects of the Business, taken as a whole.
"OTHER ASSUMED CONTRACTS" shall mean all Contracts that are identified
by Purchaser to Seller in writing not later than the fifth business day prior
to the Closing Date as Contracts to be Transferred pursuant to the terms of
Section 2.1 hereof.
"OWNED BLANKET INTELLECTUAL PROPERTY" shall mean the Intellectual
Property that is listed on SCHEDULE 4.8(a) hereto under the caption "Owned
Blanket Intellectual Property."
"OWNED EQUIPMENT" shall mean all of the tangible personal property owned
by Seller that is used by Seller in connection with the conduct of the
Business, other than computer and telecommunications equipment, including
without limitation the items listed on SCHEDULE 4.6(a) hereto under the
caption "Owned Equipment," fixtures, furnishings, furniture, equipment,
software (including disks and other embodiments of software and its source
and object codes to the extent in Seller's possession and owned by Seller),
files, books, records, libraries and archives (including lists of customers
and suppliers and other business, accounting and financial records and
information, however and wherever stored and embodied), motor vehicles, tools
and supplies.
"OWNED INTELLECTUAL PROPERTY" shall mean the Owned Blanket Intellectual
Property and the Owned Pillow Intellectual Property.
"OWNED PILLOW INTELLECTUAL PROPERTY" shall mean the Intellectual
Property that is listed on SCHEDULE 4.8(b) hereto.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.4(a)
hereof.
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"PURCHASED ASSETS" shall have the meaning set forth in Section 2.1
hereof.
"PURCHASED EQUIPMENT" shall mean all Owned Equipment other than Excluded
Owned Equipment.
"PURCHASED INVENTORY" shall mean all Inventory other than the Excluded
Inventory.
"PURCHASER" shall have the meaning set forth in the introductory
paragraph hereto.
"SELLER" shall have the meaning set forth in the introductory paragraph
hereto.
"STORAGE PERIOD" shall have the meaning set forth in Section 10.1 hereof.
"TERMINATION DATE" shall have the meaning set forth in Section 9.1
hereof.
"THIRD PARTY CLAIM" shall have the meaning set forth in Section 9.4(a)
hereof.
"TRANSFER" shall mean transfer, grant, convey, assign and deliver or, as
the context may require, any one or more of the foregoing.
"TRANSFER DOCUMENTS" shall mean such bills of sale, assignments,
certificates of title and other instruments of transfer, as may be necessary
or appropriate to Transfer to Purchaser all of Seller's right, title and
interest in, to and under the Purchased Assets, to be prepared and duly
executed by Seller in form and substance reasonably satisfactory to Purchaser.
"WAREHOUSE FACILITIES" shall have the meaning set forth in Section 10.1
hereof.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 PURCHASE AND SALE OF ASSETS. At the Closing, in reliance upon the
representations and warranties contained herein and on the terms and subject
to the conditions hereof, Seller shall Transfer to Purchaser, and Purchaser
shall purchase and accept from Seller, the following assets (collectively,
the "Purchased Assets"):
(a) the Purchased Inventory;
(b) the Purchased Equipment; and
(c) the Assumed Contracts.
2.2 NONASSIGNABLE CONTRACTS.
(a) To the extent that any Contract to be Transferred pursuant to the
terms of Section 2.1 hereof is not capable of being Transferred without the
consent, approval or waiver of a third person
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or entity (including a governmental authority), or if such Transfer or
attempted Transfer would constitute a breach thereof or a violation of any
Law, nothing in this Agreement shall constitute a Transfer or an attempted
Transfer thereof prior to the time at which all consents, waivers and
approvals necessary for such Transfer shall have been obtained.
(b) Seller shall use reasonable best efforts, and Purchaser shall
reasonably cooperate with Seller in such efforts, to obtain such consents,
approvals and waivers necessary to Transfer to Purchaser all of the Contracts
referred to in Section 2.2(a) hereof.
(c) To the extent that the consents, approvals and waivers referred to
in Section 2.2(a) hereof are not obtained by Seller, if and to the extent
requested by Purchaser, Seller shall, during the term of the affected
Contract, use reasonable best efforts, at no greater expense to Purchaser
than the expense that would be incurred by Purchaser were such consents,
approvals or waivers obtained, to (i) provide to Purchaser the benefits under
any Contract referred to in Section 2.2(a) hereof, (ii) cooperate in any
reasonable and lawful arrangement designed to provide such benefits to
Purchaser, and (iii) enforce, at the written request of Purchaser, for the
account of Purchaser, any rights of Seller under the affected Contract
(including the right to elect to terminate such Contract in accordance with
the terms thereof upon the direction of Purchaser). Purchaser shall
reasonably cooperate with Seller in order to enable Seller to provide the
benefits contemplated by this Section 2.2(c) to Purchaser.
(d) Purchaser shall perform the obligations of Seller arising under the
affected Contracts referred to in Section 2.2(a) hereof, but only if and to
the extent that Seller provides to Purchaser the benefits thereof pursuant to
Section 2.2(c) hereof; provided, however, that Seller shall indemnify, defend
and hold Purchaser harmless from and against any and all Losses arising from
or relating to any claim asserted by a third party in respect of any failure
to obtain any consent, approval or waiver alleged to be required in
connection with any of the actions required to be taken by Seller pursuant to
this Section 2.2.
2.3 ASSUMPTION OF LIABILITIES.
(a) Except as specifically provided in Section 2.3(b) hereof, Seller
shall retain all, and Purchaser shall not assume or be responsible or liable
for any, debts, obligations or liabilities of Seller, whether or not
associated with or arising from the Purchased Assets. Without limiting the
generality or effect of the immediately preceding sentence, Purchaser shall
not be responsible or liable for any royalties payable in connection with the
sale of any Licensed Inventory included in the Purchased Assets if, and to
the extent that, the amount of such royalty is included in Seller's cost of
the Licensed Inventory as reflected on the June 30, 1996 Statement.
(b) On the terms and subject to the conditions hereof (including
Section 2.2(d) hereof), as of the Closing, Purchaser shall assume and
thereafter in due course pay, perform and discharge the Assumed Liabilities.
Notwithstanding anything to the contrary contained in this Agreement or any
document delivered in connection herewith, Purchaser's obligations in respect
of the Assumed Liabilities shall be subject to Purchaser's right to contest
in good faith the nature and extent of any liability or obligation; provided,
however, that Purchaser shall indemnify, defend and hold Seller harmless from
and against any and all Losses arising as a result of or in connection with
Purchaser
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contesting the nature or extent of any such liability or obligation, unless
such liability or obligation results from or arises in connection with a
breach by Seller of any of its representations, warranties or covenants
contained in this Agreement.
2.4 PURCHASE PRICE.
(a) In consideration for the Transfer of the Purchased Assets to
Purchaser, Purchaser shall pay to Seller an amount equal to $31,500,000,
subject to adjustment as provided in Section 2.5 hereof (as adjusted, if
applicable, the "Purchase Price"), in accordance with this Section 2.4.
(b) Purchaser shall pay to Seller upon the Transfer of the Purchased
Assets to Purchaser at the Closing $30,500,000 of the Purchase Price in cash.
At the election of Seller, such amount shall be paid by either (i) wire
transfer of immediately available funds to an account designated for such
purpose in writing by Seller to Purchaser at least two business days prior to
the Closing Date or (ii) a federal funds check.
(c) Purchaser shall deposit upon the Transfer of the Purchased Assets
to Purchaser at the Closing $1,000,000 of the Purchase Price (the "Holdback
Amount") in cash into an independent escrow account to be established in
accordance with an escrow agreement mutually acceptable to Purchaser and
Seller (the "Escrow Agreement") substantially in the form attached hereto as
Exhibit "E" (the "Holdback Account"). Purchaser may make a claim against the
Holdback Amount for any and all Losses (including without limitation (i) any
and all charges to or deductions made against Purchaser by third parties for
returns, allowances for returns, restocking fees, rebates, discounts,
chargebacks or similar fees related to sales by Seller prior to Closing and
(ii) any and all liabilities for any royalties payable in connection with the
sale of any
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Licensed Inventory included in the Purchased Assets if, and to the extent
that, the amount of such royalty is included in Seller's cost of the Licensed
Inventory as reflected on the June 30, 1996 Statement) for which Seller has
an indemnification obligation pursuant to Section 9.2 hereof. The Escrow
Agreement shall govern the claims procedures and distribution of the Holdback
Account.
2.5 ADJUSTMENT TO PURCHASE PRICE FOR CHANGES IN INVENTORY.
(a) As promptly as practicable (and, in any event, within 45 calendar
days) following the Closing Date, Seller shall prepare and deliver to
Purchaser the Closing Statement. Purchaser shall have 20 calendar days
following Purchaser's receipt of the Closing Statement to review the Closing
Statement. During such 20-day period (the "Dispute Notice Period"), Purchaser
may give notice (a "Dispute Notice") to Seller in the event that Purchaser
determines in good faith that the Closing Statement was not prepared in
accordance with this Agreement and, as a result, misstates the value of the
Purchased Inventory as of the Closing Date. If Purchaser fails to deliver a
Dispute Notice within the Dispute Notice Period, Purchaser shall be deemed to
have irrevocably waived its right to deliver a Dispute Notice. If a Dispute
Notice is delivered by Purchaser, Seller and Purchaser shall negotiate in
good faith to agree upon the book value of the Purchased Inventory as of the
Closing Date and the amount of any payment required pursuant to this Section
2.5. If Seller and Purchaser fail to agree to such matters within 30
calendar days after the Dispute Notice is delivered to Seller, the Closing
Statement and the Dispute Notice shall be submitted to the Independent
Accounting Firm, which shall then determine, in accordance with the
provisions of this Agreement, the book value of the Purchased Inventory as of
the Closing Date and the amount of the payment required by this Section 2.5.
The determination of the Independent Accounting Firm shall be made as
promptly as practicable (and, in any event, within 30 calendar days)
following its receipt of the Closing Statement and the Dispute Notice, and
such determination shall be final and binding on all parties. The fees,
costs and expenses of the Independent Accounting Firm shall be borne equally
by Seller and Purchaser.
(b) If the book value of the Purchased Inventory as of June 30, 1996 as
reflected in the June 30, 1996 Statement exceeds the book value of the
Purchased Inventory as of the Closing Date as reflected in the Closing
Statement or, in the event a Dispute Notice is delivered by Purchaser to
Seller, as determined in accordance with Section 2.5(a) hereof, Seller shall
pay to Purchaser an amount equal to such excess, and if the book value of the
Purchased Inventory as of the Closing Date as reflected in the Closing
Statement or, in the event a Dispute Notice is delivered by Purchaser to
Seller, as determined in accordance with Section 2.5(a) hereof, exceeds the
book value of the Purchased Inventory as of June 30, 1996 as reflected in the
June 30, 1996 Statement, Purchaser shall pay to Seller an amount equal to
such excess. Any amount payable pursuant to this Section 2.5(b) shall be
paid in cash promptly (but, in any event, within five business days)
following the expiration of the Dispute Notice Period or, in the event a
Dispute Notice is delivered to Seller by Purchaser, the date on which Seller
and Purchaser agree to the amount of such payment or the date on which the
determination of the Independent Accounting Firm becomes final and binding,
as the case may be.
(c) In connection with the preparation of the Closing Statement, Seller
shall (i) cause a physical inventory of the Inventory to be taken as of the
Closing Date and shall cause such physical
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inventory to be observed by Ernst & Young, (ii) cause Ernst & Young to report
on such physical inventory and the Closing Statement and shall furnish
Purchaser a copy of such report promptly upon Seller's receipt thereof, and
(iii) permit Purchaser and its representatives to observe such physical
inventory. The report to be rendered by Ernst & Young on the Closing
Statement shall be based upon reasonable procedures acceptable to Purchaser.
2.6 TRANSFER TAXES; CERTAIN COSTS. Purchaser shall be responsible for
and pay any documentary transfer taxes and any sales, use or other taxes
imposed by reason of the purchase of the Purchased Assets pursuant hereto.
Seller shall be responsible for and pay the fees and costs of recording or
filing all Transfer Documents. Ad valorem taxes, if any, applicable to the
Purchased Assets shall be pro-rated between the Seller and Purchaser as of
the Closing Date. In addition, Purchaser shall reimburse Seller for any
actual pre-payment of any Assumed Liabilities as of the Closing Date on a
pro-rata basis. Seller shall provide Purchaser a schedule of such pre-paid
amounts no later than 10 days prior to the Closing Date.
ARTICLE III
CLOSING
3.1 CLOSING.
(a) Subject to the satisfaction or waiver of the other conditions set
forth in Articles VII and VIII hereof and Section 11.1(b) hereof, the closing
of the transactions contemplated by Article II hereof (the "Closing") shall
be held at 10:00 a.m., local time, on the thirty-fifth business day following
the expiration or termination of the applicable waiting period under the HSR
Act, subject to extension as provided in Section 3.1(b) hereof. The Closing
shall be held at the offices of Womble, Carlyle, Sandridge and Rice,
Winston-Salem, North Carolina.
(b) Subject to Section 11.1(b) hereof, if the Closing has not occurred
by the date specified in Section 3.1(a) hereof, then the Closing shall occur
on the earlier of (i) the twenty-fifth business day after all of the
conditions set forth in Articles VII and VIII hereof (other than those to be
satisfied by deliveries made at the Closing) shall have been satisfied or
waived and (ii) such other date to which Seller and Purchaser agree.
3.2 CLOSING DELIVERIES.
(a) At the Closing, Seller shall deliver to Purchaser (i) the Transfer
Documents, (ii) the certificate described in Section 8.2 hereof, (iii) the
documents described in Section 8.3 hereof, and (iv) such receipts, duly
executed by Seller, as Purchaser may reasonably request.
(b) At the Closing, in addition to the action required to be taken by
Purchaser pursuant to Section 2.3 hereof, Purchaser shall deliver to Seller
(i) the Assumption Documents, (ii) the certificate described in Section 7.2
hereof, and (iii) the documents described in Section 7.3 hereof.
(c) At the Closing, Seller shall execute and deliver to Purchaser, and
Purchaser shall execute and deliver to Seller, the Licensing Agreement, the
Escrow Agreement and, at the sole
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election of Purchaser (which election shall be made at least five business
days prior to the Closing), the Lease Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
4.1 ORGANIZATION OF SELLER. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to carry on the Business as it is
now being conducted and to own all of the Assets. Seller is duly qualified
to do business and is in good standing in each jurisdiction in which the
conduct of the Business or the ownership of the Assets requires such
qualification.
4.2 AUTHORIZATION. Seller has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by Seller of this Agreement
and the performance by Seller of its obligations hereunder have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by Seller and is a valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect relating to
creditors' rights generally and by general principles of equity (whether
considered in an action at law or in equity) and the discretion of the court
before which any proceeding therefor may be brought.
4.3 CONSENTS AND APPROVALS. No consent, approval or authorization of,
or declaration, filing or registration with, any federal, state, local or
foreign governmental authority, or any other person or entity, is required to
be made or obtained by Seller in connection with the execution and delivery
by Seller of this Agreement or the performance by Seller of its obligations
hereunder, except (a) for the filing of a notification and report form by
Seller under the HSR Act and the expiration or termination of the applicable
waiting period thereunder, (b) as specified on SCHEDULE 4.3 hereto, and (c)
those for which the failure to obtain such consent, approval or authorization
will not have a Material Adverse Effect.
4.4 NO CONFLICT OR VIOLATION. Except to the extent specified on
SCHEDULE 4.4 hereto, assuming that as of the Closing Date the filing referred
to in Section 4.3 hereof shall have been made and the waiting period referred
to therein shall have expired or been terminated, the execution and delivery
of this Agreement by Seller do not, and the performance by Seller of its
obligations hereunder will not, (a) violate or conflict with any provision of
the Certificate of Incorporation or Bylaws of Seller, (b) result in a breach
of or default under any provision of any material contract or agreement to
which Seller is a party or bound or to which the Assets are subject (or an
event which, with notice, lapse of time or both, would result in any such
breach or default), (c) to Seller's knowledge result in a violation by Seller
of any Law (or an event which, with notice, lapse of time or both, would
result in any such violation), or (d) result in the creation of any
Encumbrance on the Assets. Seller has no legal obligation, absolute or
contingent, to any other person or entity to sell the Assets (other than
sales of the Inventory in the ordinary course of the Business), or to effect
any
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merger, consolidation or other reorganization of Seller or to enter into any
agreement with respect thereto.
4.5 INVENTORY.
(a) Seller has heretofore delivered to Purchaser the June 30, 1996
Statement, a copy of which is attached as EXHIBIT A hereto. The June 30,
1996 Statement presents fairly the assets and liabilities of the Division,
including listings of the Inventory, the Equipment and the book value
thereof, as of June 30, 1996 and, except as specified in the notes thereto,
was prepared in all material respects using valuation and other accounting
practices based on Seller's standard inventory costs consistent with Seller's
past practices.
(b) Except as specified on SCHEDULE 4.5(b) hereto, the Inventory is of
a quality and quantity useable and saleable in the ordinary course of the
Business. Except as specified in SCHEDULE 4.5(b) hereto, (i) Seller has
good, marketable and exclusive title to, and valid and enforceable power and
unqualified right to Transfer to Purchaser, the Inventory and (ii) the
Inventory is free and clear of any Encumbrances.
(c) The delivery to Purchaser at the Closing of the Transfer Documents
shall vest good, marketable and exclusive title to the Purchased Inventory in
Purchaser, free and clear of all Encumbrances.
(d) No material portion of the Inventory has been manufactured
specifically for delivery to a specific person or entity that is no longer a
customer of the Division or as to which Seller has a reasonable basis to
believe that such person or entity will cease to be a customer of the
Division in the foreseeable future.
4.6 EQUIPMENT.
(a) Attached as SCHEDULE 4.6(a) hereto is a true and complete listing
of all of the items of material tangible personal property used by Seller in
connection with the conduct of the Business (with the exception of computer
and telecommunication equipment), with the material tangible personal
property owned by Seller and used in connection with the conduct of the
Business being listed thereon under the caption "Owned Equipment" and the
material tangible personal property held by Seller under any Contract and
used by Seller in connection with the conduct of the Business being listed
thereon under the caption "Leased Equipment." The Equipment constitutes the
only material tangible personal property used by Seller in connection with
the conduct of the Business.
(b) The Equipment is being sold "as is" and "where is" and Seller makes
no warranties whatsoever with respect thereto. Seller expressly disclaims
all implied warranties of merchantability and fitness for a particular
purpose and all other warranties, express or implied, with respect to the
tangible personal property included in the Purchased Assets. Except as
specified on SCHEDULE 4.6(b) hereto, (i) Seller has good, marketable and
exclusive title to, and valid and enforceable power and unqualified right to
use and Transfer to Purchaser, the Owned Equipment and (ii) the Owned
Equipment is free and clear of any Encumbrances.
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(c) Except as specified in SCHEDULE 4.6(b) hereto, the delivery to
Purchaser at Closing of the Transfer Documents shall vest good, marketable
and exclusive title to the Purchased Equipment in Purchaser, free and clear
of all Encumbrances.
4.7 CONTRACTS.
(a) Attached as SCHEDULE 4.7(a) hereto is a true and complete listing
or description of each Contract other than agreements or contracts entered
into in the ordinary course of the Business which are terminable without
payment of premium or penalty at will or upon not more than 30 calendar days'
notice or which impose remaining monetary obligations not in excess of
$10,000 and which impose no material non-monetary obligations. Except for
the Contracts, Seller is not a party to any agreement or contract relating
to, or used by Seller in connection with, the conduct of the Business or to
which any of the Assets is subject. Seller heretofore has made available to
Purchaser true, complete and correct copies of each of the Contracts
(including all amendments thereto) listed or described on SCHEDULE 4.7(a)
hereto that are written and true, complete and correct written summaries of
the Contracts listed or described on SCHEDULE 4.7(a) hereto that are oral.
(b) Except as set forth on SCHEDULE 4.7(b), Seller has performed all
material obligations required to be performed by it to date under the
Contracts. Neither Seller nor, to the best of Seller's knowledge, any other
party to any Contract has improperly terminated or is in breach or default
under such Contract, and there exists no condition or event which, after the
giving of notice or lapse of time or both, would constitute any such breach,
termination or default on the part of Seller or, to the best of Seller's
knowledge, any other party. Each of the Contracts is in full force and
effect and is a legal, binding and enforceable obligation of Seller and of
each of the other parties thereto.
4.8 INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.8(a) hereto sets forth a true and complete listing of
all of the Intellectual Property held for use by Seller in connection with
the manufacture and sale of any and all types of blankets and throws
(including without limitation such Intellectual Property used in connection
with the conduct of the Business), with such Intellectual Property owned by
Seller being listed thereon under the caption "Owned Blanket Intellectual
Property" and such Intellectual Property held for use by Seller under any
Contract being listed thereon under the caption "Licensed Blanket
Intellectual Property." The Blanket Intellectual Property constitutes the
only Intellectual Property held for use by Seller in connection with the
manufacture and sale of all types of blankets and throws, including without
limitation that used in connection with the conduct of the Business.
(b) SCHEDULE 4.8(b) hereto sets forth a true and complete listing of
all Intellectual Property owned by Seller and held for use in connection with
the manufacture and sale of pillows, down comforters, pillow protectors,
mattress pads, mattress covers, feather beds and related items.
(c) Except to the extent specified on SCHEDULE 4.8(c) hereto, (i)
Seller has good, marketable and exclusive title to all the Owned Intellectual
Property and (ii) all the Owned Intellectual Property is free and clear of
all Encumbrances. Except to the extent specified on SCHEDULE 4.8(c) hereto,
Seller has granted no license to, and has entered into no other contract or
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agreement with, any other person or entity relating in whole or in part to
any of the Owned Intellectual Property.
(d) Except to the extent specified on SCHEDULE 4.8(d) hereto, (i) there
is no unresolved claim or demand asserting a conflict with or infringement of
the rights of any other person or entity in connection with Seller's use of
any Intellectual Property, (ii) there is no such unasserted claim or demand
that, to the best of Seller's knowledge, is probable of assertion, and (iii)
to the best of Seller's knowledge, there is no basis for the assertion of any
such claim or demand.
4.9 BOOKS AND RECORDS. The Books and Records have been maintained in
accordance with good business practice and in all material respects in
accordance with all Laws and other requirements applicable to the conduct of
the Business.
4.10 LEGAL PROCEEDINGS. Except as specified on SCHEDULE 4.10 hereto,
there are no claims, actions, suits or proceedings, investigative or
otherwise, pending or, to the best of Seller's knowledge, threatened against
Seller arising out of or relating to this Agreement or the transactions
contemplated hereby or the conduct of the Business, or pertaining to or
affecting the Assets (including without limitation any claim, action, suit or
proceeding, investigative or otherwise, by any governmental authority, or any
other person or entity, involving allegations relating to blanket safety
requirements or blanket safety testing), and there is no unasserted claim
with respect to any of the foregoing that, to the best of Seller's knowledge,
is probable of assertion. Except as specified on SCHEDULE 4.10 hereto,
Seller is not subject to any order, judgment, writ, injunction or decree of
any federal, state, local or foreign court or other governmental authority,
and there are no unsatisfied judgments against Seller, arising out of or
relating to this Agreement or the transactions contemplated hereby or the
conduct of the Business, or pertaining to or affecting the Assets.
4.11 COMPLIANCE WITH LAW. Except as specified on SCHEDULE 4.11 hereto,
to Seller's knowledge none of the use, condition or any other aspect of any
Assets, nor Seller in connection with the conduct of the Business, is or has
been in violation in any material respect of any applicable Law except for
such matters which do not, and will not, in the aggregate, have a Material
Adverse Effect.
4.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
SCHEDULE 4.12 hereto, since June 30, 1996, there has not been:
(a) any failure to conduct the Business in the ordinary course and
consistent with past practice so as to preserve generally the goodwill of
suppliers, customers and others having relationships with the Division;
(b) any Transfer of any of the Assets, except Transfers of Inventory
in the ordinary course of the Business and consistent with past practice;
(c) any grant or creation of any Encumbrance on any of the Assets;
(d) any failure to maintain in all material respects Inventory in the
condition set forth in Section 4.5(b) hereof;
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(e) any termination, modification, amendment or waiver of any rights
under any Contract, or any new or additional Contracts entered into, except
in the ordinary course of the Business and consistent with past practice;
(f) any surrender, modification, amendment, waiver or forfeiture of
any of Seller's rights in respect of any Intellectual Property or any
failure to maintain such rights, including without limitation any failure
to file any necessary statements of use, requests for extensions of time,
renewal applications, responses to office actions or affidavits under
Sections 8 and 15 of the Lanham Act, to prosecute any INTER PARTES
proceedings or to pay any necessary maintenance or other fee;
(g) any material modification in Seller's accounting policies,
practices or procedures or in the manner in which the Books and Records are
maintained;
(h) any violation of Law in any material respect in the conduct of
the Business or the use of the Assets; or
(i) any Material Adverse Change.
Except as set forth on SCHEDULE 4.12 hereto, since the date the Equipment was
inspected by Purchaser, there has not been any failure to maintain the Equipment
in all material respects in the condition (normal wear and tear excepted) as of
such date of inspection.
4.13 NO BROKERS. Other than the arrangements with respect to this
transaction between Seller and Prudential Securities Incorporated, neither
Seller nor any affiliate of Seller has entered into or will enter into any
agreement, arrangement or understanding with any person or entity which creates
any obligation to pay any finder's fee, brokerage commission or similar payment
in connection with the transactions contemplated by this Agreement.
4.14 DISCLOSURE. None of (a) the information contained in the Schedules
hereto, (b) any other written information furnished to the Purchaser by Seller
or its representatives in connection with this Agreement or the transactions
contemplated hereby (including without limitation the Confidential Information
Memorandum prepared by Prudential Securities Incorporated and previously
delivered to Purchaser), or (c) the representations and warranties of Seller
contained in this Agreement or in any document delivered in connection herewith
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
false or misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 ORGANIZATION OF PURCHASER. Purchaser is duly organized, validly
existing and in good standing under the laws of the State of Texas and has
full corporate power and authority to conduct its business as it is now being
conducted and to own and lease its properties and assets.
5.2 AUTHORIZATION. Purchaser has all necessary corporate power and
authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery by Purchaser of this Agreement and the
performance by Purchaser of its obligations hereunder have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by Purchaser and is a valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization and other similar Laws now or hereafter in effect relating to
creditors' rights generally and by general principles of equity (whether
considered in an action at law or in equity) and the discretion of the court
before any proceeding therefor may be brought.
5.3 CONSENTS AND APPROVALS. No consent, approval or authorization of,
or declaration, filing or registration with, any federal, state, local or
foreign governmental authority, or any other person or entity, is required to
be made or obtained by Purchaser in connection with the execution and
delivery of this Agreement or the performance by Purchaser of its obligations
hereunder, except (a) for the filing of a notification and report form by
Purchaser under the HSR Act and the expiration or termination of the
applicable waiting period thereunder and (b) as specified on SCHEDULE 5.3
hereto, and (c) those for which the failure to obtain such consent, approval
or authorization would have a material adverse effect on the ability of
Purchaser to consummate the transactions contemplated by this Agreement.
5.4 NO CONFLICT OR VIOLATION. Except to the extent specified on
SCHEDULE 5.4 hereto, assuming that as of the Closing Date the filing referred
to in Section 5.3 hereof shall have been made and the waiting period referred
to therein shall have expired or been terminated, the execution and delivery
of this Agreement by Purchaser do not, and the performance by Purchaser of
its obligations hereunder will not, (a) violate or conflict with any
provision of the Articles of Incorporation or Bylaws of Purchaser, (b) result
in a breach of, or a default under, any terms or provision of any contract or
agreement to which Purchaser is a party or bound or to which any property or
asset of Purchaser is subject (or an event which, with notice, lapse of time
or both, would result in any such breach or default), or (c) to Purchaser's
knowledge, result in a violation by Purchaser of any Law (or an event which,
with notice, lapse of time or both, would result in any such violation),
which breach, default or violation would have a material adverse effect on
the ability of Purchaser to consummate the transactions contemplated by this
Agreement.
5.5 LEGAL PROCEEDINGS. There are no claims, actions, suits or
proceedings pending or, to the best of Purchaser's knowledge, threatened
against Purchaser arising out of or relating to this
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Agreement or the transactions contemplated hereby or which could reasonably
be expected to have a material adverse effect on the ability of Purchaser to
consummate the transactions contemplated by this Agreement. Purchaser is not
in violation of any order, judgment, writ, injunction or decree of any court
or other governmental authority which could reasonably be expected to have a
material adverse effect on the ability of Purchaser to consummate the
transactions contemplated by this Agreement.
5.6 NO BROKERS. Neither Purchaser nor any affiliate of Purchaser has
entered into or will enter into any agreement, arrangement or understanding
with any person or entity which creates any obligation to pay any finder's
fee, brokerage commission or similar payment in connection with the
transactions contemplated by this Agreement.
5.7 DISCLOSURE. None of (a) any written information furnished to
Seller by Purchaser in connection with this Agreement or the transactions
contemplated hereby or (b) the representations and warranties of Purchaser
contained in this Agreement or in any document delivered in connection
herewith contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not false or misleading.
ARTICLE VI
CERTAIN COVENANTS
6.1 ACTIONS PRIOR TO CLOSING. Except as otherwise specifically
required or permitted by another provision of this Agreement or approved by
Purchaser in writing, from the date hereof through the Closing Date, Seller
shall conduct the Business in the ordinary course and consistent with past
practice and use its best efforts to preserve generally the goodwill of
customers, suppliers and others having relationships with the Division and
shall not:
(a) Transfer any of the Assets, except Transfers of Inventory in the
ordinary course of the Business and consistent with past practice;
(b) grant, create or permit to exist any Encumbrance on any of the
Assets (other than Encumbrances specified on SCHEDULE 4.5(b), SCHEDULE
4.6(b) or SCHEDULE 4.8(c) hereof);
(c) fail to maintain in all material respects Inventory in the
condition set forth in Section 4.5(b) hereof and the Equipment thereof as
of the date specified in the last sentence of Section 4.12;
(d) terminate, modify, amend or waive any rights under any Contract,
or enter into any new or additional Contracts, except in the ordinary
course of the Business and consistent with past practice;
(e) surrender, modify, amend, waive or forfeit any of Seller's rights
in respect of any Intellectual Property or fail to maintain such rights by
failing to file any necessary statements of use, requests for extensions of
time, renewal applications, responses to office
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actions or affidavits under Sections 8 and 15 of the Lanham Act, to
prosecute any INTER PARTES proceedings or to pay any necessary maintenance
or other fee or otherwise;
(f) modify its accounting policies, practices or procedures or the
manner in which the Books and Records are maintained;
(g) violate in any material respect any Law applicable to the conduct
of the Business or the use of the Assets;
(h) take or permit to be taken any action that could reasonably be
expected to result in a Material Adverse Change; or
(i) agree or consent to do any of the foregoing.
6.2 INVESTIGATION BY PURCHASER. Prior to the Closing, Seller shall
allow Purchaser and its representatives, upon Purchaser's prior notice to
Seller and at Purchaser's expense, access to the facilities and personnel of
Seller in order to permit Purchaser to investigate and inspect the Assets and
to inspect and make copies of the Books and Records or other information
requested by Purchaser reasonably related to the Assets. Any such investigation,
inspection or duplication of documents shall be conducted at reasonable times
and under reasonable circumstances (including reasonable limits on the number
of Purchaser's representatives who may visit the Division or Seller at the
same time) designed to promote the orderly continuance of the businesses of
the Division and Seller. Purchaser shall be bound by the provisions of Section
11.15 hereto.
6.3 ACCOUNTANTS' REVIEW. Seller shall permit independent certified
public accountants designated by Purchaser to review the Books and Records
(including without limitation all financial statements included therein).
Seller shall request Ernst & Young to permit such designated firm to review
the work papers of Ernst & Young relating to Seller and its affiliates,
insofar as they cover matters relating to the Division or the Assets.
6.4 CONSENTS AND APPROVALS.
(a) Seller and Purchaser shall use their respective
reasonable best efforts to obtain any authorizations, consents, orders
and approvals of any governmental authority, or other person or entity,
necessary for the performance of their respective obligations under
this Agreement and the consummation of the respective transactions to
be consummated by each of them hereunder, and shall cooperate fully
with each other in all reasonable respects in promptly seeking to
obtain such authorizations, consents, orders and approvals. Neither
Seller nor Purchaser shall take any action that has the effect of
delaying, impairing or impeding the receipt of any required
authorization, consent, order or approvals.
(b) Without limiting the generality or effect of Section
6.4(a) hereof, each of the parties shall promptly file or cause to be
filed under the provisions of the HSR Act any required notification and
report form, together with all required documentary materials. Without
limiting the generality or effect of Section 6.4(a) hereof, each of the
parties shall use its reasonable best efforts to obtain
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early termination of the applicable waiting period under the HSR Act, and
shall provide any additional information requested in connection with the
filings made under the HSR Act promptly after receipt of any request for such
additional information.
6.5 INJUNCTIONS. Without limiting the generality or effect of any
provision of Section 6.4 or Article VII or VIII hereof, if any federal,
state, local or foreign court or other governmental authority having
jurisdiction over either party hereto issues or otherwise promulgates any
order, judgment, writ, injunction or decree prior to the Closing which
prohibits the consummation of the transactions contemplated hereby, the
parties hereto shall use their respective reasonable best efforts to have
such injunction dissolved or otherwise eliminated as promptly as possible.
6.6 CERTAIN NOTICES. From the date hereof through the Closing Date,
Seller shall notify Purchaser, and Purchaser shall notify Seller, promptly
(and in any event within two business days of obtaining knowledge thereof) of
any of the following:
(a) any material breach of any representation, warranty or covenant
of the notifying party contained in this Agreement (whether or not any
requirement for notice or lapse of time or other condition precedent has
been satisfied) which is then continuing, together with a certificate of
the notifying party specifying the details thereof and the action that the
notifying party has taken or proposes to take with respect thereto;
(b) any pending or threatened claim, action, suit or proceeding
challenging this Agreement or any of the transactions contemplated hereby;
(c) any notice or other communication from any third party alleging
that the consent of such third party (other than a consent the necessity of
which is disclosed on SCHEDULE 4.3 hereto) is or may be required in
connection with the transactions contemplated by this Agreement;
(d) Any other development that would prevent or raise a substantial
doubt regarding the satisfaction of any condition set forth in Article VII
hereof, if Seller is the notifying party, or Article VIII hereof, if
Purchaser is the notifying party; and
(e) Any notice or other communication from any federal, state, local
or foreign governmental authority regarding the transactions contemplated
by this Agreement.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions provided for in
Article II hereof are subject to the satisfaction or waiver, on or prior to the
Closing Date, of each of the following conditions:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Purchaser contained in this Agreement shall be true and correct in
all material respects both on and
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as of the date of this Agreement and on and as of the Closing Date (with the
same force and effect as though made anew on and as of the Closing Date), and
Purchaser shall have performed in all material respects all covenants
contained in this Agreement to be performed or complied with by it prior to
or on the Closing Date.
7.2 CERTIFICATE. Purchaser shall have delivered to Seller a certificate,
dated the Closing Date and signed by an authorized officer of Purchaser,
certifying that the condition set forth in Section 7.1 hereof has been
satisfied.
7.3 CORPORATE DOCUMENTS. Seller shall have received from Purchaser copies
of the resolutions adopted by the board of directors of Purchaser approving the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, certified by the corporate secretary of
Purchaser.
7.4 LICENSING AGREEMENT. Purchaser shall have executed and delivered to
Seller the Licensing Agreement.
7.5 ESCROW AGREEMENT. Purchaser and the escrow agent shall have each
executed and delivered to Seller the Escrow Agreement.
7.6 LEASE AGREEMENT. If Purchaser shall have elected pursuant to Section
3.2(c) hereof to enter into the Lease Agreement at the Closing, Purchaser shall
have executed and delivered to Seller the Lease Agreement.
7.7 CONSENTS. All required consents, authorizations, approvals and
waivers from governmental authorities necessary to consummate the transactions
contemplated hereby, including without limitation the expiration or termination
of the applicable waiting period under the HSR Act, shall have been obtained.
7.8 NO GOVERNMENTAL PROCEEDINGS OR LITIGATION. No suit, action,
investigation or other proceeding by any federal, state, local or foreign
governmental authority, or other person or entity, shall have been instituted or
threatened, which would make illegal or prohibit, or challenge the validity or
legality of, the transactions contemplated by this Agreement.
Notwithstanding the foregoing, Seller's obligations under this Agreement to
consummate the transactions contemplated by Article II hereof shall not be
relieved by the failure of any of the foregoing conditions if such failure is
the result, direct or indirect, of a breach by Seller of its obligations under
this Agreement.
ARTICLE VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to consummate the transactions provided for in
Article II hereof are subject to the satisfaction or waiver, on or prior to the
Closing Date, of each of the following conditions:
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8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects both on and as of the date of this Agreement and on and as
of the Closing Date (with the same force and effect as though made anew on and
as of the Closing Date), and Seller shall have performed in all material
respects all covenants contained in this Agreement to be performed or complied
with by it prior to or on the Closing Date.
8.2 CERTIFICATES. Seller shall have delivered to Purchaser a certificate,
dated the Closing Date and signed by an authorized officer of Seller, certifying
that the conditions set forth in Sections 8.1 and 8.5 hereof have been
satisfied.
8.3 CORPORATE DOCUMENTS. Purchaser shall have received from Seller copies
of the resolutions adopted by the board of directors of Seller approving the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, certified by the corporate secretary of
Seller.
8.4 LICENSING AGREEMENT. Seller shall have executed and delivered to
Purchaser the Licensing Agreement.
8.5 ESCROW AGREEMENT. Seller and the escrow agent shall have each
executed and delivered to Purchaser the Escrow Agreement.
8.6 LEASE AGREEMENT. If Purchaser shall have elected pursuant to Section
3.2(c) hereof to enter into the Lease Agreement at the Closing, Purchaser shall
have executed and delivered to Seller the Lease Agreement.
8.7 NO MATERIAL CHANGE. Since June 30, 1996, there shall have been no
Material Adverse Change.
8.8 CONSENTS. All required consents, authorizations, approvals and
waivers from governmental authorities and other persons and entities necessary
to consummate the transactions contemplated hereby (including without limitation
the expiration or termination of the applicable waiting period under the HSR Act
and the consents, authorizations and approvals specified on SCHEDULE 4.3 hereto)
shall have been obtained.
8.9 NO GOVERNMENTAL PROCEEDINGS OR LITIGATION. No suit, action,
investigation or other proceeding by any federal, state, local or foreign
governmental authority, or other person or entity, shall have been instituted or
threatened, which would make illegal or prohibit, or challenge the validity or
legality of, the transactions contemplated by this Agreement.
Notwithstanding the foregoing, Purchaser's obligations under this Agreement
to consummate the transactions contemplated by Article II hereof shall not be
relieved by the failure of any of the foregoing conditions if such failure is
the result, direct or indirect, of a breach by Purchaser of its obligations
under this Agreement.
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ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the parties contained in this Agreement (or
in any document delivered in connection herewith) shall be deemed to have
been made on and as of the date of this Agreement and on and as of the
Closing Date and shall survive the Closing Date and shall remain operative
and in full force and effect until the second anniversary of the Closing Date
(the "Termination Date"). The covenants of the parties contained in this
Agreement (or in any document delivered in connection herewith) shall remain
operative and in full force and effect without any time limitation, except to
the extent that any such covenant is limited in duration by the express terms
thereof. Any right of indemnification pursuant to this Article IX with
respect to a claimed breach of a representation or warranty shall expire at
11:59 p.m. on the Termination Date unless, on or prior to the Termination
Date, a Claim Notice has been given to the party from whom indemnification is
sought. Provided that a Claim Notice is timely so given, the right to
indemnification pursuant to this Article IX with respect to a claimed breach
to which such Claim Notice relates shall not be affected by the occurrence of
the Termination Date. For purposes of this Agreement, a "Claim Notice" shall
mean a written notice asserting a breach of a representation or warranty
contained in this Agreement which reasonably sets forth, in light of the
information then known to the party giving such notice, a description of, and
an estimate (if it is then reasonable to make an estimate) of the amount
involved in such breach, together with copies of all available documentation
with respect thereto. The representations, warranties and covenants of
Purchaser contained in this Agreement (or in any document delivered in
connection herewith) shall not be diminished or otherwise affected as a
result of any investigation by or knowledge of Seller. The representations,
warranties and covenants of Seller contained in this Agreement (or in any
document delivered in connection herewith) shall not be diminished or
otherwise affected as a result of any investigation by or knowledge of
Purchaser.
9.2 INDEMNIFICATION BY SELLER. Seller shall indemnify, defend and hold
Purchaser harmless from and against any and all Losses (including without
limitation (i) any and all charges to or deductions made against Purchaser by
third parties for returns, allowances for returns, restocking fees, rebates,
discounts, chargebacks or similar items related to Sales by the Seller prior
to Closing and (ii) any and all liabilities for any royalties payable in
connection with the sale of any Licensed Inventory included in the Purchased
Assets if, and to the extent that, the amount of such royalty is included in
Seller's cost of the Licensed Inventory as reflected on the June 30, 1996
Statement) resulting or arising from, relating to or incurred in connection
with (a) any failure by Seller to pay, perform and discharge any debts,
obligations or liabilities of Seller (other than the Assumed Liabilities),
(b) any breach of any representation, warranty or covenant of Seller
contained in this Agreement or in any document delivered in connection
herewith, (c) the conduct of the Business or the ownership or use of the
Assets (other than the Purchased Assets) at any time, whether on, prior to or
following the Closing Date, and (d) the ownership or use of the Purchased
Assets at any time on or prior to the Closing Date.
9.3 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify, defend
and hold Seller harmless from and against any and all Losses resulting or
arising from, relating to or incurred in
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connection with (a) any breach of any representation, warranty or covenant of
Purchaser contained in this Agreement or in any document delivered in
connection herewith and (b) the ownership of the Purchased Assets at any time
following the Closing Date.
9.4 NOTICE OF CLAIM; RIGHT TO PARTICIPATE IN AND DEFEND THIRD PARTY CLAIM.
(a) If any indemnified party receives notice of the assertion of any
claim, the commencement of any suit, action or proceeding, or the imposition of
any penalty or assessment by a third party in respect of which indemnity may be
sought hereunder (a "Third Party Claim"), and the indemnified party intends to
seek indemnity hereunder, then the indemnified party shall promptly provide the
indemnifying party with written notice of the Third Party Claim (but, in any
event, not later than 30 calendar days after receipt of such notice of Third
Party Claim) and a complete description of the Third Party Claim. The failure
by an indemnified party to notify an indemnifying party of a Third Party Claim
shall not relieve the indemnifying party of any indemnification responsibility
under this Article IX, except to the extent, if any, that such failure
materially prejudices the ability of the indemnifying party to defend such Third
Party Claim.
(b) Without prejudice to the rights of the indemnified party prior
thereto, the indemnifying party shall have the right to control the defense,
compromise or settlement of the Third Party Claim with its own counsel
(reasonably satisfactory to the indemnified party) if the indemnifying party
delivers written notice to the indemnified party within 30 calendar days
following the indemnifying party's receipt of notice of the Third Party Claim
from the indemnified party setting forth its undertaking to defend such Third
Party Claim in accordance with this Article IX; provided, however, that the
indemnifying party shall not enter into any settlement of any Third Party
Claim which would impose or create any obligation or any financial or other
liability on the part of the indemnified party if such liability or
obligation (i) requires more than the payment of a liquidated sum or (ii) is
not covered by the indemnification provided to the indemnified party
hereunder. In its defense, compromise or settlement of any Third Party
Claim, the indemnifying party shall timely provide the indemnified party with
such information with respect to such defense, compromise or settlement as
the indemnified party may reasonably request, and shall not assume any
position or take any action that would impose an obligation of any kind on,
or restrict the actions of, the indemnified party. The indemnified party
shall be entitled (at the indemnified party's expense) to participate in the
defense by the indemnifying party of any Third Party Claim with its own
counsel.
(c) In the event that the indemnifying party does not undertake the
defense, compromise or settlement of a Third Party Claim in accordance with
Section 9.4(b) hereof, the indemnified party shall have the right to control the
defense or settlement of such Third Party Claim with counsel of its choosing;
provided, however, that the indemnified party shall not settle or compromise any
Third Party Claim without the indemnifying party's prior written consent, unless
(i) the terms of such settlement or compromise release the indemnified party or
the indemnifying party from any and all liability with respect to the Third
Party Claim or (ii) the indemnifying party shall not have acknowledged its
obligations to indemnify the indemnified party with respect to such Third Party
Claim in accordance with this Article IX. The indemnifying party shall be
entitled (at the indemnifying party's expense) to participate in the defense of
any Third Party Claim with its own counsel.
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(d) Any indemnifiable claim hereunder that is not a Third Party Claim
shall be asserted by the indemnified party by promptly delivering notice
thereof to the indemnifying party. If the indemnifying party does not
respond to such notice within 60 calendar days after its receipt, it shall
have no further right to contest the validity of such claim.
9.5 LIMITATION. Notwithstanding the provisions of Section 9.2, neither
party shall have any indemnification obligation to the other party under this
Agreement unless and until the aggregate amount of the Losses of such other
party exceeds $250,000; PROVIDED HOWEVER; that such limitation shall not be
applicable with respect to any claim made by Purchaser with respect to all
charges to or deductions made against Purchaser by third parties for returns,
allowances for returns, restocking fees, rebates, discounts, chargebacks or
similar fees related to sales by Seller prior to Closing.
9.6 REDUCTION BY INSURANCE PROCEEDS. The amount payable by an
indemnifying party to an indemnified party with respect to a Loss shall be
reduced by the amount of any insurance proceeds received by the indemnified
party with respect to the Loss, and each of the parties hereby agrees to use its
best efforts to collect any and all insurance proceeds to which it may be
entitled in respect of any Loss.
ARTICLE X
OTHER COVENANTS
10.1 STORAGE OF PURCHASED INVENTORY AND CERTAIN EQUIPMENT. From the
Closing Date through March 31, 1997 (the "Storage Period"), Seller shall,
without any additional cost to Purchaser (except as expressly provided below),
permit Purchaser to store the Purchased Inventory, the Purchased Equipment and
any Leased Equipment covered by an Assumed Equipment Lease at Seller's warehouse
facilities where such Inventory and Equipment are presently located
(collectively, the "Warehouse Facilities"). During the Storage Period,
Purchaser shall be responsible for the shipping and handling of the Purchased
Inventory, and Seller shall allow Purchaser full access to the Warehouse
Facilities for such purpose. Seller shall cause its employees to assist with
the shipping and handling of the Purchased Inventory as requested by Purchaser,
and, promptly upon receipt of an invoice therefor (which shall include
reasonable detail in support thereof), Purchaser shall reimburse Seller for that
portion of Seller's labor costs and other out-of-pocket costs that may
reasonably be allocated to the assistance so provided. The Purchased Inventory
shall not be shipped from the Warehouse Facilities except in accordance with the
instructions of Purchaser. During the Storage Period, Seller shall allow
Purchaser full access to such facilities for the purpose of examining or
removing such Equipment. Such Equipment shall not be removed from such
facilities except by Purchaser. Purchaser shall provide Seller a schedule of
labor requirements no later than 10 days prior to Closing.
10.2 POST-CLOSING ACCESS. From and after the Closing Date, Seller will
allow Purchaser and its representatives full access to any Books and Records,
including without limitation customer and supplier records, that are not
included in the Purchased Assets. Seller expressly acknowledges that,
notwithstanding anything to the contrary herein contained, Purchaser may use any
information contained in such Books and Records for its own benefit.
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10.3 BACKLOG. In the event that (a) prior to the Closing Seller shall have
received from any of its customers, in the ordinary course of the Business,
consistent with past practices, purchase orders for finished products included
in the Purchased Inventory and (b) as of the Closing Seller shall not have made
shipments in respect of any such purchase orders, Purchaser shall use its
reasonable best efforts to make shipments in respect of such purchase orders,
subject to normal credit terms and conditions. Seller shall instruct its
customers to remit payment in respect of such purchase orders to Purchaser
rather than Seller and, in the event any customer remits such payment to Seller,
Seller shall promptly (and, in any event, within five business days) after its
receipt thereof forward to Purchaser an amount in cash equal to such payment.
10.4 PROCESSING OF WORK-IN-PROCESS INVENTORY. During the Storage Period,
Seller shall, upon Purchaser's written request, perform processing of work-in-
process included in the Purchased Inventory as may be directed by Purchaser.
Such processing of work-in-process inventory shall be to Purchaser's reasonable
satisfaction. Purchaser agrees to reimburse Seller for that portion of Seller's
labor costs and other out-of-pocket costs that may reasonably be allocated to
the assistance so provided promptly upon receipt of an invoice therefor (which
shall include reasonable detail in support thereof). Purchaser shall provide
Seller a schedule of labor requirements no later than 10 days prior to Closing.
ARTICLE XI
MISCELLANEOUS
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) By the mutual written consent of Seller and Purchaser;
(b) By Seller, upon written notice to Purchaser, or by Purchaser,
upon written notice to Seller, if the Closing has not occurred on or before
December 6, 1996;
(c) By Seller, upon written notice to Purchaser, or by Purchaser,
upon written notice to Seller, if there shall have been entered a final,
nonappealable order of any federal, state, local or foreign court or
governmental authority prohibiting the consummation of the transactions
contemplated hereby or any material part thereof; and
(d) By Seller, upon written notice to Purchaser, upon a breach in any
material respect of any representation, warranty or covenant of Purchaser
contained in this Agreement, provided that such breach is not capable of
being cured or has not been cured within 10 calendar days after the giving
of notice thereof by Seller to Purchaser, or by Purchaser, upon written
notice to Seller, upon a breach in any material respect of any
representation, warranty or covenant of Seller contained in this Agreement,
provided that such breach is not capable of being cured or has not been
cured within 10 calendar days after the giving of notice thereof by
Purchaser to Seller.
If this Agreement is terminated as provided herein, each party hereto shall
pay all of its own fees and expenses and no party hereto shall have any
liability or further obligation to the other party
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hereto under this Agreement, except that (i) the provisions of Section 11.15
hereof shall remain in full force and effect following any termination hereof
and (ii) nothing contained herein will relieve any party of any liability for
any breach prior to such termination of any representation, warranty or
covenant contained in this Agreement and, without limiting the generality or
effect of the preceding provisions of this clause (ii), in the event of such
a pre-termination breach, the nonbreaching party shall, in addition to any
other remedy provided for hereunder or existing from time to time at law or
in equity or by statute or otherwise, be entitled to recover from the
breaching party all out-of-pocket legal, accounting and due diligence
expenses actually incurred in connection with this Agreement.
11.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by either party hereto without the prior
written consent of the other party hereto; except, that Purchaser may, without
such consent, assign all such rights and obligations to a direct or indirect,
wholly owned subsidiary or subsidiaries of Purchaser or to a successor to the
business of Purchaser which shall assume all obligations and liabilities
hereunder, but without releasing Purchaser with respect to any such obligations
or liabilities except with the prior written consent of Seller in its sole
discretion. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, and no other person shall have any right, benefit or obligation
hereunder.
11.3 NOTICES. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by either party hereto to
the other shall be in writing and shall be deemed to have been duly given when
delivered in person or when dispatched by electronic facsimile transfer
(confirmed in writing by mail simultaneously dispatched) or one business day
after having been dispatched by a nationally recognized overnight courier
service to the appropriate party at the address specified below:
If to Seller, addressed to:
Fieldcrest Cannon, Inc.
One Lake Drive
Kannapolis, North Carolina 28081
Facsimile No: (704) 939-4031
Attention: Kevin M. Finlay
With a copy to:
Fieldcrest Cannon, Inc.
326 East Stadium Drive
Eden, North Carolina 27288
Facsimile No: (910) 627-3109
Attention: M. Kenneth Doss
General Counsel
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If to Purchaser, addressed to:
Pillowtex Corporation
4111 Mint Way
Dallas, Texas 75237
Facsimile No: (214) 330-6016
Attention: Charles M. Hansen, Jr.
Chairman and Chief Executive Officer
With a copy to:
Pillowtex Corporation
4111 Mint Way
Dallas, Texas 75237
Facsimile No: (214) 467-0823
Attention: T.R. Tunnell
General Counsel
or to such other address and with such other copies as either party may
designate as to itself by like notice to the other.
11.4 CHOICE OF LAW. This Agreement shall be construed and interpreted, and
the rights of the parties determined, in accordance with the laws of the State
of Delaware (without reference to the choice of law provisions thereof).
11.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, together
with all exhibits and schedules hereto, constitutes the entire agreement by
and between the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of such parties, including without
limitation that certain letter of intent dated September 4, 1996. No
amendment, supplement, modification or waiver of this Agreement or any
provision hereof shall be binding unless executed in writing by the party
hereto to be bound thereby. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall any such waiver constitute a
continuing waiver unless otherwise expressly provided.
11.6 EXPENSES. Except as otherwise specified herein, each party hereto
shall pay its own legal, accounting and other out-of-pocket expenses incident to
this Agreement and to any action taken by such party in preparation for carrying
this Agreement into effect.
11.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to either party hereto. Upon any such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
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manner to the end that the transactions contemplated by this Agreement are
consummated to the extent possible.
11.8 REMEDIES. No remedy conferred by any of the specific provisions of
this Agreement is intended to be exclusive of any other remedy, and each remedy
shall be cumulative and shall be in addition to every other remedy provided for
hereunder or existing from time to time at law or in equity or by statute or
otherwise. The election of any one or more remedies shall not constitute a
waiver of the right to pursue other available remedies.
11.9 BULK SALES. Purchaser waives compliance by Seller with the
provisions of the so-called bulk sales law of any state. Seller shall
indemnify, defend and hold Purchaser harmless against any and all Losses
suffered by Purchaser as a result of non-compliance by Seller with any such bulk
sales laws, this indemnity being in addition to the indemnity provided elsewhere
herein.
11.10 PASSAGE OF TITLE AND RISK OF LOSS. Legal title, equitable title and
risk of loss with respect to the Purchased Assets shall not pass to Purchaser
until the Purchased Assets are Transferred at the Closing, which Transfer, once
it has occurred, shall be deemed effective for tax, accounting and other
computational purposes as of 11:59 p.m., Eastern time, on the Closing Date.
11.11 TRANSFERS. Seller and Purchaser shall cooperate and take such action
as may be reasonably requested by the other in order to effect an orderly
Transfer of the Purchased Assets.
11.12 FURTHER ASSURANCES. From time to time, as and when requested by
either party hereto, the other party hereto shall execute and deliver, or cause
to be executed and delivered, all such documents and instruments as may be
reasonably necessary to consummate the transactions contemplated by this
Agreement and to fully effectuate the purposes and intent hereof.
11.13 TITLES. The titles, captions or headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.14 PUBLICITY. Except as required by Law, neither party hereto shall
issue any press release or make any announcement or other public statement
regarding this Agreement or the transactions contemplated hereby, without the
prior approval of the other party.
11.15 CONFIDENTIAL INFORMATION. Each party hereto acknowledges that, in
connection with the negotiation of this Agreement, the preparation for the
consummation of the transactions contemplated hereby and the performance of
obligations hereunder, it will have access to confidential information relating
to the other party. Except as otherwise expressly provided herein or as required
by Law, each party shall treat such information as confidential, shall preserve
the confidentiality thereof and shall not duplicate or disclose such
information, except to advisors, consultants and affiliates who also agree to
treat such information as confidential. Seller, at a time and in a manner which
it reasonably determines and after prior notice to and consultation with
Purchaser, may notify employees, unions and bargaining agents of the
transactions contemplated
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hereby. In the event of the termination of this Agreement for any reason
whatsoever, each party hereto shall return to the other party all documents,
workpapers and other material (including all copies thereof) obtained in
connection with the transactions contemplated hereby and shall use all
reasonable efforts, including instructing its employees and others who have
had access to such information, to keep confidential and not to use any such
information, unless such information is now, or is hereafter disclosed,
through no act or omission of such party, in any manner making it available
to the general public.
11.16 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.17 TAX FILINGS. Each of the parties acknowledges its understanding of
the requirements under Section 1060 of the Internal Revenue Code for the filing
of Form 8594 for their respective tax years in which the Closing occurs. Each
of Seller and Purchaser agrees to allocate the Purchase Price among the Purchase
Assets in a manner mutually agreeable to the parties within 60 days following
Closing.
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INWITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers
thereunto duly authorized, in multiple originals, all as of the day and year
first above written.
FIELDCREST CANNON, INC.
By:____________________________________
Name:__________________________________
ATTEST: Title:_________________________________
____________________________________
Secretary
PILLOWTEX CORPORATION
By:____________________________________
Name:__________________________________
ATTEST: Title:_________________________________
____________________________________
Secretary
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TRADEMARK LICENSING AGREEMENT
This TRADEMARK LICENSING AGREEMENT (this "License"), dated as of November
18, 1996, is by and between FIELDCREST CANNON, INC., a Delaware corporation
("Licensor"), and PILLOWTEX CORPORATION, a Texas corporation ("Licensee").
W I T N E S S E T H:
WHEREAS, Licensor is engaged, through its Blanket Division located in Eden,
North Carolina (the "Division"), in the business of manufacturing, designing and
selling blankets and throws; and
WHEREAS, Licensor desires to sell, and Licensee desires to purchase,
certain assets used by the Division in the conduct of such business (the
"Business"), together with certain other assets of Licensor, on the terms and
conditions set forth in a certain Asset Purchase Agreement (the "Agreement"),
dated as of October 3, 1996; and
WHEREAS, Licensor is the owner or exclusive licensee of certain Licensed
Marks, as defined herein, held for use in connection with the manufacture and
sale of (i) any and all types of blankets and throws, and (ii) any and all types
of pillows, down comforters, pillow protectors, mattress pads, mattress covers
and featherbeds, including without limitation those used in connection with the
conduct of the Business; and
WHEREAS, Licensee desires to use the Licensed Marks in connection with the
manufacture and sale of any and all types of blankets, throws, pillows, down
comforters, pillow protectors, mattress pads, mattress covers, feather beds and
related items.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. Unless otherwise defined herein, the following terms
as used herein shall have the following respective meanings:
<PAGE>
"BLANKET PRODUCTS" shall mean any and all types of blankets and throws sold
under the Licensed Marks.
"LICENSED MARKS" shall mean the intellectual property listed on Schedule
2.1 hereto.
"LICENSED PRODUCTS" shall mean Blanket Products and Pillow Products,
collectively.
"PILLOW PRODUCTS" shall mean any and all types of pillows, down comforters,
pillow protectors, mattress pads, mattress covers and featherbeds sold under the
Licensed Marks.
ARTICLE II
LICENSE GRANT
2.1 LICENSE GRANT. Subject to the terms and conditions contained herein,
Licensor grants to Licensee the exclusive, worldwide license to use the Licensed
Marks in connection with the Licensed Products. This right is exclusive even as
against the Licensor.
2.2 CORPORATE AND TRADE NAMES. Licensee shall not use any Licensed Mark
as part of its corporate name or trade name without the prior written consent of
Licensor.
2.3 SUBLICENSING. Licensee shall not grant a sublicense to use the
Licensed Marks without the prior written consent of Licensor, except that
Licensee may grant a sublicense to a subsidiary or affiliate in which it owns
and maintains more than 50% of the issued and outstanding shares of voting stock
or other equity interest; PROVIDED, HOWEVER, that each permitted sublicense, if
any, shall be subject to all of the following additional terms and conditions:
(a) Any such permitted sublicense shall immediately terminate in the event
Licensee ceases to own more than 50% of the issued and outstanding shares
of voting stock or other equity interest of the sublicensee.
(b) Each sublicense agreement ("Sublicense Agreement") between licensee
and any permitted sublicensee shall be subject to the terms and conditions
of this License.
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<PAGE>
(c) Any termination of this License shall immediately terminate all
Sublicense Agreements.
(d) Licensee shall remain fully liable to Licensor for the full and timely
performance of each permitted sublicensee.
(e) All Licensed Products sold by any permitted sublicensee under the
Licensed Marks shall be deemed "Licensed Products" for purposes of this
License, as if Licensee were the seller thereof.
(f) Each Sublicense Agreement with each permitted sublicensee shall
include a provision specifically stating that Licensor is an intended
third-party beneficiary of such Sublicense Agreement.
(g) Further sublicensing by any permitted sublicensee of any rights
arising hereunder is expressly prohibited.
(h) Within 15 calendar days following the execution and delivery of any
Sublicense Agreement, Licensee shall deliver to Licensor a written notice
specifying the name and address of the permitted sublicensee party thereto.
Any sublicensing or attempted sublicensing by Licensee of the Licensed Marks
other than in accordance with this subsection shall be null and void and shall
be deemed a material breach of this License.
ARTICLE III
TERM
3.1 INITIAL TERM. This License shall begin on the date hereof and, unless
earlier terminated as set forth in this License, shall end on December 31, 2021
(the "Initial Term"), subject to renewal as provided in Section 3.2.
3.2 RENEWAL TERM. This License shall automatically renew for an
additional ten year period, until December 31, 2031 (the "Renewal Term"), unless
(a) Licensor shall give Licensee written notice of Licensor's election not to
renew this License for the Renewal Term on or before December 31, 2018, or
(b) Licensee is not in compliance in all material respects with the provisions
of this License on December 31, 2021, provided that Licensee shall have received
from Licensor written notice of such non-compliance and Licensee shall
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<PAGE>
have failed to cure such non-compliance in accordance with the applicable
cure provisions of Article VIII below. The provisions of this Section 3.2
shall not limit or affect Licensor's right to terminate this License in
accordance with the provisions of Article VIII below.
ARTICLE IV
ROYALTIES
4.1 INITIAL TERM ROYALTY. During the Initial Term, Licensee shall pay
Licensor a royalty as follows:
(a) Licensee shall pay Licensor a royalty of one percent (1%) of the Net
Sales of Blanket Products invoiced on or before December 31, 2001.
(b) Licensee shall pay Licensor a royalty of three percent (3%) of the Net
Sales of Blanket Products invoiced after December 31, 2001.
(c) Licensee shall pay Licensor a royalty of three percent (3%) of the Net
Sales of Pillow Products.
4.2 RENEWAL TERM ROYALTY. During the Renewal Term, if any, Licensee shall
pay Licensor a royalty of three percent (3%) of the Net Sales of all Licensed
Products.
4.3 ADVANCES AGAINST ROYALTY PAYMENTS. During the Initial Term and
Renewal Term, if any, of this License, Licensee shall pay to Licensor advances
against royalty payments as follows:
(a) On or prior to March 1 of each fiscal year of Licensee commencing
during the Initial Term or the Renewal Term, if any, Licensee shall pay to
Licensor $300,000 for royalties due in respect of Net Sales of Blanket
Products for such fiscal year. For each such fiscal year, such amount
shall be applied against the payment of such royalties pursuant to this
Article IV, and, if such royalties do not equal or exceed such amount,
Licensor shall retain any portion of such amount not so applied and shall
have no obligation to carry forward any such remaining portion of the
advance to any succeeding year.
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<PAGE>
(b) On or prior to March 1 of each fiscal year of Licensee commencing
during the Initial Term or the Renewal Term, if any, Licensee shall pay to
Licensor $300,000 for royalties due in respect of Net Sales of Pillow
Products for such fiscal year. For each such fiscal year, such amount
shall be applied against the payment of such royalties pursuant to this
Article IV, and, if such royalties do not equal or exceed such amount,
Licensor shall retain any portion of such amount not so applied and shall
have no obligation to carry forward any such remaining portion of the
advance to any succeeding year.
With respect to Licensee's fiscal year during which this License terminates, if
any payment provided for in this Section 4.3 has been made for such fiscal year
prior to such termination, Licensor shall refund to Licensee promptly following
such termination a pro rata portion of such payment based on the number of days
remaining in such fiscal year following such termination.
4.4 NET SALES. The term "Net Sales" shall mean Licensee's or any
permitted sublicensee's actual gross sales (excluding any advertising price
loads requested by customers) less any trade discounts or returns actually made
or allowed. For purposes of computing Net Sales, no deduction shall be made for
doubtful or uncollectible accounts.
4.5 ROYALTY PAYMENTS. Subject to the provisions of Section 4.3, royalties
shall become due and payable to Licensor on a quarterly basis and shall be paid
by Licensee within 45 calendar days following the end of each of Licensee's
fiscal quarters of each fiscal year. Subject to the provisions of Section 4.3,
at the termination of this License all unpaid royalties shall become due and
payable and shall be paid within 45 calendar days following the date of
termination. Each royalty payment shall be accompanied by a statement of
account, certified as accurate by an officer of Licensee, itemizing in
reasonable detail the gross revenues and deductions therefrom in computing Net
Sales, the royalty due for that calendar quarter and the amount of such royalty
against which payments made by Licensee pursuant to Section 4.3 shall be
applied. Each such statement of account shall segregate and itemize the Net
Sales by Licensee and the Net Sales by each permitted sublicense (if any).
4.6 ROYALTY RECORDS. Licensee shall keep records sufficient to verify its
royalty payments under this License.
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All such records shall be kept for at least three years after the end of the
fiscal year in respect of which a royalty is due under this License.
Licensor shall have the right, no more frequently than once during any
Licensee fiscal year, upon reasonable notice to Licensee, to have all such
records examined at Licensor's expense, without unreasonable disruption of
Licensee's business and personnel and during normal business hours, by
Licensor's representatives or by its certified public accounting firm;
PROVIDED, HOWEVER, in the event an underpayment in past royalties in excess
of two percent (2%) is discovered, Licensee shall, in addition to paying the
underpaid amount, pay for all inspection costs, plus interest on the amount
of any royalty underpayment from the date such royalty was payable until the
date such royalty is actually paid at an annual rate equal to the prime
lending rate of Wachovia Bank & Trust, N.A., Winston-Salem, North Carolina,
as announced and in effect at the date of the discovery of the underpayment.
ARTICLE V
PRODUCT QUALITY
5.1 QUALITY STANDARDS;PRODUCT APPROVAL. Licensor shall have the right
to approve all Licensed Products to ensure that the Licensed Products meet
its quality standards. Before selling any new Licensed Product item,
Licensee shall deliver to Licensor a sample of such item for Licensor's
approval, which shall not be unreasonably withheld. Licensor shall be deemed
to have approved each such sample if it has neither approved nor disapproved
the sample in writing within 20 calendar days after the sample's delivery.
All Licensed Products sold hereunder shall be at least equal in quality to
the corresponding samples delivered to Licensor, but Licensee shall not be
obligated to deliver any further samples to Licensor unless the quality of a
given item is to be changed. All Licensed Products shall be manufactured and
sold in accordance with all applicable laws and regulations.
5.2 QUALITY INSPECTIONS. Licensor shall have the right to inspect, upon
reasonable notice to Licensee, without unreasonable disruption of Licensee's
business and personnel and during normal business hours, such of the premises,
facilities and records of Licensee and any permitted sublicensee as are
necessary solely for the purpose of maintaining quality control over the nature
and quality of the Licensed Products.
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5.3 NOTIFICATION OF QUALITY CONTROL PROBLEMS. In the event any Licensed
Products do not, in Licensor's reasonable judgment, meet the quality standards
set forth in this License during the term hereof, Licensor shall notify Licensee
in writing of any such deficiencies, and Licensee shall promptly (but in any
event within 30 days after receiving such written notice from Licensor) repair
or change such Licensed Products (or, in the case of Licensed Products
manufactured or sold by any permitted sublicensee, Licensee shall cause such
permitted sublicensee to repair or change such Licensed Products) to conform to
such quality standards. If such conformity is not or cannot be attained,
Licensee shall not permit the Licensed Marks to be used in connection with such
Licensed Products; PROVIDED, HOWEVER, that sales of any such Licensed Products
shipped prior to Licensor's written notice of such deficiencies shall
nevertheless be treated as Net Sales for purposes of computing royalties
hereunder.
5.4 USE OF LICENSED MARKS DESIGNATED FOR "PREMIUM" PRODUCTS. The parties
acknowledge that Licensor has designated certain of the Licensed Marks as its
"premium" marks, based on the premium quality materials with which the products
bearing such Licensed Marks are manufactured and based on the price points at
which Licensor has targeted such products. Such Licensed Marks are hereinafter
referred to as the "Premium Licensed Marks," and are designated on Schedule 2.1
with an asterisk. Licensee expressly acknowledges that the preservation of the
brand image of such Premium Licensed Marks depends upon the preservation of the
premium quality of all products bearing such Premium Licensed Marks. Prior to
the date hereof, Licensor has provided Licensee with the manufacturing and
content specifications (the "Premium Product Specifications") for all Blanket
Products and Pillow Products previously manufactured and sold by Licensor under
the Premium Licensed Marks. Without the prior written consent of Licensor,
Licensee shall not use, and shall not permit any permitted sublicensee to use,
any Premium Licensed Mark on or in connection with any product that does not
meet or exceed the quality standards of content and/or manufacture set forth in
the Premium Product Specifications or otherwise approved by Licensor.
5.5 SALE OF "SECONDS" OR REJECTED PRODUCTS. The Licensed Marks must be
removed from and may not appear on any "second-quality goods," "irregulars" or
"defective goods," unless removal of the Licensed Marks would damage the
physical integrity of the product.
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ARTICLE VI
MARK OWNERSHIP, USE, AND PROTECTION
6.1 MARK OWNERSHIP.
(a) Licensor represents and warrants that it is the owner or exclusive
licensee of the Licensed Marks as applied to the products manufactured and sold
by Licensor under the Licensed Marks immediately prior to the execution and
delivery hereof and that no other entity, to the best of Licensor's knowledge
and belief, has the right to use any mark, either in the identical form or in
such near resemblance as to be likely, when applied to the goods or services of
such entity, to cause confusion, or to cause mistake, or to deceive. Licensor
represents and warrants that it has the full power and authority to grant to
Licensee the rights granted under this License. Notwithstanding the foregoing
or any other provision contained in this License, Licensor neither represents
nor warrants that Licensee's or any permitted sublicensee's use of any Licensed
Mark in connection with any Licensed Product, other than those manufactured and
sold by Licensor under the Licensed Marks immediately prior to the execution and
delivery hereof, will not infringe the rights of any third party.
(b) Licensee expressly acknowledges Licensor's exclusive ownership of, or
exclusive license under, the Licensed Marks and that Licensee's use of the
Licensed Marks shall not create in Licensee's favor any right, title or interest
in or to the Licensed Marks, that such use shall inure exclusively to the
benefit of Licensor's interest in the Licensed Marks, and that Licensee may not
make any application to register any Licensed Mark or any translation thereof or
any mark confusingly similar thereto anywhere in the world. For the term of
this License or thereafter, Licensee shall not raise or cause to be raised any
question concerning or objection to the validity of the Licensed Marks or the
right of Licensor thereto on any grounds whatsoever.
6.2 MARK USAGE. All Licensed Products shall be labeled, packaged and
advertised in accordance with all applicable laws and regulations and in
conformity with Licensor's labels, packages and advertisements for comparable
products immediately prior to the execution and delivery hereof and with
Licensee's labels, packages and advertisements used by Licensee in connection
with products sold under the Prior Licenses (as
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<PAGE>
defined in Section 8.8) immediately prior to the execution and delivery
hereof. All advertising, promotional materials (including all labels,
packaging, containers and displays) and catalogs that include or refer to any
of the Licensed Marks in connection with Licensed Products shall be subject
to Licensor's prior written approval, which approval shall not be
unreasonably withheld. Licensee shall submit to Licensor layouts for all
proposed copy and layouts of such advertising and promotional materials, with
a list of media outlets in which such copy is intended to be placed, prior to
any usage thereof. If Licensor does not give Licensee notice of disapproval
of any such material within 15 days of its receipt thereof, the materials so
submitted shall be deemed to have been approved by Licensor. In addition,
Licensee shall supply Licensor, upon request, with specimens of all uses of
the Licensed Marks.
6.3 MARK PROTECTION. Licensor shall take all reasonable actions to
maintain and enforce the Licensed Marks, whether or not Licensor uses the
Licensed Marks or licenses the Licensed Marks to another party. Licensee
shall promptly notify (and shall require each permitted sublicensee to
notify) Licensor in writing of any and all uses of infringing marks, unfair
competition or colorable imitations of the Licensed Marks that become known
by a senior executive officer of Licensee or of any permitted sublicensee.
In the event that a Licensed Mark is infringed by a third party, Licensor
shall have the sole authority to conduct an action for infringement or a
cancellation, opposition or other INTER PARTES proceeding, at its own
expense, provided that Licensee shall have the right to participate in such
action or proceeding through counsel retained at Licensee's own expense.
Licensee shall provide reasonable assistance to Licensor, at Licensor's
expense (other than Licensee's attorney's fees), in any action for
infringement or unfair competition involving a Licensed Mark or in any
opposition, cancellation or other INTER PARTES proceeding involving rights in
and to a Licensed Mark. Licensor, if it so desires, may join Licensee as a
party, at Licensor's expense, to any litigation involving rights in and to a
Licensed Mark.
6.4 COMPLIANCE WITH LOCAL TRADEMARK LAWS. Licensee shall use the
Licensed Marks in accordance with the applicable legal requirements in each
jurisdiction in which it uses the Licensed Marks, and shall use such markings
in connection therewith as may be reasonably required by Licensor or be
required by such jurisdiction's pertinent legal provisions. Licensee shall
fully cooperate with Licensor in preparing and causing to be recorded
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in every jurisdiction where applicable, registered user applications and/or
agreements and all other documents which may be necessary or desirable to
evidence, protect and implement the rights of Licensor in the Licensed Marks.
If registration of Licensee or any permitted sublicensee as a registered
user is required in any jurisdiction in which Licensee or such permitted
sublicensee intends to use the Licensed Marks or to distribute Licensed
Products, Licensor shall bear all expenses, including government fees and
trademark agents' fees, relating to the registration of Licensee or the
permitted sublicensee as a user of the License Marks and relating to the
cancellation of any registration. Licensee hereby irrevocably appoints
Licensor as its agent and attorney-in-fact to execute and file on behalf of
Licensee in the trademark offices of all registered-user jurisdictions
cancellation applications and withdrawal requests with respect to any
existing user registrations and any pending registered-user applications upon
the expiration or termination of this License.
6.5 MARKING REQUIREMENT FOR LICENSED PRODUCTS SOLD IN CANADA. In addition
to the customary usage and presentation of the Licensed Marks on labels,
packaging, containers and displays, all Licensed Products shipped to Canada
shall bear the following additional legend: "Manufactured under exclusive
license from Fieldcrest Cannon, Inc."
ARTICLE VII
INDEMNIFICATION
7.1 LICENSOR'S INDEMNIFICATION. Licensor shall indemnify, defend and hold
harmless Licensee for all liability and costs (including reasonable attorneys'
fees) of Licensee arising from (i) a claim of mark infringement or mark dilution
related to Licensee's use of the Licensed Marks under this License, (ii) any
breach of any representation or warranty made by Licensor under this License, or
(iii) any failure by Licensor to perform or fulfill any of its covenants or
agreements set forth in this License.
7.2 LICENSEE'S INDEMNIFICATION. Licensee shall indemnify, defend and hold
harmless Licensor for all liability (other than liability for mark infringement
or mark dilution related to Licensee's use of the Licensed Marks under this
License) and costs (including reasonable attorneys' fees) of Licensor arising
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<PAGE>
from (i) a tort claim, if the cause of the liability is the action or
inaction of Licensee, and Licensor's liability arises from Licensee's use of
the Licensed Marks under this License, (ii) any breach of any representation
or warranty made by Licensee under this License, or (iii) any failure by
Licensee to perform or fulfill any of its covenants or agreements set forth
in this License.
7.3 NOTICE OF CLAIMS. If Licensor or Licensee believes that it has
suffered or incurred any liability and cost covered by Section 7.1 or 7.2, as
the case may be ("Covered Liability and Costs"), such party shall notify the
other promptly in writing describing such Covered Liability and Costs, the
amount thereof, if known, and the method of computation of Covered Liability
and Costs, all within reasonable particularity and containing references to
the provisions of this License in respect of which such Covered Liability and
Costs occurred. If any action at law or suit in equity is instituted by any
third party with respect to which either party hereto intends to make a claim
for liability or cost as Covered Liability and Costs under this Article, such
party shall promptly notify the indemnifying party of such action or suit.
7.4 THIRD-PARTY ACTIONS. In connection with any third-party action in
which an indemnified party hereunder seeks indemnity for any Covered
Liability and Costs, the indemnifying party shall have the right to conduct
and control, through counsel of its own choosing, any such third-party claim,
action or suit, but the indemnified party may, at its election, participate
in the defense of any such claim, action or suit at its sole cost and
expense; PROVIDED, HOWEVER, that if the indemnifying party shall fail to
defend any such third-party claim, action or suit, then the indemnified party
may defend, through counsel of its own choosing, such claim, action or suit
and (so long as it gives the indemnifying party at least 15 days written
notice of the terms of the proposed settlement thereof and permits the
indemnifying party then to undertake the defense thereof) to settle such
claim, action or suit, and to recover from the indemnifying party the amount
of such settlement or of any judgment and the costs and expenses of such
defense, including reasonable attorneys' fees.
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1 TERMINATION BY LICENSOR.
(a) Licensor may terminate this License in accordance with the
next following sentence if Licensee fails to make any required royalty
payments or deliver any required royalty statements. In the event Licensee
does not cure such failure within 15 calendar days after receipt from
Licensor of a written notice indicating Licensor's intention to terminate
this License pursuant to this Section 8.1, then Licensor may terminate this
License not earlier than 60 calendar days following the expiration of such
15-day period by giving Licensor written notice of such termination.
(b) In addition, Licensor may terminate this License by giving
Licensee written notice if either of the following events occurs: (i) a
majority of the issued and outstanding voting stock of Licensee is acquired
by a Competitor of Licensor or by an Affiliate of a Competitor of Licensor or
(ii) Licensee merges with or consolidates with a Competitor of Licensor or an
Affiliate of a Competitor of Licensor, and a majority of the board of
directors of the surviving corporation in such merger or consolidation does
not consist of persons designated by Licensee. For purposes of this Section
8.1(b), a "Competitor of Licensor" shall be defined as any person,
corporation or entity that manufactures and sells products of a type that are
also manufactured and sold by Licensor (such types of products being referred
to herein as the "Overlapping Products"), but only if (A) the Overlapping
Products are directly competitive and (B) the revenues derived from the sale
of Overlapping Products by each of such person, corporation or entity, on the
one hand, and Licensor, on the other hand, exceeded 15% of its total revenues
for its most recently completed fiscal year. For purposes of this Section
8.1(b), the term "Affiliate" shall have the meaning ascribed such term in
Rule 405 promulgated under the Securities Act of 1933, as amended.
8.2 TERMINATION BY EITHER PARTY. Either party may terminate this
License by giving the other party written notice if the non-terminating party
fails to comply in any material respect with any provision of this License
(other than a royalty obligation by Licensee). In the event any such written
notice is given, this License shall terminate 90 calendar days after the
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<PAGE>
receipt thereof by the non-terminating party unless the non-terminating party
cures the failure within such 90-day period.
8.3 TERMINATION IN LICENSOR'S BANKRUPTCY. The parties acknowledge the
substantial length of the term of this License and anticipate that, during
such term, Licensee will invest in and develop a substantial business in
Licensed Products that depends upon this License. The parties anticipate
that the termination of this License, except as provided for in Sections 8.1
and 8.2 of this License, would cause material damage to Licensee and its
business that is impossible to quantify. The parties therefore agree that,
in the event of a proceeding under Title 11, United States Code, in which the
Licensor is the debtor, the parties intend that the provisions of section
365(n) of the Bankruptcy Code, 11 U.S.C. Section 365(n), shall apply to this
License and hereby consent to such application.
8.4 EFFECT OF TERMINATION AND DISPOSAL OF INVENTORY. The termination
of this License shall not affect any payment or performance obligation
accruing or arising prior to such termination, including without limitation
any royalty payment obligation. Upon the termination of this License, (i)
the license and all other rights granted to Licensee hereunder shall
immediately cease and terminate, (ii) Licensee shall thereafter discontinue
all use of the Licensed Marks and all content specifications or other
manufacturing information provided by Licensor hereunder and shall no longer
have the right to use the Licensed Marks, or any variation or simulation
thereof or any mark or designs confusingly similar thereto, whether for
advertising, promotion or otherwise, or any content specifications or other
manufacturing information provided by Licensor hereunder, and (iii) any and
all rights granted to Licensee by this License shall thereupon revert to
Licensor. Notwithstanding the preceding sentence, upon the termination for
any reason of this License, Licensee shall have the right to dispose of all
Licensed Products which are on hand, in the process of manufacture or for
which specially manufactured raw materials have been purchased. Licensee
shall pay to Licensor a royalty on the sale of such Licensed Products at the
rate applicable at the time of termination and under the terms and conditions
of this License, and the provisions of Sections 2.3, 4.5, 4.6, 5.4, 5.5, 6.4
and 6.5 shall continue to apply with respect to the sale of such Licensed
Products.
8.5 ASSIGNMENT. Neither this License nor any of the rights or
obligations hereunder may be assigned by either party hereto
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<PAGE>
without the prior written consent of the other party hereto; except, that
Licensee may, without such consent, assign all such rights and obligations to
a direct or indirect wholly-owned subsidiary or subsidiaries of Licensee or
to a successor to the business of Licensee which shall assume all obligations
and liabilities hereunder, but without releasing Licensee with respect to any
such obligations or liabilities except with the prior written consent of
Licensor in its sole discretion. Subject to the foregoing, this License
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, and no other person shall have any
right, benefit or obligation hereunder.
8.6 NOTICES. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by either party hereto to
the other shall be in writing and shall be deemed to have been duly given
when delivered in person or when dispatched by electronic facsimile transfer
(confirmed in writing by mail simultaneously dispatched) or one business day
after having been dispatched by a nationally recognized overnight courier
service to the appropriate party at the address specified below:
If to Licensor, addressed to:
Fieldcrest Cannon, Inc.
One Lake Drive
Kannapolis, North Carolina 28081
Facsimile No: (704) 939-4031
Attention: Kevin M. Finlay
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<PAGE>
With a copy to:
Fieldcrest Cannon, Inc.
326 East Stadium Drive
Eden, North Carolina 27288
Facsimile No: (910) 627-3109
Attention: M. Kenneth Doss
General Counsel
If to Licensee, addressed to:
Pillowtex Corporation
4111 Mint Way
Dallas, Texas 75237
Facsimile No: (214) 330-6016
Attention: Charles M. Hansen, Jr.
Chairman and Chief Executive Officer
With a copy to:
Pillowtex Corporation
4111 Mint Way
Dallas, Texas 75237
Facsimile No: (214) 339-8565
Attention: Jeffrey D. Cordes
Executive Vice President and
Chief Financial Officer
or to such other address and with such other copies as either party may
designate as to itself by like notice to the other.
8.7 CHOICE OF LAW. This License shall be construed and interpreted, and
the rights of the parties determined, in accordance with the laws of the State
of North Carolina (without reference to the choice of law provisions thereof).
Any case, claim or action arising under or with respect to this License or
respecting the construction or enforcement thereof shall be brought only in the
Superior Court sitting in Rockingham County, North Carolina, or in the Federal
District Court for the Middle District of North Carolina. Each of the parties
expressly consents to the personal jurisdiction and venue of such courts.
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<PAGE>
8.8 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS.
(a) This License, together with the schedule hereto, constitutes the
entire agreement by and between the parties hereto pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of such parties, including without
limitation that certain letter of intent dated September 4, 1996, by and between
the parties. Without limiting the generality or effect of the foregoing, this
License supersedes all trademark license agreements between the parties in
effect as of the date of this License (the "Prior Licenses"), which are hereby
terminated, and the parties shall have no further rights or obligations under
the Prior License as of the date of this License.
(b) No amendment, supplement or modification of this License or any
provision hereof shall be binding unless executed in writing by both parties.
No waiver of any provision of this License shall be binding unless evidenced by
a writing signed by the party waiving compliance with such provision. No waiver
of any of the provisions of this License shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall any
such waiver constitute a continuing waiver unless otherwise expressly provided.
8.9 EXPENSES. Except as otherwise specified herein, each party hereto
shall pay its own legal, accounting and other out-of-pocket expenses incident to
this License and to any action taken by such party in preparation for carrying
this License into effect.
8.10 SEVERABILITY. If any term or other provision of this License is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this License shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to either party hereto.
8.11 REMEDIES. No remedy conferred by any of the specific provisions of
this License is intended to be exclusive of any other remedy, and each remedy
shall be cumulative and shall be in addition to every other remedy provided for
hereunder or existing from time to time at law or in equity or by statute or
otherwise.
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<PAGE>
The election of any one or more remedies shall not constitute a waiver of the
right to pursue other available remedies.
8.12 FURTHER ASSURANCES. From time to time, as and when requested by
either party hereto, the other party hereto shall execute and deliver, or cause
to be executed and delivered, all such documents and instruments as may be
reasonably necessary to consummate the transactions contemplated by this License
and to fully effectuate the purposes and intent hereof.
8.13 TITLES. The titles, captions or headings of the Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this License.
8.14 CONFIDENTIAL INFORMATION. Each party hereto acknowledges that, in the
performance of obligations under this License, it will have access to
confidential information relating to the other party. Except as otherwise
expressly provided herein or as required by law, each party shall treat such
information as confidential, shall preserve the confidentiality thereof and
shall not duplicate or disclose such information, except to advisors,
consultants and affiliates who also agree to treat such information as
confidential. Notwithstanding the preceding sentence, neither party (nor their
advisors, consultants or affiliates) shall be obligated to keep confidential any
information which:
(a) is known to it (as evidenced by its written records) prior to the
receipt thereof from the other,
(b) is disclosed to it by a third party without any knowledge of the
recipient party of the existence of any obligation of the third party not
to disclose such information; or
(c) without any fault on the recipient's party's part, is in the public
domain or becomes generally known.
8.15 MULTIPLE COUNTERPARTS. This License may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.16 SURVIVAL OF CERTAIN PROVISIONS. The provisions of the last sentence
of Section 4.3(b), the second sentence of Section
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4.5 and the second and third sentences of Section 4.6, and the provisions of
Sections 7.1 through 7.4 (inclusive), 8.4 and 8.14, shall survive any
termination of this License.
8.17 INSURANCE. Throughout the term of this License, Licensee shall
maintain a public liability insurance policy including products liability
coverage with respect to the Licensed Products and contractual liability
coverage relating to this License. Such insurance shall have policy limits of
no less than $10,000,000. Such policy shall name Licensor as an additional
insured and loss payee, and shall include a provision requiring the carrier to
notify Licensor in writing at least 30 calendar days prior to any cancellation,
termination or modification of such insurance coverage. Within 10 days
following the date hereof and upon any subsequent request by Licensor, Licensee
will deliver to Licensor a certificate of insurance verifying the foregoing
insurance coverage.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this License to be duly
executed on their respective behalf, by their respective officers thereunto duly
authorized, in multiple originals, all as of the day and year first above
written.
FIELDCREST CANNON, INC.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
ATTEST:
- ---------------------------------
Secretary
PILLOWTEX CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
ATTEST:
- ---------------------------------
Secretary
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<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12.1
<TABLE>
YEARS ENDED
-----------------------------------------------------------------------
PRO FORMA
12/31/91 12/31/92 12/31/93 12/31/94 12/30/95 12/30/95 9/30/95
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Earnings before income taxes $ 13,830 11,429 21,200 12,425 18,978 16,240 11,666
Fixed charges from below 5,878 5,624 3,666 7,004 19,055 21,860 14,137
-------- ------ ------ ------ ------ ------ ------
Earnings as adjusted(A) 19,708 17,053 24,866 19,429 38,033 38,100 25,803
-------- ------ ------ ------ ------ ------ ------
-------- ------ ------ ------ ------ ------ ------
FIXED CHARGES:
Interest expense $ 5,283 4,997 3,042 6,361 17,491 19,936 12,964
Amortization of debt issuance costs - - - - 544 904 408
Interest component of rent expense (Note) 595 627 624 643 1,020 1,020 765
-------- ------ ------ ------ ------ ------ ------
Fixed charges as adjusted(B) $ 5,878 5,624 3,666 7,004 19,055 21,860 14,137
-------- ------ ------ ------ ------ ------ ------
-------- ------ ------ ------ ------ ------ ------
Ratio of earnings to fixed charges (A) divided by (B) $ 3.35 3.03 6.78 2.77 2.00 1.74 1.83
-------- ------ ------ ------ ------ ------ ------
-------- ------ ------ ------ ------ ------ ------
NINE MONTHS ENDED
-----------------------------
PRO FORMA PRO FORMA
9/30/95 9/28/96 9/28/96
-----------------------------
<S> <C> <C> <C>
EARNINGS:
Earnings before income taxes $ 9,282 14,049 10,224
Fixed charges from below 16,553 11,986 15,857
Earnings as adjusted(A) 25,835 26,035 26,081
-------- ------ ------
-------- ------ ------
FIXED CHARGES:
Interest expense 15,110 10,279 13,879
Amortization of debt issuance costs 678 408 678
Interest component of rent expense (Note) 765 1,300 1,300
-------- ------ ------
Fixed charges as adjusted(B) 16,553 11,986 15,857
-------- ------ ------
-------- ------ ------
Ratio of earnings to fixed charges (A) divided by (B) 1.56 2.17 1.64
-------- ------ ------
-------- ------ ------
</TABLE>
Note: Approximately one-third of rent expense which management believes
is representative of the interest component.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS AND REPORT
ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors and Shareholders
Pillowtex Corporation:
The audits referred to in our report dated February 6, 1996, included the
related financial statement schedule as of December 30, 1995, and for each of
the years in the three-year period ended Decmeber 30, 1995, included in the
registration statement. This financial statement schedule is the
responsiblity of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, represents
fairly in all material respects the information set forth therein.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG Peat Marwick LLP
Dallas, Texas
December 12, 1996
<PAGE>
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, COLUMBUS, N.A.
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code) executive offices)
Ted Kravits
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-2566
(Name, address and telephone number of agent for service)
PILLOWTEX CORPORATION
(Exact name of obligor as specified in its charter)
Texas 75-2147728
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
4111 Mint Way
Dallas, Texas 75237
(Address of principal executive (Zip Code)
offices)
PILLOWTEX CORPORATION 10% SENIOR SUBORDINATED NOTES DUE 2006
(Title of the Indenture securities)
<PAGE>
GENERAL
1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee.
16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY
AND QUALIFICATION. (EXHIBITS IDENTIFIED IN PARENTHESES, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS EXHIBITS HERETO.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3 relating
to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities
and Exchange Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
<PAGE>
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on
September 30, 1996, published pursuant to the requirements of the Comptroller of
the Company.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, Columbus, NA, a national banking association
organized under the National Banking Act, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in Columbus, Ohio, on December 10, 1996.
Bank One, Columbus, NA
By: /s/ Ted Kravits
------------------------------
Ted Kravits
Authorized Signer
<PAGE>
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business of
banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS, NATIONAL
ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus, County of
Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined from
time-to-time by resolution of the shareholders at any annual or special meeting
thereof, provided, however, that the Board of Directors, by resolution of a
majority thereof, shall be authorized to increase the number of its members by
not more than two between regular meetings of the shareholders. Each Director,
during the full term of his directorship, shall own, as qualifying shares, the
minimum number of shares of either this Association or of its parent bank
holding company in accordance with the provisions of applicable law. Unless
otherwise provided by the laws of the United States, any vacancy in the Board of
Directors for any reason, including an increase in the number thereof, may be
filled by action of the Board of Directors.
<PAGE>
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year specified
therefor in the By-Laws, but if no election is held on that day, it may be held
on any subsequent business day according to the provisions of law; and all
elections shall be held according to such lawful regulations as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall be
2,073,750 shares of common stock of the par value of Ten Dollars ($10) each; but
said capital stock may be increased or decreased from time-to-time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription to
any share of any class of stock of this Association, whether now or hereafter
authorized or to any obligations convertible into stock of this Association,
issued or sold, nor any right of subscription to any thereof other than such, if
any, as the Board of Directors, in its discretion, may from time-to-time
determine and at such price as the Board of Directors may from time-to-time fix.
This Association, at any time and from time-to-time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of
the shareholders.
SIXTH. The Board of Directors shall appoint one of its members President
of the Association, who shall be Chairman of the Board, unless the Board
appoints another director to be the Chairman. The Board of Directors shall have
the power to appoint one or more Vice Presidents and to appoint a Secretary and
such other officers and employees as may be required to transact the business of
this Association.
-5-
<PAGE>
The Board of Directors shall have the power to define the duties of
the officers and employees of this Association; to fix the salaries to be paid
to them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of this
Association shall be made; to manage and administer the business and affairs of
this Association; to make all By-Laws that it may be lawful for them to make;
and generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Columbus, Ohio, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this Association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place and purpose of every annual and special meeting of the shareholders
shall be given by first-class mail, postage prepaid, mailed at least ten days
prior to the date of such meeting to each shareholder of record at his address
as shown upon the books of this Association.
-6-
<PAGE>
TENTH. Every person who is or was a Director, officer or employee of the
Association or of any other corporation which he served as a Director, officer
or employee at the request of the Association as part of his regularly assigned
duties may be indemnified by the Association in accordance with the provisions
of this paragraph against all liability (including, without limitation,
judgments, fines, penalties and settlements) and all reasonable expenses
(including, without limitation, attorneys' fees and investigative expenses) that
may be incurred or paid by him in connection with any claim, action, suit or
proceeding, whether civil, criminal or administrative (all referred to hereafter
in this paragraphs as "Claims") or in connection with any appeal relating
thereto in which he may become involved as a party or otherwise or with which he
may be threatened by reason of his being or having been a Director, officer or
employee of the Association or such other corporation, or by reason of any
action taken or omitted by him in his capacity as such Director, officer or
employee, whether or not he continues to be such at the time such liability or
expenses are incurred, provided that nothing contained in this paragraph shall
be construed to permit indemnification of any such person who is adjudged guilty
of, or liable for, willful misconduct, gross neglect of duty or criminal acts,
unless, at the time such indemnification is sought, such indemnification in such
instance is permissible under applicable law and regulations, including
published rulings of the Comptroller of the Currency or other appropriate
supervisory or regulatory authority, and provided further that there shall be no
indemnification of directors, officers, or employees against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by an appropriate regulatory agency which proceeding or action
results in a final order assessing civil money penalties or requiring
affirmative action by an individual or individuals in the form of payments to
the Association. Every person who may be indemnified under the provisions of
this paragraph and who has been wholly successful on the merits with respect to
any Claim shall be entitled to indemnification as of right. Except as provided
in the preceding sentence, any indemnification under this paragraph shall be at
the sole discretion of the Board of Directors and shall be made only if the
Board of Directors or the Executive Committee acting by a quorum consisting of
-7-
<PAGE>
Directors who are not parties to such Claim shall find or if independent legal
counsel (who may be the regular counsel of the Association) selected by the
Board of Directors or Executive Committee whether or not a disinterested quorum
exists shall render their opinion that in view of all of the circumstances then
surrounding the Claim, such indemnification is equitable and in the best
interests of the Association. Among the circumstances to be taken into
consideration in arriving at such a finding or opinion is the existence or non-
existence of a contract of insurance or indemnity under which the Association
would be wholly or partially reimbursed for such indemnification, but the
existence or non-existence of such insurance is not the sole circumstance to be
considered nor shall it be wholly determinative of whether such indemnification
shall be made. In addition to such finding or opinion, no indemnification under
this paragraph shall be made unless the Board of Directors or the Executive
Committee acting by a quorum consisting of Directors who are not parties to such
Claim shall find or if independent legal counsel (who may be the regular counsel
of the Association) selected by the Board of Directors or Executive Committee
whether or not a disinterested quorum exists shall render their opinion that the
Director, officer or employee acted in good faith in what he reasonably believed
to be the best interests of the Association or such other corporation and
further in the case of any criminal action or proceeding, that the Director,
officer or employee reasonably believed his conduct to be lawful. Determination
of any Claim by judgment adverse to a Director, officer or employee by
settlement with or without Court approval or conviction upon a plea of guilty or
of NOLOCONTENDERE or its equivalent shall not create a presumption that a
Director, officer or employee failed to meet the standards of conduct set forth
in this paragraph. Expenses incurred with respect to any Claim may be advanced
by the Association prior to the final disposition thereof upon receipt of an
undertaking satisfactory to the Association by or on behalf of the recipient to
repay such amount unless it is ultimately determined that he is entitled to
indemnification under this paragraph. The rights of indemnification provided in
this paragraph shall be in addition to any rights to which any Director, officer
or employee may otherwise be entitled by contract or as a matter of law.
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Every person who shall act as a Director, officer or employee of this
Association shall be conclusively presumed to be doing so in reliance upon the
right of indemnification provided for in this paragraph.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
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Exhibit 4
BY-LAWS
OF
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders
of the Bank for the election of Directors and for the transaction of such
business as may properly come before the meeting shall be held at its main
banking house, or other convenient place duly authorized by the Board of
Directors, on the third Monday of January of each year, or on the next
succeeding banking day, if the day fixed falls on a legal holiday. If from any
cause, an election of directors is not made on the day fixed for the regular
meeting of shareholders or, in the event of a legal holiday, on the next
succeeding banking day, the Board of Directors shall order the election to be
held on some subsequent day, as soon thereafter as practicable, according to the
provisions of law; and notice thereof shall be given in the manner herein
provided for the annual meeting. Notice of such annual meeting shall be given
by or under the direction of the Secretary or such other officer as may be
designated by the Chief Executive Officer by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as shown
upon the books of the Bank mailed not less than ten days prior to the date fixed
for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this
Bank may be called at any time by the Board of Directors or by any three or more
shareholders owning, in the aggregate, not less than ten percent of the stock of
this Bank. The notice of any special meeting of the shareholders called by the
Board of Directors, stating the time, place and purpose of the meeting, shall be
given by or under the direction of the Secretary, or such other officer as is
designated by the Chief Executive Officer, by first-class mail, postage prepaid,
to all shareholders of
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record of the Bank at their respective addresses as shown upon the books of the
Bank, mailed not less than ten days prior to the date fixed for such meeting.
Any special meeting of shareholders shall be conducted and its proceedings
recorded in the manner prescribed in these By-Laws for annual meetings of
shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may
designate a person to be the Secretary of the meetings of shareholders. In the
absence of a presiding officer, as designated in these By-Laws, the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a Secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as Secretary
of the meeting.
The Secretary of the meetings of shareholders shall cause the returns made
by the judges and election and other proceedings to be recorded in the minute
book of the Bank. The presiding officer shall notify the directors-elect of
their election and to meet forthwith for the organization of the new board.
The minutes of the meeting shall be signed by the presiding officer and the
Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many
as three shareholders to be judges of the election, who shall hold and conduct
the same, and who shall, after the election has been held, notify, in writing
over their signatures, the secretary of the shareholders' meeting of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their proxies to fill the vacancies. The judges of election at
the request of the chairman of the
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meeting, shall act as tellers of any other vote by ballot taken at such meeting,
and shall notify, in writing over their signatures, the secretary of the Board
of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall have
the right to vote the number of shares of record in his name for as many persons
as there are Directors to be elected, or to cumulate such shares as provided by
Federal Law. In deciding all other questions at meetings of shareholders, each
shareholder shall be entitled to one vote on each share of stock of record in
his name. Shareholders may vote by proxy duly authorized in writing. All
proxies used at the annual meeting shall be secured for that meeting only, or
any adjournment thereof, and shall be dated, and if not dated by the
shareholder, shall be dated as of the date of receipt thereof. No officer or
employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and constituting less
than a quorum may, without further notice, adjourn the meeting from time to
time until a quorum is obtained. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
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ARTICLE II
DIRECTORS
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION
and shall be employed either in the position of Chief Executive Officer or
active leadership within his or her business, professional or community
interest which shall be located within the geographic area in which the Bank
operates, or as an executive officer of the Bank. A director shall not be
eligible for nomination and re-election as a director of the Bank if such
person's executive or leadership position within his or her business,
professional or community interests which qualifies such person as a director
of Bank terminates. The age of 70 is the mandatory retirement age as a
director of the Bank. When a person's eligibility as director of the Bank
terminates, whether because of change in share ownership, position, residency
or age, within 30 days after such termination, such person shall submit his
resignation as a director to be effective at the pleasure of the Board
provided, however, that in no event shall such person be nominated or elected
as a director. Provided, however, following a person's retirement or
resignation as a director because of the age limitations herein set forth
with respect to election or re-election as a director, such person may, in
special or unusual circumstances, and at the discretion of the Board, be
elected by the directors as a Director Emeritus of the Bank for a limited
period of time. A Director Emeritus shall have the right to participate in
board meetings but shall be without the power to vote and shall be subject to
re-election by the Board at its organizational meeting following the Bank's
annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
prescribed by law. No person elected a director may exercise any of the
powers of his office until he has taken the oath of such office.
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SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until
the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to his prior
death, resignation, or removal from office. Whenever any vacancy shall occur
among the directors, the remaining directors shall constitute the directors
of the Bank until such vacancy is filled by the remaining directors, and any
director so appointed shall hold office for the unexpired term of his or her
successor. Notwithstanding the foregoing, each director shall hold office and
serve at the pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the
shareholders shall meet for organization of the new board at the time fixed
by the presiding officer of the annual meeting. If at the time fixed for
such meeting there is no quorum present, the Directors in attendance may
adjourn from time to time until a quorum is obtained. A majority of the
number of Directors elected by the shareholders shall constitute a quorum for
the transaction of business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of
Directors shall be held on the third Monday of each calendar month excluding
March and July, which meeting will be held at 4:00 p.m. When any regular
meeting of the Board falls on a holiday, the meeting shall be held on such
other day as the Board may previously designate or should the Board fail to
so designate, on such day as the Chairman of the Board of President may fix.
Whenever a quorum is not present, the directors in attendance shall adjourn
the meeting to a time not later than the date fixed by the Bylaws for the
next succeeding regular meeting of the Board.
Section 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held at the call of the Chairman of the Board or President, or at
the request of two or more Directors. Any special meeting may be held at
such place in Franklin County, Ohio, and at such time as may be fixed in the
call. Written or oral notice shall be given to each Director not later than
the day next preceding the day on which special meeting is to be held, which
notice may be waived in writing.
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The presence of a Director at any meeting of the Board shall be deemed a
waiver of notice thereof by him. Whenever a quorum is not present the
Directors in attendance shall adjourn the special meeting from day to day
until a quorum is obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a lesser number
may adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as
herein defined, but at least one-third and not less than two of the
authorized number of Directors are present at a meeting of the Directors,
business of the Bank may be transacted and matters before the Board approved
or disapproved by the unanimous vote of the Directors present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
receive such fees for, and transportation expenses incident to, attendance at
Board and Board Committee Meetings and such fees for service as a Director
irrespective of meeting attendance as from time to time are fixed by
resolution of the Board; provided, however, that payment hereunder shall not
be made to a Director for meetings attended and/or Board service which are
not for the Bank's sole benefit and which are concurrent and duplicative with
meetings attended or board service for an affiliate of the Bank for which the
Director receives payment; and provided further, that payment hereunder shall
not be made in the case of any Director in the regular employment of the Bank
or of one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of
the Board of Directors known as the Executive Committee which shall possess
and exercise, when the Board is not in session, all powers of the Board that
may lawfully be delegated. The Executive Committee shall also exercise the
powers of the Board of Directors in accordance with the Provisions of the
"Employees Retirement Plan" and the "Agreement and Declaration of Trust" as
the same now
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exist or may be amended hereafter. The Executive Committee shall consist of
not fewer than four board members, including the Chairman of the Board and
President of the Bank, one of whom, as hereinafter required by these By-laws,
shall be the Chief Executive Officer. The other members of the Committee
shall be appointed by the Chairman of the Board or by the President, with the
approval of the Board and shall continue as members of the Executive
Committee until their successors are appointed, provided, however, that any
member of the Executive Committee may be removed by the Board upon a majority
vote thereof at any regular or special meeting of the Board. The Chairman or
President shall fill any vacancy in the Committee by the appointment of
another Director, subject to the approval of the Board of Directors. The
regular meetings of the Executive Committee shall be held on a regular basis
as scheduled by the Board of Directors. Special meetings of the Executive
Committee shall be held at the call of the Chairman or President or any two
members thereof at such time or times as may be designated. In the event of
the absence of any member or members of the Committee, the presiding member
may appoint a member or members of the Board to fill the place or places of
such absent member or members to serve during such absence. Not fewer than
three members of the Committee must be present at any meeting of the
Executive Committee to constitute a quorum, provided, however that with
regard to any matters on which the Executive Committee shall vote, a majority
of the Committee members present at the meeting at which a vote is to be
taken shall not be officers of the Bank and, provided further, that if, at
any meeting at which the Chairman of the Board and President are both
present, Committee members who are not officers are not in the majority, then
the Chairman of the Board or President, which ever of such officers is not
also the Chief Executive Officer, shall not be eligible to vote at such
meeting and shall not be recognized for purposes of determining if a quorum
is present at such meeting. When neither the Chairman of the Board nor
President are present, the Committee shall appoint a presiding officer. The
Executive Committee shall keep a record of its proceedings and report its
proceedings and the action taken by it to the Board of Directors.
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SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE.
There shall be a standing committee of the Board of Directors known as the
Community Reinvestment Act and Compliance Policy Committee the duties of
which shall be, at least once in each calendar year, to review, develop and
recommend policies and programs related to the Bank's Community Reinvestment
Act Compliance and regulatory compliance with all existing statutes, rules
and regulations affecting the Bank under state and federal law. Such
Committee shall provide and promptly make a full report of such review of
current Bank policies with regard to Community Reinvestment Act and
regulatory compliance in writing to the Board, with recommendations, if any,
which may be necessary to correct any unsatisfactory conditions. Such
Committee may, in its discretion, in fulfilling its duties, utilize the
Community Reinvestment Act officers of the Bank, Banc One Ohio Corporation
and Banc One Corporation and may engage outside Community Reinvestment Act
experts, as approved by the Board, to review, develop and recommend policies
and programs as herein required. The Community Reinvestment Act and
regulatory compliance policies and procedures established and the
recommendations made shall be consistent with, and shall supplement, the
Community Reinvestment Act and regulatory compliance programs, policies and
procedures of Banc One Corporation and Banc One Ohio Corporation. The
Community Reinvestment Act and Compliance Policy Committee shall consist of
not fewer than four board members, one of whom shall be the Chief Executive
Officer and a majority of whom are not officers of the Bank. Not fewer than
three members of the Committee, a majority of whom are not officers of the
Bank, must be present to constitute a quorum. The Chairman of the Board or
President of the Bank, whichever is not the Chief Executive Officer, shall be
an ex officio member of the Community Reinvestment Act and Compliance Policy
Committee. The Community Reinvestment Act and Compliance Policy Committee,
whose chairman shall be appointed by the Board, shall keep a record of its
proceedings and report its proceedings and the action taken by it to the
Board of Directors.
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SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees
known as the Trust Management Committee and the Trust Examination Committee
appointed as hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
special committees from time to time as are in its judgment necessary in the
interest of the Bank.
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ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a) The officers of the Bank shall include a President, Secretary and
Security Officer and may include a Chairman of the Board, one or more
Vice Chairmen, one or more Vice Presidents (which may include one or
more Executive Vice Presidents and/or Senior Vice Presidents) and one
or more Assistant Secretaries, all of whom shall be elected by the
Board. All other officers may be elected by the Board or appointed in
writing by the Chief Executive Officer. The salaries of all officers
elected by the Board shall be fixed by the Board. The Board from
time-to-time shall designate the President or Chairman of the Board
to serve as the Bank's Chief Executive Officer.
(b) The Chairman of the Board, if any, and the President shall be
elected by the Board from their own number. The President and
Chairman of the Board shall be re-elected by the Board annually at
the organizational meeting of the Board of Directors following the
Annual Meeting of Shareholders. Such officers as the Board shall
elect from their own number shall hold office from the date of their
election as officers until the organization meeting of the Board of
Directors following the next Annual Meeting of Shareholders,
provided, however, that such officers may be relieved of their
duties at any time by action of the Board in which event all the
powers incident to their office shall immediately terminate.
(c) Except as provided in the case of the elected officers who are
members of the Board, all officers, whether elected or appointed,
shall hold office at the pleasure of the Board. Except as otherwise
limited by law or these By-laws, the Board assigns to Chief
Executive Officer and/or his
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designees the authority to appoint and dismiss any elected or
appointed officer or other member of the Bank's management staff and
other employees of the Bank, as the person in charge of and
responsible for any branch office, department, section, operation,
function, assignment or duty in the Bank.
(d) The management staff of the Bank shall include officers elected
by the Board, officers appointed by the Chief Executive Officer, and
such other persons in the employment of the Bank who, pursuant to
written appointment and authorization by a duly authorized officer
of the Bank, perform management functions and have management
responsibilities. Any two or more offices may be held by the same
person except that no person shall hold the office of Chairman of
the Board and/or President and at the same time also hold the office
of Secretary.
(e) The Chief Executive Officer of the Bank and any other officer
of the Bank, to the extent that such officer is authorized in
writing by the Chief Executive Officer, may appoint persons other
than officers who are in the employment of the Bank to serve in
management positions and in connection therewith, the appointing
officer may assign such title, salary, responsibilities and
functions as are deemed appropriate by him, provided, however, that
nothing contained herein shall be construed as placing any
limitation on the authority of the Chief Executive Officer as
provided in this and other sections of these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Bank shall have general and active management of the business of the Bank and
shall see that all orders and resolutions of the Board of Directors are
carried into effect. Except as otherwise prescribed or limited by these
By-Laws, the Chief Executive Officer shall have full right, authority and
power to control all personnel, including elected and appointed officers, of
the Bank, to employ or direct the
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employment of such personnel and officers as he may deem necessary, including
the fixing of salaries and the dismissal of them at pleasure, and to define
and prescribe the duties and responsibility of all Officers of the Bank,
subject to such further limitations and directions as he may from
time-to-time deem proper. The Chief Executive Officer shall perform all
duties incident to his office and such other and further duties, as may, from
time-to-time, be required of him by the Board of Directors or the
shareholders. The specification of authority in these By-Laws wherever and
to whomever granted shall not be construed to limit in any manner the general
powers of delegation granted to the Chief Executive Officer in conducting the
business of the Bank. The Chief Executive Officer or, in his absence, the
Chairman of the Board or President of the Bank, as designated by the Chief
Executive Officer, shall preside at all meetings of shareholders and meetings
of the Board. In the absence of the Chief Executive Officer, such officer as
is designated by the Chief Executive Officer shall be vested with all the
powers and perform all the duties of the Chief Executive Officer as defined
by these By-Laws. When designating an officer to serve in his absence, the
Chief Executive Officer shall select an officer who is a member of the Board
of Directors whenever such officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for
an on behalf of the Bank, and to the extent permitted by law, to make loans
and discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and
attorneys; to sign and give any notice required to be given; to demand
payment and/or to declare due for any default any debt or obligation due or
payable to the Bank upon demand or authorized to be declared due; to
foreclose any mortgages, to exercise any option, privilege or election to
forfeit, terminate, extend or renew any lease; to authorize and direct any
proceedings for the collection of any money or for the enforcement
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of any right or obligation; to adjust, settle and compromise all claims of
every kind and description in favor of or against the Bank, and to give
receipts, releases and discharges therefor; to borrow money and in connection
therewith to make, execute and deliver notes, bonds or other evidences of
indebtedness; to pledge or hypothecate any securities or any stocks, bonds,
notes or any property real or personal held or owned by the Bank, or to
rediscount any notes or other obligations held or owned by the Bank, to
employ or direct the employment of all personnel, including elected and
appointed officers, and the dismissal of them at pleasure, and in furtherance
of and in addition to the powers hereinabove set forth to do all such acts
and to take all such proceedings as in his judgment are necessary and
incidental to the operation of the Bank.
Other persons in the employment of the Bank, including but not limited to
officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control
of the records of the Bank and, subject to the direction of the Chief
Executive Officer, shall undertake other duties and functions usually
performed by a corporate secretary. Other officers may be designated by the
Chief Executive Officer or the Board of Directors as Assistant Secretary to
perform the duties of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer being a member of the Bank's management
staff who is also a person in charge of and responsible for any department
within the Bank and any other officer to the extent such officer is so
designated and authorized by the Chief Executive Officer, the Chairman of the
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Board, the President, or any other officer who is a member of the Bank's
management staff who is in charge of and responsible for any department
within the Bank, are hereby authorized on behalf of the Bank to sell, assign,
lease, mortgage, transfer, deliver and convey any real or personal property
now or hereafter owned by or standing in the name of the Bank or its nominee,
or held by this Bank as collateral security, and to execute and deliver such
deeds, contracts, leases, assignments, bills of sale, transfers or other
papers or documents as may be appropriate in the circumstances; to execute
any loan agreement, security agreement, commitment letters and financing
statements and other documents on behalf of the Bank as a lender; to execute
purchase orders, documents and agreements entered into by the Bank in the
ordinary course of business, relating to purchase, sale, exchange or lease of
services, tangible personal property, materials and equipment for the use of
the Bank; to execute powers of attorney to perform specific or general
functions in the name of or on behalf of the Bank; to execute promissory
notes or other instruments evidencing debt of the Bank; to execute
instruments pledging or releasing securities for public funds, documents
submitting public fund bids on behalf of the Bank and public fund contracts;
to purchase and acquire any real or personal property including loan
portfolios and to execute and deliver such agreements, contracts or other
papers or documents as may be appropriate in the circumstances; to execute
any indemnity and fidelity bonds, proxies or other papers or documents of
like or different character necessary, desirable or incidental to the conduct
of its banking business; to execute and deliver settlement agreements or
other papers or documents as may be appropriate in connection with a
dismissal authorized by Section 3.01(c) of these By-laws; to execute
agreements, instruments, documents, contracts or other papers of like or
difference character necessary, desirable or incidental to the conduct of its
banking business; and to execute and deliver partial releases from and
discharges or assignments of mortgages, financing statements and assignments
or surrender of insurance policies, now or hereafter held by this Bank.
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The Chief Executive Officer, Chairman of the Board, President, any
officer being a member of the Bank's management staff who is also a person in
charge of and responsible for any department within the Bank, and any other
officer of the Bank so designated and authorized by the Chief Executive
Officer, Chairman of the Board, President or any officer who is a member of
the Bank's management staff who is in charge of and responsible for any
department within the Bank are authorized for and on behalf of the Bank to
sign and issue checks, drafts, and certificates of deposit; to sign and
endorse bills of exchange, to sign and countersign foreign and domestic
letters of credit, to receive and receipt for payments of principal,
interest, dividends, rents, fees and payments of every kind and description
paid to the Bank, to sign receipts for property acquired by or entrusted to
the Bank, to guarantee the genuineness of signatures on assignments of
stocks, bonds or other securities, to sign certifications of checks, to
endorse and deliver checks, drafts, warrants, bills, notes, certificates of
deposit and acceptances in all business transactions of the Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management
staff, may be authorized by the Chief Executive Officer, Chairman of the
Board, President or by an officer so designated by the Chief Executive
Officer, Chairman of the Board, or President to perform the acts and to
execute the documents set forth above, subject, however, to such limitations
and conditions as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank
shall be bonded for the honest and faithful performance of their duties for
such amount as may be prescribed by the Board of Directors.
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ARTICLE IV
TRUST DEPARTMENT
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to
this Bank under the provisions of Federal Law and Regulations of the
Comp-troller of the Currency, there shall be maintained a separate Trust
Department of the Bank, which shall be operated in the manner specified
herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing
Committee known as the Trust Management Committee, consisting of at least
five members, a majority of whom shall not be officers of the Bank. The
Committee shall consist of the Chairman of the Board who shall be Chairman of
the Committee, the President, and at least three other Directors appointed
by the Board of Directors and who shall continue as members of the Committee
until their successors are appointed. Any vacancy in the Trust Management
Committee may be filled by the Board at any regular or special meeting. In
the event of the absence of any member or members, such Committee may, in its
discretion, appoint members of the Board to fill the place of such absent
members to serve during such absence. Three members of the Committee shall
constitute a quorum. Any member of the Committee may be removed by the Board
by a majority vote at any regular or special meeting of the Board. The
Committee shall meet at such times as it may determine or at the call of the
Chairman, or President or any two members thereof.
The Trust Management Committee, under the general direction of the Board
of Directors, shall supervise the policy of the Trust Department which shall
be formulated and executed in accordance with Law, Regulations of the Comp-
troller of the Currency, and sound fiduciary principles.
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SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing
Committee known as the Trust Examination Committee, consisting of three
directors appointed by the Board of Directors and who shall continue as
members of the committee until their successors are appointed. Such members
shall not be active officers of the Bank. Two members of the Committee shall
constitute a quorum. Any member of the Committee may be removed by the Board
by a majority vote at any regular or special meeting of the Board. The
Committee shall meet at such times as it may determine or at the call of two
members thereof.
This Committee shall, at least once during each calendar year and within
fifteen months of the last such audit, or at such other time(s) as may be
required by Regulations of the Comptroller of the Currency, make suitable
audits of the Trust Department or cause suitable audits to be made by
auditors responsible only to the Board of Directors, and at such time shall
ascertain whether the Department has been administered in accordance with
Law, Regulations of the Comptroller of the Currency and sound fiduciary
principles.
The Committee shall promptly make a full report of such audits in writing
to the Board of Directors of the Bank, together with a recommendation as to
what action, if any, may be necessary to correct any unsatisfactory
condition. A report of the audits together with the action taken thereon
shall be noted in the Minutes of the Board of Directors and such report shall
be a part of the records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the
management and supervision of an officer of the Bank or of the trust
affiliate of the Bank designated by and subject to the advice and direction
of the Chief Executive Officer. Such officer having supervisory
responsibility over the Trust Department shall do or cause to be done all
things necessary or proper in carrying on the business of the Trust
Department in accordance with provisions of law and applicable regulations.
- 26 -
<PAGE>
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department
may be carried in the name of the Bank in its fiduciary capacity, in the name
of Bank, or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
capacity awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing
a fiduciary relationship and local law. Where such instrument does not
specify the character or class of investments to be made and does not vest in
the Bank any discretion in the matter, funds held pursuant to such instrument
shall be invested in any investment which corporate fiduciaries may invest
under local law.
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint
custody or control of not less than two of the officers or employees of the
Bank or of the trust affiliate of the Bank designated for the purpose by the
Trust Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the Bank as are specifically designated
and authorized by the Chief Executive Officer, the President, or the officer
in charge of the Trust Department, are hereby authorized, on behalf of this
Bank, to sell, assign, lease, mortgage, transfer, deliver and convey any real
property or personal property and to purchase and acquire any real or
personal property and to execute and deliver such agreements, contracts, or
other papers and documents as may be appropriate in the circumstances for
property now or hereafter owned by or standing in the name of this Bank, or
its nominee, in any fiduciary capacity, or in the name of any principal for
whom this Bank may now or hereafter be acting under a power of attorney, or
as agent and to execute and deliver partial releases from
- 27 -
<PAGE>
any discharges or assignments or mortgages and assignments or surrender of
insurance policies, to execute and deliver deeds, contracts, leases,
assignments, bills of sale, transfers or such other papers or documents as
may be appropriate in the circumstances for property now or hereafter held by
this Bank in any fiduciary capacity or owned by any principal for whom this
Bank may now or hereafter be acting under a power of attorney or as agent; to
execute and deliver settlement agreements or other papers or documents as may
be appropriate in connection with a dismissal authorized by Section 3.01(c)
of these By-laws; provided that the signature of any such person shall be
attested in each case by any officer of the Trust Department or by any other
person who is specifically authorized by the Chief Executive Officer, the
President or the officer in charge of the Trust Department.
The Chief Executive Officer, Chairman of the Board, President, any
officer of the Trust Department and such other officers of the trust
affiliate of the Bank as are specifically designated and authorized by the
Chief Executive Officer, the President, or the officer in charge of the Trust
Department, or any other person or corporation as is specifically authorized
by the Chief Executive Officer, the President or the officer in charge of the
Trust Department, are hereby authorized on behalf of this Bank, to sign any
and all pleadings and papers in probate and other court proceedings, to
execute any indemnity and fidelity bonds, trust agreements, proxies or other
papers or documents of like or different character necessary, desirable or
incidental to the appointment of the Bank in any fiduciary capacity and the
conduct of its business in any fiduciary capacity; also to foreclose any
mortgage, to execute and deliver receipts for payments of principal,
interest, dividends, rents, fees and payments of every kind and description
paid to the Bank; to sign receipts for property acquired or entrusted to the
Bank; also to sign stock or bond certificates on behalf of this Bank in any
fiduciary capacity and on behalf of this Bank as transfer agent or registrar;
to guarantee the genuineness of signatures on assignments of stocks, bonds or
other securities, and to authenticate bonds, debentures, land or lease trust
certificates or other forms of security issued pursuant to any indenture
under which this Bank now or hereafter is acting as
- 28 -
<PAGE>
Trustee. Any such person, as well as such other persons as are specifically
authorized by the Chief Executive Officer or the officer in charge of the
Trust Department, may sign checks, drafts and orders for the payment of money
executed by the Trust Department in the course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any
officer of the Trust Department, any officer of the trust affiliate of the
Bank and such other persons as may be specifically authorized by Resolution
of the Trust Management Committee or the Board of Directors, may vote shares
of stock of a corporation of record on the books of the issuing company in
the name of the Bank or in the name of the Bank as fiduciary, or may grant
proxies for the voting of such stock of the granting if same is permitted by
the instrument under which the Bank is acting in a fiduciary capacity, or by
the law applicable to such fiduciary account. In the case of shares of stock
which are held by a nominee of the Bank, such shares may be voted by such
person(s) authorized by such nominee.
- 29 -
<PAGE>
ARTICLE V
STOCKS AND STOCK CERTIFICATES
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
evidenced by certificates which shall bear the signature of the Chairman of
the Board, the President, or a Vice President (which signature may be
engraved, printed or impressed), and shall be signed manually by the
Secretary, or any other officer appointed by the Chief Executive Officer for
that purpose.
In case any such officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as
if such officer had not ceased to be such at the time of its issue. Each
such certificate shall bear the corporate seal of the Bank, shall recite on
its fact that the stock represented thereby is transferable only upon the
books of the Bank properly endorsed and shall recite such other information
as is required by law and deemed appropriate by the Board. The corporate
seal may be facsimile engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank
shall be transferable only upon the stock transfer books of the Bank and
except as hereinafter provided, no transfer shall be made or new certificates
issued except upon the surrender for cancellation of the certificate or
certificates previously issued therefor. In the case of the loss, theft, or
destruction of any certificate, a new certificate may be issued in place of
such certificate upon the furnishing of any affidavit setting forth the
circumstances of such loss, theft, or destruction and indemnity satisfactory
to the Chairman of the Board, the President, or a Vice President. The Board
of Directors, or the Chief Executive Officer, may authorize the issuance of a
new certificate therefor without the furnishing of indemnity. Stock Transfer
Books, in which all transfers of stock shall be recorded, shall be provided.
- 30 -
<PAGE>
The stock transfer books may be closed for a reasonable period and under
such conditions as the Board of Directors may at any time determine for any
meeting of shareholders, the payment of dividends or any other lawful
purpose. In lieu of closing the transfer books, the Board may, in its
discretion, fix a record date and hour constituting a reasonable period prior
to the day designated for the holding of any meeting of the shareholders or
the day appointed for the payment of any dividend or for any other purpose at
the time as of which shareholders entitled to notice of and to vote at any
such meeting or to receive such dividend or to be treated as shareholders for
such other purpose shall be determined, and only shareholders of record at
such time shall be entitled to notice of or to vote at such meeting or to
receive such dividends or to be treated as shareholders for such other
purpose.
- 31 -
<PAGE>
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. SEAL. The impression made below is an impression of the seal
adopted by the Board of Directors of BANK ONE, COLUMBUS, NATIONAL
ASSOCIATION. The Seal may be affixed by any officer of the Bank to any
document executed by an authorized officer on behalf of the Bank, and any
officer may certify any act, proceedings, record, instrument or authority of
the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
Committee, the Bank and each of its Branches shall be open for business on
such days and during such hours as the Chief Executive Officer of the Bank
shall, from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the
Articles of Association, the returns of the judges of elections, the By-Laws
and any amendments thereto, the proceedings of all regular and special
meetings of the shareholders and of the Board of Directors, and reports of
the committees of the Board of Directors shall be recorded in the minute book
of the Bank. The minutes of each such meeting shall be signed by the
presiding Officer and attested by the secretary of the meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of
a majority of the Directors.
- 32 -
<PAGE>
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
The undersigned, designated to act as Trustee under the Indenture for
Pillowtex Corporation described in the attached Statement of Eligibility and
Qualification, does hereby consent that reports of examinations by Federal,
State, Territorial, or District Authorities may be furnished by such
authorities to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the
Trust Indenture Act of 1939, as amended.
Bank One, Columbus, NA
Dated: December 10, 1996 By: /s/ TED KRAVITS
----------------------
Ted Kravits
Authorized Signer
- 33 -
<PAGE>
Exhibit 7
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
- -------------------------------------------------------------------------------
-----
[Logo] Please refer to page i, | 1 |
Table of Contents, for -----
the required disclosure
of estimated burden.
- -------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND
FOREIGN OFFICES -- FFIEC 031
(960930)
REPORT AT THE CLOSE OF BUSINESS SEPTEMBER 30, 1996 ----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- -------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Richard D. Nadler, Controller
---------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ R.D. NADLER
- -----------------------------------------------------
Signature of Officer Authorized to Sign Report
10/29/96
- -----------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it
has been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate
Federal regulatory authority and is true and correct.
/s/ illegible
- -----------------------------------------------------
Director (Trustee)
/s/ illegible
- -----------------------------------------------------
Director (Trustee)
/s/ ALEX SHUMATE
- -----------------------------------------------------
Director (Trustee)
- -------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate
Federal Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the SPECIAL RETURN ADDRESS
ENVELOPE PROVIDED. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the SPECIAL RETURN ADDRESS
ENVELOPE PROVIDED. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
- -------------------------------------------------------------------------------
FDIC Certificate Number |__|__|__|__|__|
(RCRI 9050)
__ __
| |
CALL NO. 197 31 09-30-96
STBK: 39-1580 00088 STCERT: 39-06559
BANK ONE, COLUMBUS, NATIONAL ASSOCIA
100 EAST BROAD STREET
COLUMBUS, OH 43271
|__ __|
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 031
Page i
-----
| 2 |
-----
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI -- Income Statement...................................... RI-1, 2, 3
Schedule RI-A -- Changes in Equity Capital........................... RI-4
Schedule RI-B -- Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease Losses..................... RI-4, 5
Schedule RI-C -- Applicable Income Taxes by Taxing Authority......... RI-5
Schedule RI-D -- Income from International Operations................ RI-6
Schedule RI-E -- Explanations........................................ RI-7, 8
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the
required form, and completing the information collection, but exclude the time
for compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and
Budget, Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
REPORT OF CONDITION
Schedule RC -- Balance Sheet......................................... RC-1, 2
Schedule RC-A -- Cash and Balances Due From Depository Institutions.. RC-3
Schedule RC-B -- Securities.......................................... RC-3, 4, 5
Schedule RC-C -- Loans and Lease Financing Receivables:
Part I. Loans and Leases.......................................... RC-6, 7
Part II. Loans to Small Businesses and Small Farms
(included in the forms for June 30 only)................ RC-7a, 7b
Schedule RC-D -- Trading Assets and Liabilities
(to be completed only by selected banks)........................... RC-8
Schedule RC-E -- Deposit Liabilities............................... RC-9, 10, 11
Schedule RC-F -- Other Assets........................................ RC-11
Schedule RC-G -- Other Liabilities................................... RC-11
Schedule RC-H -- Selected Balance Sheet Items for Domestic Offices... RC-12
Schedule RC-I -- Selected Assets and Liabilities of IBFs............. RC-13
Schedule RC-K -- Quarterly Averages.................................. RC-13
Schedule RC-L -- Off-Balance Sheet Items.......................... RC-14, 15, 16
Schedule RC-M -- Memoranda........................................... RC-17, 18
Schedule RC-N -- Past Due and Nonaccrual Loans, Leases,
and Other Assets................................................... RC-19, 20
Schedule RC-O -- Other Data for Deposit Insurance Assessments........ RC-21, 22
Schedule RC-R -- Regulatory Capital.................................. RC-23, 24
Optional Narrative Statement Concerning the Amounts Reported
in the Reports of Condition and Income............................. RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J -- Repricing Opportunities (sent only to and to be completed
only by savings banks)
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW,
Washington, D.C. 20429, toll free on (800) 688-FDIC(3342), Monday through
Friday between 8:00 a.m. and 5:00 p.m., Eastern time. State member banks
should contact their Federal Reserve District Bank.
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RI-1
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
Consolidated Report of Income
for the period January 1, 1996 - September 30, 1996
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI -- INCOME STATEMENT
<TABLE>
<S> <C> <C> <C>
-----------
I480
------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------
1. Interest income: ////////////////////
a. Interest and fee income on loans: ////////////////////
(1) In domestic offices: ////////////////////
(a) Loans secured by real estate........................... 4011 91,724 1.a (1) (a)
(b) Loans to depository institutions....................... 4019 26 1.a (1) (b)
(c) Loans to finance agricultural production and ////////////////////
other loans to farmers................................. 4024 633 1.a (1) (c)
(d) Commercial and industrial loans........................ 4012 53,366 1.a (1) (d)
(e) Acceptances of other banks............................. 4026 0 1.a (1) (e)
(f) Loans to individuals for household, family, and ////////////////////
other personal expenditures: ////////////////////
(1) Credit cards and related plans..................... 4054 305,745 1.a. (1) (f) (1)
(2) Other.............................................. 4055 68,770 1.a. (1) (f) (2)
(g) Loans to foreign governments and official ////////////////////
institutions........................................... 4056 1 1.a. (1) (g)
(h) Obligations (other than securities and leases) ////////////////////
of states and political subdivisions in the U.S.: ////////////////////
(1) Taxable obligations................................ 4503 117 1.a. (1) (h) (1)
(2) Tax-exempt obligations............................. 4504 868 1.a. (1) (h) (2)
(i) All other loans in domestic offices.................... 4058 6,395 1.a. (1) (i)
(2) In foreign offices, Edge and Agreement subsidiaries, ////////////////////
and IBFs................................................... 4059 0 1.a. (2)
b. Income from lease financing receivables: ////////////////////
(1) Taxable leases............................................. 4505 48,753 1.b. (1)
(2) Tax-exempt leases.......................................... 4307 79 1.b. (2)
c. Interest income on balances due from depository ////////////////////
institutions: (1) ////////////////////
(1) In domestic offices........................................ 4105 0 1.c. (1)
(2) In foreign offices, Edge and Agreement subsidiaries, ////////////////////
and IBFs................................................... 4106 0 1.c. (2)
d. Interest and dividend income on securities: ////////////////////
(1) U.S. Treasury securities and U.S. Government agency ////////////////////
and corporation obligations................................ 4027 14,883 1.d. (1)
(2) Securities issued by states and political subdivisions ////////////////////
in the U.S.: ////////////////////
(a) Taxable securities..................................... 4506 0 1.d. (2) (a)
(b) Tax-exempt securities.................................. 4507 2,135 1.d. (2) (b)
(3) Other domestic debt securities............................. 3657 527 1.d. (3)
(4) Foreign debt securities.................................... 3658 161 1.d. (4)
(5) Equity securities (including investments in mutual funds).. 3659 172 1.d. (5)
e. Interest income from trading assets............................ 4069 0 1.e.
------------------------
</TABLE>
- ----------------
(1) Includes interest on time certificates of deposit not held for trading.
3
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-2
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 0 6 5 5 9
SCHEDULE RI--CONTINUED
--------------
Dollar Amounts in Thousands Year-to-date
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interest income (continued) RIAD Bil Mil Thou
f. Interest income on federal funds sold and securities purchased under //////////////////
agreements to resell in domestic offices of the bank and of its Edge //////////////////
and Agreement subsidiaries, and in IBFs ............................. 4020 10,402 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ 4107 604,757 1.g.
2. Interest expense: //////////////////
a. Interest on deposits: //////////////////
(1) Interest on deposits in domestic offices: //////////////////
(a) Transaction accounts (NOW accounts, ATS accounts, and
telephone and preauthorized transfer accounts) .............. 4508 1,099 2.a.(1)(a)
(b) Nontransaction accounts: //////////////////
(1) Money market deposit accounts (MMDAs) ................... 4509 40,024 2.a.(1)(b)(1)
(2) Other savings deposits .................................. 4511 17,173 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ 4174 3,459 2.a.(1)(b)(3)
(4) All other time deposits ................................. 4512 45,672 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement //////////////////
subsidiaries, and IBFs .......................................... 4172 22,936 2.a.(2)
b. Expense of federal funds purchased and securities sold under //////////////////
agreements to repurchase in domestic offices of the bank and of its //////////////////
Edge and Agreement subsidiaries, and in IBFs ........................ 4180 53,206 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading //////////////////
liabilities, and other borrowed money ............................... 4185 35,699 2.c.
d. Interest on mortgage indebtedness and obligations under capitalized //////////////////
leases .............................................................. 4072 280 2.d.
e. Interest on subordinated notes and debentures ....................... 4200 8,847 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... 4073 228,395 2.f.
--------------------
3. Net interest income (item 1.g minus 2.f) ............................... ////////////////// RIAD 4074 376,362 3.
--------------------
4. Provisions: //////////////////
--------------------
a. Provision for loan and lease losses ................................. ////////////////// RIAD 4230 168,988 4.a
b. Provision for allocated transfer risk ............................... ////////////////// RIAD 4243 0 4.b.
--------------------
5. Noninterest income: //////////////////
a. Income from fiduciary activities .................................... 4070 26,009 5.a.
b. Service charges on deposit accounts in domestic offices ............. 4080 29,654 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum //////////////////
items 8.a through 8.d) .............................................. A220 0 5.c.
d. Other foreign transaction gains (losses) ............................ 4076 1,410 5.d.
e. Not applicable //////////////////
f. Other noninterest income: //////////////////
(1) Other fee income ................................................ 5407 199,480 5.f.(1)
(2) All other noninterest income* ................................... 5408 69,227 5.f.(2)
--------------------
g. Total noninterest income (sum of items 5.a through 5.f) ............. ////////////////// RIAD 4079 325,780 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. ////////////////// RIAD 3521 (49) 6.a.
b. Realized gains (losses) on available-for-sale securities ............ ////////////////// RIAD 3196 9 6.b.
--------------------
7. Noninterest expense: //////////////////
a. Salaries and employee benefits ...................................... 4135 109,534 7.a.
b. Expenses of premises and fixed assets (not of rental income) //////////////////
(excluding salaries and employee benefits and mortgage interest) .... 4217 19,214 7.b.
c. Other noninterest expense* .......................................... 4092 368,927 7.c.
--------------------
d. Total noninterest expense (sum of items 7.a through 7.c) ............ ////////////////// RIAD 4093 497,675 7.d.
////////////////// --------------------
8. Income (loss) before income taxes and extraordinary items and other //////////////////
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)////////////////// RIAD 4301 35,429 8.
9. Applicable income taxes (on item 8) .................................... ////////////////// RIAD 4302 9,851 9.
--------------------
10. Income (loss) before extraordinary items and other adjustments (item 8 //////////////////
minus 9) ............................................................... ////////////////// RIAD 4300 25,578 10.
----------------------------------------
__________
* Describe on Schedule RI-E--Explanations.
</TABLE>
4
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-3
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 0 6 5 5 9
SCHEDULE RI--CONTINUED
---------------
Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
11. Extraordinary items and other adjustments: //////////////////
a. Extraordinary items and other adjustments, gross of income taxes* ... 4310 0 11.a.
b. Applicable income taxes (on item 11.a)* ............................. 4315 0 11.b.
--------------------
c. Extraordinary items and other adjustments, net of income taxes //////////////////
(item 11.a minus 11.b) .............................................. ////////////////// RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ........................... ////////////////// RIAD 4340 25,578 12.
----------------------------------------
------
I481
--------------
Year-to-date
-------------------
Memoranda Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after //////////////////
August 7, 1986, that is not deductible for federal income tax purposes ...................... 4513 155 M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices //////////////////
(included in Schedule RI, item 8) ........................................................... 8431 1,381 M.2.
3.-4. Not applicable //////////////////
5. Number of full-time equivalent employees on payroll at end of current period (round to //// Number
nearest whole number) ....................................................................... 4150 3,551 M.5.
6. Not applicable //////////////////
7. If the reporting bank has restated its balance sheet as a result of applying push down //// mm dd yy
accounting this calendar year, report the date of the bank's acquisition .................... 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) //////////////////
(SUM OF MEMORANDUM ITEMS 8.a THROUGH 8.d MUST EQUAL SCHEDULE RI, ITEM 5.c): //// Bil Mil Thou
a. Interest rate exposures .................................................................. 8757 0 M.8.a.
b. Foreign exchange exposures ............................................................... 8758 0 M.8.b.
c. Equity security and index exposures ...................................................... 8759 0 M.8.c.
d. Commodity and other exposures ............................................................ 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: //////////////////
a. Net increase (decrease) to interest income ............................................... 8761 (763) M.9.a.
b. Net (increase) decrease to interest expense .............................................. 8762 (3,128) M.9.b.
c. Other (noninterest) allocations .......................................................... 8763 (1,667) M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions) ........................... A251 0 M.10.
--------------------
__________
* Describe on Schedule RI-E--Explanations.
</TABLE>
5
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-4
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 0 6 5 5 9
SCHEDULE RI-A--CHANGES IN EQUITY CAPITAL
Indicate decreases and losses in parentheses.
------
I483
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition //////////////////
and Income .................................................................................. 3215 501,192 1.
2. Equity capital adjustments from amended Reports of Income, net* ............................. 3216 (10,104) 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ........................ 3217 491,088 3.
4. Net income (loss) (must equal Schedule RI, item 12) ......................................... 4340 25,578 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .......................... 4346 0 5.
6. Changes incident to business combinations, net .............................................. 4356 0 6.
7. LESS: Cash dividends declared on preferred stock ............................................ 4470 0 7.
8. LESS: Cash dividends declared on common stock ............................................... 4460 16,000 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions for //////////////////
this schedule) .............................................................................. 4411 0 9.
10. Corrections of material accounting errors from prior years* (see instructions for this //////////////////
schedule) ................................................................................... 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ............ 8433 (3,068) 11.
12. Foreign currency translation adjustments .................................................... 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) .... 4415 98,400 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal //////////////////
Schedule RC, item 28) ....................................................................... 3210 595,998 14.
-------------------
__________
* Describe on Schedule RI-E--Explanations.
SCHEDULE RI-B--CHARGE-OFFS AND RECOVERIES AND CHANGES
IN ALLOWANCE FOR LOAN AND LEASE LOSSES
PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES
PART I EXCLUDES CHARGE-OFFS AND RECOVERIES THROUGH
THE ALLOCATED TRANSFER RISK RESERVE.
------
I486
----------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
----------------------------------------
Calendar year-to-date
----------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
1. Loans secured by real estate: ////////////////// //////////////////
a. To U.S. addressees (domicile) ....................................... 4651 2,149 4661 1,798 1.a.
b. To non-U.S. addressees (domicile) ................................... 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks: ////////////////// //////////////////
a. To U.S. banks and other U.S. depository institutions ................ 4653 0 4663 0 2.a.
b. To foreign banks .................................................... 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers .... 4655 21 4665 1 3.
4. Commercial and industrial loans: ////////////////// //////////////////
a. To U.S. addressees (domicile) ....................................... 4645 2,425 4617 347 4.a.
b. To non-U.S. addressees (domicile) ................................... 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal ////////////////// //////////////////
expenditures: ////////////////// //////////////////
a. Credit cards and related plans ...................................... 4656 124,918 4666 14,194 5.a.
b. Other (includes single payment, installment, and all student loans) . 4657 18,879 4667 11,944 5.b.
6. Loans to foreign governments and official institutions ................. 4643 0 4627 0 6.
7. All other loans ........................................................ 4644 286 4628 734 7.
8. Lease financing receivables: ////////////////// //////////////////
a. Of U.S. addressees (domicile) ....................................... 4658 1,359 4668 337 8.a.
b. Of non-U.S. addressees (domicile) ................................... 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8) ....................................... 4635 150,037 4605 29,355 9.
----------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-5
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 0 6 5 5 9
SCHEDULE RI-B--CONTINUED
PART I. CONTINUED
----------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
----------------------------------------
Calendar year-to-date
----------------------------------------
Memoranda Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
1-3. Not applicable ////////////////// //////////////////
4. Loans to finance commercial real estate, construction, and land ////////////////// //////////////////
development activities (not secured by real estate) included in ////////////////// //////////////////
Schedule RI-B, part I, items 4 and 7, above ............................ 5409 0 5410 253 M.4.
5. Loans secured by real estate in domestic offices (included in ////////////////// //////////////////
Schedule RI-B, part I, item 1, above): ////////////////// //////////////////
a. Construction and land development ................................... 3582 241 3583 59 M.5.a.
b. Secured by farmland ................................................. 3584 0 3585 3 M.5.b.
c. Secured by 1-4 family residential properties: ////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family residential ////////////////// //////////////////
properties and extended under lines of credit ................... 5411 980 5412 0 M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties .... 5413 848 5414 842 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ........... 3588 0 3589 378 M.5.d.
e. Secured by nonfarm nonresidential properties ........................ 3590 80 3591 418 M.5.e.
----------------------------------------
PART II. CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income ...... 3124 152,121 1.
2. Recoveries (must equal part I, item 9, column B above) ..................................... 4605 29,355 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) .............................. 4635 150,037 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a) ..................... 4230 168,998 4.
5. Adjustments* (see instructions for this schedule) .......................................... 4815 0 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, //////////////////
item 4.b) .................................................................................. 3123 200,437 6.
--------------------
__________
* Describe on Schedule RI-E--Explanations.
SCHEDULE RI-C--APPLICABLE INCOME TAXES BY TAXING AUTHORITY
SCHEDULE RI-C IS TO BE REPORTED WITH THE DECEMBER REPORT OF INCOME.
------
I489
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
1. Federal .................................................................................... 4780 N/A 1.
2. State and local ............................................................................ 4790 N/A 2.
3. Foreign .................................................................................... 4795 N/A 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ......... 4770 N/A 4.
--------------------
5. Deferred portion of item 4 .............................................. RIAD 4772 N/A ////////////////// 5.
---------------------------------------
</TABLE>
7
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580
FFIEC 031
Address: 100 EAST BROAD STREET Page RI-6
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
SCHEDULE RI-D--INCOME FROM INTERNATIONAL OPERATIONS
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
<TABLE>
I492
----------------
YEAR-TO-DATE
-----------------------
Dollar Amounts in Thousands RIAD BIL MIL THOU
- ------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, /////////////////////
and IBFs: /////////////////////
a. Interest income booked................................................................ 4837 144 1.a.
b. Interest expense booked .............................................................. 4838 22,937 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and /////////////////////
IBFs (item 1.a minus 1.b) ............................................................ 4839 (22,793) 1.c.
2. Adjustments for booking location of international operations: /////////////////////
a. Net interest income attributable to international operations booked at domestic /////////////////////
offices .............................................................................. 4840 0 2.a.
b. Net interest income attributable to domestic business booked at foreign offices ...... 4941 0 2.b.
c. Net booking location adjustment (item 2.a. minus 2.b) ................................ 4842 0 2.c.
3. Noninterest income and expense attributable to international operations: /////////////////////
a. Noninterest income attributable to international operations .......................... 4097 0 3.a.
b. Provision for loan and lease losses attributable to international operations ......... 4235 0 3.b.
c. Other noninterest expense attributable to international operations ................... 4239 0 3.c.
d. Net noninterest income (expense) attributable to international operations /////////////////////
(item 3.a minus 3.b and 3.c) ......................................................... 4843 0 3.d.
4. Estimated pretax income attributable to international operations before capital /////////////////////
allocations adjustment (sum of items 1.c, 2.c, and 3.d) .............................. 4844 (22,793) 4.
5. Adjustment to pretax income for international allocations to international operations /////////////////////
to reflect the effects of equity capital on overall bank funding costs ............... 4845 0 5.
6. Estimated pretax income attributable to international operations after capital /////////////////////
allocation adjustment (sum of items 4 and 5) ............................................. 4846 (22,793) 6.
7. Income taxes attributable to income from international operations as estimated in item 6.. 4797 (7,978) 7.
8. Estimated net income attributable to international operations (item 6 minus 7) ........... 4341 (14,815) 8.
---------------------
</TABLE>
<TABLE>
-----------------------
Memoranda Dollar Amounts in Thousands RIAD BIL MIL THOU
- ------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
1. Intracompany interest income included in item 1.a above .................................. 4847 0 M.1.
2. Intracompany interest expense included in item 1.b above ................................. 4848 0 M.2.
---------------------
PART II. SUPPLEMENTARY DETAILS OF INCOME FROM INTERNATIONAL OPERATIONS REQUIRED
BY THE DEPARTMENTS OF COMMERCE AND TREASURY FOR PURPOSES OF THE U.S.
INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS
YEAR-TO-DATE
-----------------------
Dollar Amounts in Thousands RIAD BIL MIL THOU
- ------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
1. Interest income booked at IBFs ........................................................... 4849 0 1.
2. Interest expense booked at IBFs .......................................................... 4850 0 2.
3. Noninterest income attributable to international operations booked at domestic offices /////////////////////
(excluding IBFs): /////////////////////
a. Gains (losses) and extraordinary items ............................................... 5491 0 3.a.
b. Fees and other noninterest income .................................................... 5492 0 3.b.
4. Provision for loan and lease losses attributable to international operations booked at /////////////////////
domestic offices (excluding IBFs) ........................................................ 4852 0 4.
5. Other noninterest expense attributable to international operations booked at domestic /////////////////////
offices (excluding IBFs) ................................................................. 4853 0 5.
</TABLE>
8
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580
FFIEC 031
Address: 100 EAST BROAD STREET Page RI-7
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
SCHEDULE RI-E--EXPLANATIONS
SCHEDULE RI-E IS TO BE COMPLETED EACH QUARTER ON A CALENDAR YEAR-TO-DATE BASIS.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other
noninterest income and other noninterest expense in Schedule RI. (See
instructions for details.)
<TABLE>
I492
----------------
YEAR-TO-DATE
-----------------------
Dollar Amounts in Thousands RIAD BIL MIL THOU
- ------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) /////////////////////
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): /////////////////////
a. Net gains on other real estate owned ................................................. 5415 0 1.a.
b. Net gains on sales of loans .......................................................... 5416 0 1.b.
c. Net gains on sales of premises and fixed assets ...................................... 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, /////////////////////
item 5.f.(2): /////////////////////
d. / TEXT 4461 / CARD PROCESSING INCOME 4461 59,153 1.d
--------- ------------------------------------------------------------------------
e. / TEXT 4462 / INSTALLMENT LOAN SERVICING INCOME 4462 8,092 1.e.
--------- ------------------------------------------------------------------------
f. / TEXT 4463 / 4463 1.f.
--------- ------------------------------------------------------------------------
2. Other noninterest expense (from Schedule RI, item 7.c): /////////////////////
a. Amortization expense of intangible assets ............................................ 4531 0 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: /////////////////////
b. Net losses on other real estate owned ................................................ 5418 0 2.b.
c. Net losses on sales of loans ......................................................... 5419 0 2.c.
d. Net losses on sales of premises and fixed assets ..................................... 5420 0 2.d.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, /////////////////////
item 7.c: /////////////////////
e. / TEXT 4464 / DATA PROCESSING 4464 95,203 2.e.
--------- ------------------------------------------------------------------------
f. / TEXT 4467 / 4467 2.f.
--------- ------------------------------------------------------------------------
g. / TEXT 4468 / 4468 2.g.
--------- ------------------------------------------------------------------------
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and applicable /////////////////////
income tax effect (from Schedule RI, item 11.b) (itemize and describe all extraordinary /////////////////////
items and other adjustments): /////////////////////
a. (1) / TEXT 4469 / 4469 3.a.(1)
----------------------------------------------------------------------------------
(2) Applicable income tax effect / RIAD 4486 / ///////////////////// 3.a.(2)
----------------------------------------------------------------------------------
b. (1) / TEXT 4487 / 4487 3.b.(1)
--------------------------------------------------------------------------------
(2) Applicable income tax effect / RIAD 4488 / ///////////////////// 3.b.(2)
----------------------------------------------------------------------------------
c. (1) / TEXT 4489 / 4489 3.c.(1)
--------------------------------------------------------------------------------
(2) Applicable income tax effect / RIAD 4491 / ///////////////////// 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2) /////////////////////
(itemize and describe all adjustments): /////////////////////
a. / TEXT 4492 / AMENDED CALL REPORT 4492 (10,104) 4.a.
--------- ------------------------------------------------------------------------
b. / TEXT 4493 / 4493 4.b.
--------- ------------------------------------------------------------------------
5. Cumulative effect of changes in accounting principles from prior years /////////////////////
(from Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): /////////////////////
a. / TEXT 4494 / 4494 5.a.
--------- ------------------------------------------------------------------------
b. / TEXT 4495 / 4495 5.b.
--------- ------------------------------------------------------------------------
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) /////////////////////
(itemize and describe all corrections):
a. / TEXT 4496 / 4496 6.a.
--------- ------------------------------------------------------------------------
b. / TEXT 4497 / 4497 6.b.
--------- ------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580
FFIEC 031
Address: 100 EAST BROAD STREET Page RI-8
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
SCHEDULE RI-E--CONTINUED
<TABLE>
-----------------------
YEAR-TO-DATE
-----------------------
Dollar Amounts in Thousands RIAD BIL MIL THOU
- ------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) /////////////////////
(itemize and describe all such transactions): /////////////////////
a. / TEXT 4498 / CAPITAL CONTRIBUTIONS 4498 98,400 7.a.
--------- --------------------------------------------------------------------
b. / TEXT 4499 / 4499 7.b.
--------- --------------------------------------------------------------------
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) /////////////////////
(itemize and describe all adjustments): /////////////////////
a. / TEXT 4521 / 4521 8.a.
--------- --------------------------------------------------------------------
b. / TEXT 4522 / 4522 8.b.
--------- -------------------------------------------------------------------- ---------------------
9. Other explanations (the space below is provided for the bank to briefly describe, at its I498 I499
---------------------
option, any other significant items affecting the Report of Income):
No comment / / (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-1
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET
---------
C400
------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS ///////////////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): ///////////////////////
a. Noninterest-bearing balances and currency and coin(1).................................. 0081 930,094 1.a.
b. Interest-bearing balances(2)........................................................... 0071 0 1.b.
2. Securities: ///////////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A)............................. 1754 36,966 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........................... 1773 254,157 2.b.
3. Federal funds sold and securities purchased under agreements to resell in ///////////////////////
domestic offices of the bank and of its Edge and Agreement subsidiaries, ///////////////////////
and in IBFs: ///////////////////////
a. Federal funds sold..................................................................... 0276 219,165 3.a.
b. Securities purchased under agreements to resell........................................ 0277 0 3.b.
4. Loans and lease financing receivables: ----------------------- ///////////////////////
a. Loans and leases, net of unearned income (from Schedule RC-C)... RCFD 2122 7,418,081 /////////////////////// 4.a.
b. LESS: Allowance for loan and lease losses....................... RCFD 3123 200,437 /////////////////////// 4.b.
c. LESS: Allocated transfer risk reserve........................... RCFD 3128 0 /////////////////////// 4.c.
----------------------- ///////////////////////
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c).................................... 2125 7,217,644 4.d.
5. Trading assets (from Schedule RC-D)........................................................ 3545 0 5.
6. Premises and fixed assets (including capitalized leases)................................... 2145 62,349 6.
7. Other real estate owned (from Schedule RC-M)............................................... 2150 5,908 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)... 2130 857 8.
9. Customers' liability to this bank on acceptances outstanding............................... 2155 5,171 9.
10. Intangible assets (from Schedule RC-M)..................................................... 2143 35,696 10.
11. Other assets (from Schedule RC-F).......................................................... 2160 498,055 11.
12. Total assets (sum of items 1 through 11)................................................... 2170 9,266,062 12.
------------------------
- -----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
11
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-2
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC--CONTINUED
------------------------
Dollar Amounts in Thousands ////////// Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES ///////////////////////
13. Deposits: ///////////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, ///////////////////////
part I).............................................................................. RCON 2200 4,662,047 13.a.
---------------------- ///////////////////////
(1) Noninterest-bearing(1)................................... RCON 6631 1,783,070 /////////////////////// 13.a.(1)
(2) Interest-bearing......................................... RCON 6636 2,878,977 /////////////////////// 13.a.(2)
---------------------- ///////////////////////
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, ///////////////////////
part II) ............................................................................ RCFN 2200 1,275,194 13.b.
(1) Noninterest-bearing ..................................... RCFN 6631 0 /////////////////////// 13.b.(1)
(2) Interest-bearing ........................................ RCFN 6636 1,275,194 /////////////////////// 13.b.(2)
----------------------
14. Federal funds purchased and securities sold under agreements to repurchase in domestic ///////////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: ///////////////////////
a. Federal funds purchased.............................................................. RCFD 0278 1,385,147 14.a.
b. Securities sold under agreements to repurchase....................................... RCFD 0279 31,000 14.b.
15. a. Demand notes issued to the U.S. Treasury............................................. RCON 2840 59,993 15.a.
b. Trading liabilities (from Schedule RC-D)............................................. RCFD 3548 0 15.b.
16. Other borrowed money: ///////////////////////
a. With a remaining maturity of one year or less........................................ RCFD 2332 614,713 16.a.
b. With a remaining maturity of more than one year...................................... RCFD 2333 289,764 16.b.
17. Mortgage indebtedness and obligations under capitalized leases........................... RCFD 2910 3,939 17.
18. Bank's liability on acceptances executed and outstanding................................. RCFD 2920 5,171 18.
19. Subordinated notes and debentures........................................................ RCFD 3200 189,305 19.
20. Other liabilities (from Schedule RC-G)................................................... RCFD 2930 153,791 20.
21. Total liabilities (sum of items 13 through 20)........................................... RCFD 2948 8,670,064 21.
///////////////////////
22. Limited-life preferred stock and related surplus......................................... RCFD 3282 0 22.
EQUITY CAPITAL ///////////////////////
23. Perpetual preferred stock and related surplus............................................ RCFD 3838 0 23.
24. Common stock............................................................................. RCFD 3230 20,738 24.
25. Surplus (exclude all surplus related to preferred stock)................................. RCFD 3839 205,756 25.
26. a. Undivided profits and capital reserves............................................... RCFD 3632 370,841 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities............... RCFD 8434 (1,337) 26.b.
27. Cumulative foreign currency translation adjustments...................................... RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27)........................................ RCFD 3210 595,998 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, ///////////////////////
22, and 28).............................................................................. RCFD 3300 9,266,062 29.
-----------------------
Memorandum
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external ------------------------
auditors as of any date during 1995....................................................... RCFD 6724 N/A M.1.
------------------------
1 - Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank
2 - Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by
a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately)
3 - Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
4 - Directors' examination of the bank performed by other external auditors (may be required by state chartering authority)
5 - Review of the bank's financial statements by external auditors
6 - Compilation of the bank's financial statements by external auditors
7 - Other audit procedures (excluding tax preparation work)
8 - No external audit work
- -----------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
</TABLE>
12
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-3
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-A--CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
Exclude assets held for trading.
---------
C405
--------------------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
--------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency /////////////////////// ///////////////////////
and coin.......................................................... 0022 876,942 /////////////////////// 1.
a. Cash items in process of collection and unposted debits....... /////////////////////// 0020 825,552 1.a.
b. Currency and coin............................................. /////////////////////// 0080 51,390 1.b.
2. Balances due from depository institutions in the U.S. ............ /////////////////////// 0082 36,122 2.
a. U.S. branches and agencies of foreign banks (including /////////////////////// ///////////////////////
their IBFs)................................................... 0083 0 /////////////////////// 2.a.
b. Other commercial banks in the U.S. and other depository /////////////////////// ///////////////////////
institutions in the U.S. (including their IBFs)............... 0085 36,122 /////////////////////// 2.b.
3. Balances due from banks in foreign countries and foreign central /////////////////////// ///////////////////////
banks............................................................. /////////////////////// 0070 4,374 3.
a. Foreign branches of other U.S. banks.......................... 0073 0 /////////////////////// 3.a.
b. Other banks in foreign countries and foreign central banks.... 0074 4,374 /////////////////////// 3.b.
4. Balances due from Federal Reserve Banks........................... 0090 12,656 0090 12,656 4.
5. Total (sum of items 1 through 4) (total of column A must equal ////////////////////////////////////////////////
Schedule RC, sum of items 1.a and 1.b)............................ 0010 930,094 0010 930,094 5.
--------------------------------------------------
-----------------------
Memorandum Dollar Amounts in Thousands RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2,
column B above)............................................................................ 0050 36,122 M.1.
-----------------------
SCHEDULE RC-B--SECURITIES
Exclude assets held for trading.
---------
C410
------------------------------------------------------------------------------
Held-to-maturity Available-for-sale
------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
------------------------------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
1. U.S. Treasury securities.............. 0211 0 0213 0 1286 125,903 1287 123,279 1.
2. U.S. Government agency and corporation ///////////////// ///////////////// ///////////////// /////////////////
obligations (exclude mortgage-backed ///////////////// ///////////////// ///////////////// /////////////////
securities: ///////////////// ///////////////// ///////////////// /////////////////
a. Issued by U.S. Government ///////////////// ///////////////// ///////////////// /////////////////
agencies(2)....................... 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. Government- ///////////////// ///////////////// ///////////////// /////////////////
sponsored agencies(3)............. 1294 0 1295 0 1297 87,621 1298 87,682 2.b.
------------------------------------------------------------------------------
- ------------
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the Farm Credit System, the Federal Home Loan Bank
System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing Corporation,
Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley
Authority.
</TABLE>
13
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK:39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-4
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-B--CONTINUED
----------------------------------------- -----------------------------------------
Held-to-maturity Available-for-sale
----------------------------------------- -----------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
------------------- ------------------- ------------------- -------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
3. Securities issued by states /////////////////// /////////////////// /////////////////// ///////////////////
and political subdivisions /////////////////// /////////////////// /////////////////// ///////////////////
in the U.S.: /////////////////// /////////////////// /////////////////// ///////////////////
a. General obligations........ 1676 11,904 1677 15,725 1678 0 1679 0 3.a.
b. Revenue obligations........ 1681 12,457 1686 10,099 1690 645 1691 660 3.b.
c. Industrial development /////////////////// /////////////////// /////////////////// ///////////////////
and similar obligations... 1694 9,383 1695 9,405 1696 0 1697 0 3.c.
4. Mortgage-backed /////////////////// /////////////////// /////////////////// ///////////////////
securities (MBS): /////////////////// /////////////////// /////////////////// ///////////////////
a. Pass-through securities: /////////////////// /////////////////// /////////////////// ///////////////////
(1) Guaranteed by /////////////////// /////////////////// /////////////////// ///////////////////
GNMA.................. 1698 0 1699 0 1701 0 1702 0 4.a.(1)
(2) Issued by FNMA /////////////////// /////////////////// /////////////////// ///////////////////
and FHLMC............. 1703 0 1705 0 1706 13,782 1707 14,038 4.a.(2)
(3) Other pass-through /////////////////// /////////////////// /////////////////// ///////////////////
securities............ 1709 472 1710 458 1711 5,820 1713 6,020 4.a.(3)
b. Other mortgage-backed /////////////////// /////////////////// /////////////////// ///////////////////
securities (include CMOs, /////////////////// /////////////////// /////////////////// ///////////////////
REMICs, and stripped /////////////////// /////////////////// /////////////////// ///////////////////
MBS): /////////////////// /////////////////// /////////////////// ///////////////////
(1) Issued or guaranteed /////////////////// /////////////////// /////////////////// ///////////////////
by FNMA, FHLMC, /////////////////// /////////////////// /////////////////// ///////////////////
or GNMA............... 1714 0 1715 0 1716 18,110 1717 18,133 4.b.(1)
(2) Collateralized /////////////////// /////////////////// /////////////////// ///////////////////
by MBS issued or /////////////////// /////////////////// /////////////////// ///////////////////
guaranteed by FNMA, /////////////////// /////////////////// /////////////////// ///////////////////
FHLMC, or GNMA........ 1718 0 1719 0 1731 0 1732 0 4.b.(2)
(3) All other mortgage- /////////////////// /////////////////// /////////////////// ///////////////////
backed securities..... 1733 0 1734 0 1735 0 1736 0 4.b.(3)
5. Other debt securities: /////////////////// /////////////////// /////////////////// ///////////////////
a. Other domestic debt /////////////////// /////////////////// /////////////////// ///////////////////
securities................. 1737 0 1738 0 1739 490 1741 502 5.a.
b. Foreign debt /////////////////// /////////////////// /////////////////// ///////////////////
securities................. 1742 2,750 1743 2,750 1744 0 1746 0 5.b.
6. Equity securities: /////////////////// /////////////////// /////////////////// ///////////////////
a. Investments in mutual /////////////////// /////////////////// /////////////////// ///////////////////
funds...................... /////////////////// /////////////////// 1747 0 1748 0 6.a.
b. Other equity securities /////////////////// /////////////////// /////////////////// ///////////////////
with readily determin- /////////////////// /////////////////// /////////////////// ///////////////////
able fair values........... /////////////////// /////////////////// 1749 0 1751 0 6.b.
c. All other equity /////////////////// /////////////////// /////////////////// ///////////////////
securities(1).............. /////////////////// /////////////////// 1752 3,843 1753 3,843 6.c.
7. Total (sum of items 1 /////////////////// /////////////////// /////////////////// ///////////////////
through 6) (total of /////////////////// /////////////////// /////////////////// ///////////////////
column A must equal /////////////////// /////////////////// /////////////////// ///////////////////
Schedule RC, item 2.a) /////////////////// /////////////////// /////////////////// ///////////////////
(total of column D must /////////////////// /////////////////// /////////////////// ///////////////////
equal Schedule RC, /////////////////// /////////////////// /////////////////// ///////////////////
item 2.b)...................... 1754 36,966 1771 38,437 1772 256,214 1773 254,157 7.
------------------- ------------------- ------------------- -------------------
_____________________
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.
14
</TABLE>
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK:39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-5
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-B--CONTINUED
---------
C412
-------------------
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- ------------------
<S> <C>
1. Pledged securities(2) ........................................................................... 0416 281,985 M.1.
2. Maturity and repricing data for debt securities (2), (3), (4) (excluding those in //////////////////
nonaccrual status): //////////////////
a. Fixed rate debt securities with a remaining maturity of: //////////////////
(1) Three months or less ................................................................... 0343 1,000 M.2.a.(1)
(2) Over three months through 12 months .................................................... 0344 8,333 M.2.a.(2)
(3) Over one year through five years ....................................................... 0345 183,243 M.2.a.(3)
(4) Over five years ........................................................................ 0346 14,178 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a(1) through 2.a(4) ........ 0347 206,754 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: //////////////////
(1) Quarterly or more frequently ........................................................... 4544 78,889 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ 4545 1,637 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. 4551 0 M.2.b.(3)
(4) Less frequently than every five years .................................................. 4552 0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4))... 4553 80,526 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total //////////////////
debt securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus //////////////////
nonaccrual debt securities included in Schedule RC-N, item 9, column C) ..................... 0393 287,280 M.2.c.
3. Not applicable //////////////////
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included //////////////////
in Schedule RC-B, items 3 through 5, column A, above) ........................................... 5365 0 M.4.
5. Not applicable //////////////////
6. Floating rate debt securities with a remaining maturity of one year or less(2), (4) (included in //////////////////
Memorandum items 2.b.(1) through 2.b.(4) above) ................................................. 5519 40,100 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or //////////////////
trading securities during the calendar year-to-date (report the amortized cost at date of sale //////////////////
or transfer) .................................................................................... 1778 0 M.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale //////////////////
accounts in Schedule RC-B, item 4.b): //////////////////
a. Amortized cost .............................................................................. 8780 0 M.8.a.
b. Fair value .................................................................................. 8781 0 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in //////////////////
Schedule RC-B, items 2, 3, and 5): //////////////////
a. Amortized cost .............................................................................. 8782 0 M.9.a.
b. Fair value .................................................................................. 8783 0 M.9.b.
-------------------
_____________________
(2) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
15
</TABLE>
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK:39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-6
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES
PART I. LOANS AND LEASES
Do not deduct the allowance for loan and lease losses from amounts ---------
reported in this schedule. Report total loans and leases, net of unearned C415
income. Exclude assets for trading. --------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ------------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
1. Loans secured by real estate ............................................. 1410 1,088,609 ////////////////// 1.
a. Construction and land development .................................... ////////////////// 1415 149,467 1.a.
b. Secured by farmland (including farm residential and other ////////////////// //////////////////
improvements) ........................................................ ////////////////// 1420 6,478 1.b.
c. Secured by 1-4 family residential properties: ////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family residential ////////////////// //////////////////
properties and extended under lines of credit ................... ////////////////// 1797 225,263 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: ////////////////// //////////////////
(a) Secured by first liens ..................................... ////////////////// 5367 226,673 1.c.(2)(a)
(b) Secured by junior liens .................................... ////////////////// 5368 80,927 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ............ ////////////////// 1460 24,414 1.d.
e. Secured by nonfarm nonresidential properties ......................... ////////////////// 1480 375,387 1.e.
2. Loans to depository institutions: ////////////////// //////////////////
a. To commercial banks in the U.S. ...................................... ////////////////// 1505 2,004 2.a.
(1) To U.S. branches and agencies of foreign banks .................. 1506 0 ////////////////// 2.a.(1)
(2) To other commercial banks in the U.S. ........................... 1507 2,004 ////////////////// 2.a.(2)
b. To other depository institutions in the U.S. ......................... 1517 251 1517 251 2.b.
c. To banks in foreign countries ........................................ ////////////////// 1510 500 2.c.
(1) To foreign branches of other U.S. banks ......................... 1513 0 ////////////////// 2.c.(1)
(2) To other banks in foreign countries ............................. 1516 500 ////////////////// 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers ...... 1590 10,949 1590 10,949 3.
4. Commercial and industrial loans: ////////////////// //////////////////
a. To U.S. addressees (domicile) ........................................ 1763 949,898 1763 949,898 4.a.
b. To non-U.S. addressees (domicile) .................................... 1764 0 1764 0 4.b.
5. Acceptances of other banks: ////////////////// //////////////////
a. Of U.S. banks ........................................................ 1756 0 1756 0 5.a.
b. Of foreign banks ..................................................... 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal ////////////////// //////////////////
expenditures (i.e., consumer loans) (includes purchased paper) ........... ////////////////// 1975 4l,157,233 6.
a. Credit cards and related plans (includes check credit and other ////////////////// //////////////////
revolving credit plans) .............................................. 2008 3,138,216 ////////////////// 6.a.
b. Other (includes single payment, installment, and all student loans) .. 2011 1,019,017 ////////////////// 6.b.
7. Loans to foreign governments and official institutions (including ////////////////// //////////////////
foreign central banks) ................................................... 2081 13 2081 13 7.
8. Obligations (other than securities and leases) of states and political ////////////////// //////////////////
subdivisions in the U.S. (includes nonrated industrial development ////////////////// //////////////////
obligations) ............................................................. 2107 27,790 2107 27,790 8.
9. Other loans .............................................................. 1563 164,847 ////////////////// 9.
a. Loans for purchasing or carrying securities (secured and unsecured) .. ////////////////// 1545 7,191 9.a.
b. All other loans (exclude consumer loans) ............................. ////////////////// 1564 157,656 9.b.
10. Lease financing receivables (net of unearned income) ..................... ////////////////// 2165 1,016,511 10.
a. Of U.S. addressees (domicile) ........................................ 2182 1,016,511 ////////////////// 10.a
b. Of non-U.S. addressees (domicile) .................................... 2183 0 ////////////////// 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ......... 2123 524 2123 524 11.
12. Total loans and leases, net of unearned income (sum of items 1 ////////////////// //////////////////
through 10 minus item 11) (total of column A must equal ////////////////// //////////////////
Schedule RC, item 4.a) ................................................... 2122 7,418,081 2122 7,418,081 12.
--------------------------------------
16
</TABLE>
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK:39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-7
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-C--CONTINUED
PART I. CONTINUED
--------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
------------------ ------------------
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ------------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above ................ 1496 0 1496 0 M.1.
2. Loans and leases restructured and in compliance with modified terms ////////////////// //////////////////
(included in Schedule RC-C, part I, above and not reported as past due ////////////////// //////////////////
or nonaccrual in Schedule RC-N, Memorandum item 1): ////////////////// //////////////////
a. Loans secured by real estate: ////////////////// //////////////////
------------------
(1) To U.S. addressees (domicile) ................................... 1687 0 M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... 1689 0 M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to //////////////////
individuals for household, family, and other personal expenditures) .. 8691 0 M.2.b
c. Commercial and industrial loans to and lease financing receivables //////////////////
of non-U.S. addressees (domicile) included in Memorandum item 2.b //////////////////
above ................................................................ 8692 0 M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those in //////////////////
nonaccrual status): //////////////////
a. Fixed rate loans and leases with a remaining maturity of: //////////////////
(1) Three months or less ............................................. 0348 97,601 M.3.a.(1)
(2) Over three months through 12 months .............................. 0349 228,161 M.3.a.(2)
(3) Over one year through five years ................................. 0356 1,570,688 M.3.a.(3)
(4) Over five years .................................................. 0357 613,413 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum //////////////////
items 3.a.(1) through 3.a.(4)) ................................... 0358 2,509,863 M.3.a.(5)
b. Floating rate loans with a repricing frequency of: //////////////////
(1) Quarterly or more frequently ..................................... 4554 4,091,557 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly .. 4555 700,694 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than //////////////////
annually ......................................................... 4561 78,177 M.3.b.(3)
(4) Less frequently than every five years ............................ 4564 15,629 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) //////////////////
through 3.b.(4)).................................................. 4567 4,886,057 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and //////////////////
3.b.(5)) (must equal the sum of total loans and leases, net, from //////////////////
Schedule RC-C, part I, item 12, plus unearned income from //////////////////
Schedule RC-C, part I, item 11, minus total nonaccrual loans and //////////////////
leases from Schedule RC-N, sum of items 1 through 8, column C) ........ 1479 7,395,920 M.3.c.
d. Floating rate loans with a remaining maturity of one year or less //////////////////
(included in Memorandum items 3.b.(1) through 3.b.(4) above) .......... A246 1,566,132 M.3.d.
4. Loans to finance commercial real estate, construction, and land //////////////////
development activities (not secured by real estate) included in //////////////////
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) .............. 2746 27,059 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, //////////////////
above) .................................................................... 5369 0 M.5.
------------------
6. Adjustable rate closed-end loans secured by first liens on 1-4 family ////////////////// RCON Bil Mil Thou
residential properties (included in Schedule RC-C, part I, item 1.c.(2)(a), ////////////////// ------------------
column B, page RC-6) ...................................................... ////////////////// 5370 29,737 M.6.
--------------------------------------
_____________________
1) Memorandum item 3 is not applicable to savings banks that must complete supplemental Schedule RC-J.
2) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A.
17
</TABLE>
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-8
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-D--TRADING ASSETS AND LIABILITIES
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
---------
C420
---------------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS /////////////////////////
1. U.S. Treasury securities in domestic offices............... RCON 3531 0 1.
2. U.S. Government agency and corporation obligations /////////////////////////
in domestic offices (exclude mortgage-backed securities)... RCON 3532 0 2.
3. Securities issued by states and political /////////////////////////
subdivisions in the U.S. in domestic offices............... RCON 3533 0 3.
4. Mortgage-backed securities (MBS) in domestic offices: /////////////////////////
a. Pass-through securities issued or guaranteed by /////////////////////////
FNMA, FHLMC, or GNMA.................................... RCON 3534 0 4.a.
b. Other mortgage-backed securities issued or /////////////////////////
guaranteed by FNMA, FHLMC, or GNMA /////////////////////////
(include CMOs, REMICs, and stripped MBS)................ RCON 3535 0 4.b.
c. All other mortgage-backed securities.................... RCON 3536 0 4.c.
5. Other debt securities in domestic offices.................. RCON 3537 0 5.
6. Certificates of deposit in domestic offices................ RCON 3538 0 6.
7. Commercial paper in domestic offices....................... RCON 3539 0 7.
8. Bankers acceptances in domestic offices.................... RCON 3540 0 8.
9. Other trading assets in domestic offices................... RCON 3541 0 9.
10. Trading assets in foreign offices.......................... RCON 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange /////////////////////////
rate, and other commodity and equity contracts: /////////////////////////
a. In domestic offices..................................... RCON 3543 0 11.a.
b. In foreign offices...................................... RCFN 3544 0 11.b.
12. Total trading assets (sum of items 1 through 11) /////////////////////////
(must equal Schedule RC, item 5)........................... RCON 3545 0 12.
---------------------------
---------------------------
LIABILITIES ///////// Bil Mil Thou
---------------------------
13. Liability for short positions.............................. RCFD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange /////////////////////////
rate, and other commodity and equity contracts............. RCFD 3547 0 14.
15. Total trading liabilities (sum of items 13 and 14) /////////////////////////
(must equal Schedule RC, item 15.b)........................ RCFD 3548 0 15.
---------------------------
</TABLE>
18
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-9
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-E--DEPOSIT LIABILITIES
PART I. DEPOSITS IN DOMESTIC OFFICES
---------
C425
-----------------------------------------------------------
Nontransaction
Transaction Accounts Accounts
-----------------------------------------------------------
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
-----------------------------------------------------------
Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Deposits of: ///////////////// ///////////////// /////////////////
1. Individuals, partnerships, and corporations.............. 2201 1,214,536 2240 1,152,080 2346 2,770,144 1.
2. U.S. Government.......................................... 2202 5,218 2280 5,218 2520 0 2.
3. States and political subdivisions in the U.S. ........... 2203 41,555 2290 39,593 2530 27,564 3.
4. Commercial banks in the U.S. ............................ 2206 521,517 2310 521,517 2550 16,851 4.
5. Other depository institutions in the U.S. ............... 2207 7,523 2312 7,523 2349 0 5.
6. Banks in foreign countries............................... 2213 5,884 2320 5,884 2236 0 6.
7. Foreign governments and official institutions (including ///////////////// ///////////////// /////////////////
foreign central banks)................................... 2216 0 2300 0 2377 0 7.
8. Certified and official checks............................ 2330 51,255 2330 51,255 ///////////////// 8.
9. Total (sum of items 1 through 8) (sum of columns A and C ///////////////// ///////////////// /////////////////
must equal Schedule RC, item 13.a)...................... 2215 1,847,488 2210 1,783,070 2385 2,814,559 9.
-----------------------------------------------------------
Memoranda
-----------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): /////////////////
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts........................ 6835 232,060 M.1.a.
b. Total brokered deposits.................................................................... 2365 3,265 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): /////////////////
(1) Issued in denominations of less than $100,000......................................... 2343 178 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than /////////////////
$100,000 and participated out by the broker in shares of $100,000 or less............. 2344 2,481 M.1.c.(2)
d. Maturity data for brokered deposits: /////////////////
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining /////////////////
maturity of one year or less (included in Memorandum item 1.c.(1) above).............. A243 175 M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a remaining /////////////////
maturity of one year or less (included in Memorandum item 1.b above).................. A244 1,006 M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. /////////////////
reported in item 3 above which are secured or collateralized as required under state law).. 5590 68,158 M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d must /////////////////
equal item 9, column C above): /////////////////
a. Savings deposits: /////////////////
(1) Money market deposit accounts (MMDAs)................................................. 6810 1,306,498 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs)............................................... 0352 486,321 M.2.a.(2)
b. Total time deposits of less than $100,000.................................................. 6648 903,076 M.2.b.
c. Time certificates of deposit of $100,000 or more........................................... 6645 118,664 M.2.c.
d. Open-account time deposits of $100,000 or more............................................. 6646 0 M.2.d.
3. All NOW accounts (included in column A above).................................................. 2398 64,418 M.3.
-----------------
4. Not applicable
</TABLE>
19
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-10
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-E--CONTINUED
PART I. CONTINUED
Memoranda (continued)
-----------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of Memorandum /////////////////
items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) /////////////////
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: /////////////////
(1) Three months or less.................................................................. A225 106,815 M.5.a.(1)
(2) Over three months through 12 months................................................... A226 309,797 M.5.a.(2)
(3) Over one year......................................................................... A227 486,464 M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: /////////////////
(1) Quarterly or more frequently.......................................................... A228 0 M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly....................... A229 0 M.5.b.(2)
(3) Less frequently than annually......................................................... A230 0 M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of /////////////////
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above).............. A231 0 M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates of /////////////////
deposit of $100,000 or more and open-account time deposits of $100,000 or more) (sum of /////////////////
Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum items 2.c and 2.d /////////////////
above):(1) /////////////////
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: /////////////////
(1) Three months or less.................................................................. A232 53,487 M.6.a.(1)
(2) Over three months through 12 months................................................... A233 32,792 M.6.a.(2)
(3) Over one year through five years...................................................... A234 16,313 M.6.a.(3)
(4) Over five years....................................................................... A235 16,072 M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: /////////////////
(1) Quarterly or more frequently.......................................................... A236 0 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly....................... A237 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually................ A238 0 M.6.b.(3)
(4) Less frequently than every five years................................................. A239 0 M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of one year or /////////////////
less (included in Memorandum items 6.b.(1) through 6.b.(4) above).......................... A240 0 M.6.c.
-----------------
- ------------
(1) Memorandum items 5 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
</TABLE>
20
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-11
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-E--CONTINUED
PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND
AGREEMENT SUBSIDIARIES AND IBFS)
-----------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deposits of: /////////////////
1. Individuals, partnerships, and corporations.................................................... 2621 504,194 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks)................................. 2623 771,000 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).... 2625 0 3.
4. Foreign governments and official institutions (including foreign central banks)................ 2650 0 4.
5. Certified and official checks.................................................................. 2330 0 5.
6. All other deposits............................................................................. 2668 0 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b)........................... 2200 1,275,194 7.
-----------------
Memorandum
-----------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
1. Time deposits with a remaining maturity of one year or less (included in Part II, /////////////////
item 7 above).................................................................................. A245 1,271,001 M.1.
-----------------
SCHEDULE RC-F--OTHER ASSETS
-------
C430
----------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
1. Income earned, not collected on loans..................................................... RCFD 2164 61,662 1.
2. Net deferred tax assets(1)................................................................ RCFD 2148 0 2.
3. Excess residential mortgage servicing fees receivable..................................... RCFD 5371 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item)......................... RCFD 2168 436,393 4.
----------- ---------------------- //////////////////////
a. TEXT 3549 CASH SURRENDER VALUE - COLI RCFD 3549 136,126 ////////////////////// 4.a.
----------------------------------------------------------------- //////////////////////
b. TEXT 3550 VISA DRAFTS RCFD 3550 136,955 ////////////////////// 4.b.
----------------------------------------------------------------- //////////////////////
c. TEXT 3551 RCFD 3551 ////////////////////// 4.c.
--------------------------------------------------------------------------------------- //////////////////////
5. Total (sum of items 1 through 4 ) (must equal Schedule RC, item 11)....................... RCFD 2160 498,055 5.
----------------------
Memorandum
----------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
1. Deferred tax assets disallowed for regulatory capital purposes............................ RCFD 5610 0 M.1.
----------------------
SCHEDULE RC-G--OTHER LIABILITIES
-------
C435
-----------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
1. a. Interest accrued and unpaid on deposits in domestic offices(2)........................ RCON 3645 21,167 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable)............. RCFD 3646 40,077 1.b.
2. Net deferred tax liabilities(1)........................................................... RCFD 3049 62,486 2.
3. Minority interest in consolidated subsidiaries............................................ RCFD 3000 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item)......................... RCFD 2938 30,061 4.
----------- ---------------------- //////////////////////
a. TEXT 3552 DEFERRED FEES RECEIVED ON SWAPS RCFD 3552 25,967 ////////////////////// 4.a.
----------------------------------------------------------------- //////////////////////
b. TEXT 3553 RCFD 3553 ////////////////////// 4.b.
----------------------------------------------------------------- //////////////////////
c. TEXT 3554 RCFD 3554 ////////////////////// 4.c.
--------------------------------------------------------------------------------------- //////////////////////
5. Total (sum of items 1 through 4 ) (must equal Schedule RC, item 20)....................... RCFD 2930 153,791 5.
-----------------------
- ------------
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
</TABLE>
21
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580
FFIEC 031
Address: 100 East Broad Street Page RC-12
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES
<TABLE>
-----------
C440
----------------
DOMESTIC OFFICES
-----------------------
Dollar Amounts in Thousands RIAD BIL MIL THOU
- ------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
1. Customers' liability to this bank on acceptances outstanding ............................. 2155 5,170 1.
2. Bank's liability on acceptances executed and outstanding ................................. 2920 5,170 2.
3. Federal funds sold and securities purchased under agreements to resell ................... 1350 219,165 3.
4. Federal funds purchased and securities sold under agreements to repurchase ............... 2800 1,416,147 4.
5. Other borrowed money ..................................................................... 3190 904,477 5.
EITHER /////////////////////
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs .............. 2163 N/A 6.
OR /////////////////////
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ................ 2941 1,276,129 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and /////////////////////
IBFs) .................................................................................... 2192 9,263,209 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, /////////////////////
and IBFs) ................................................................................ 3129 7,391,082 9.
---------------------
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices.
-----------------------
RCON BIL MIL THOU
-----------------------
10. U.S. Treasury securities ................................................................ 1779 123,278 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed /////////////////////
securities) ............................................................................. 1785 87,682 11.
12. Securities issued by states and political subdivisions in the U.S. ...................... 1786 34,403 12.
13. Mortgage-backed securities (MBS): /////////////////////
a. Pass-through securities: /////////////////////
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA .................................... 1787 14,038 13.a.(1)
(2) Other pass-through securities ................................................... 1869 6,492 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): /////////////////////
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA .................................... 1877 18,133 13.b.(1)
(2) All other mortgage-backed securities ............................................ 2253 0 13.b.(2)
14. Other domestic debt securities .......................................................... 3159 502 14.
15. Foreign debt securities ................................................................. 3160 0 15.
16. Equity securities: /////////////////////
a. Investments in mutual funds .......................................................... 3161 0 16.a.
b. Other equity securities with readily determinable fair values ........................ 3162 0 16.b.
c. All other equity securities .......................................................... 3169 3,843 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) ... 3170 288,371 17.
---------------------
</TABLE>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
<TABLE>
-----------------------
Dollar Amounts in Thousands RCON BIL MIL THOU
- ------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
EITHER /////////////////////
1. Net due from the IBF of the domestic offices of the reporting bank ...................... 3051 N/A M.1.
OR /////////////////////
2. Net due to the IBF of the domestic offices of the reporting bank ........................ 3059 N/A M.2.
</TABLE>
22
<PAGE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580
FFIEC 031
Address: 100 East Broad Street Page RC-13
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
SCHEDULE RC-I--SELECTED ASSETS AND LIABILITIES OF IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
-----------
C445
-----------------------
Dollar Amounts in Thousands RCFN BIL MIL THOU
- ------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ............ 2133 N/A 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, /////////////////////
item 12, column A) ....................................................................... 2076 N/A 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4 /////////////////////
column A) ................................................................................ 2077 N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ................................ 2898 N/A 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, /////////////////////
part II, items 2 and 3) .................................................................. 2379 N/A 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6). 2381 N/A 6.
---------------------
SCHEDULE RC-K--QUARTERLY AVERAGES (1)
------------
C455
-----------------
Dollar Amounts in Thousands //////// BIL MIL THOU
- ------------------------------------------------------------------------------------------- ------------------------
ASSETS ///////////////////////
1. Interest-bearing balances due from depository institutions ............................ RCFD 3381 0 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations (2) ... RCFD 3382 248,254 2.
3. Securities issued by states and political subdivisions in the U.S. (2) ................ RCFD 3383 24,439 3.
4. a. Other debt securities(2) .......................................................... RCFD 3647 8,729 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve ///////////////////////
stock) ................................................................................ RCFD 3648 3,844 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic ///////////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ........... RCFD 3365 339,259 5.
6. Loans: ///////////////////////
a. Loans in domestic offices: ///////////////////////
(1) Total loans ................................................................... RCON 3360 5,906,357 6.a.(1)
(2) Loans secured by real estate .................................................. RCON 3385 1,167,110 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers ........... RCON 3386 10,854 6.a.(3)
(4) Commercial and industrial loans ............................................... RCON 3387 813,051 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ... RCON 3388 3,018,134 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ......... RCFN 3360 0 6.b.
7. Trading assets ........................................................................ RCFD 3401 0 7.
8. Lease financing receivables (net of unearned income) .................................. RCFD 3484 986,066 8.
9. Total assets(4) ....................................................................... RCFD 3368 8,489,826 9.
LIABILITIES ///////////////////////
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, ///////////////////////
and telephone and preauthorized transfer accounts) (exclude demand deposits) .......... RCON 3485 54,373 10.
11. Nontransaction accounts in domestic offices: ///////////////////////
a. Money market deposit accounts (MMDAs) ............................................. RCON 3486 1,310,099 11.a.
b. Other savings deposits ............................................................ RCON 3487 719,218 11.b.
c. Time certificates of deposit of $100,000 or more .................................. RCON 3345 119,200 11.c.
d. All other time deposits ........................................................... RCON 3469 910,048 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, ///////////////////////
and IBFs .............................................................................. RCFN 3404 773,590 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic ///////////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ........... RCFD 3353 1,462,527 13.
14. Other borrowed money .................................................................. RCFD 3355 937,171 14.
-----------------------
</TABLE>
- --------------------
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
costs.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-14
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 0 6 5 5 9
SCHEDULE RC-L--OFF-BALANCE SHEET ITEMS
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk.
-------
C460
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Unused commitments: //////////////////
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home equity //////////////////
lines .................................................................................... 3814 336,979 1.a.
b. Credit card lines ........................................................................ 3815 23,924,602 1.b.
c. Commercial real estate, construction, and land development: //////////////////
(1) Commitments to fund loans secured by real estate ..................................... 3816 102,032 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................. 6550 17,311 1.c.(2)
d. Securities underwriting .................................................................. 3817 0 1.d.
e. Other unused commitments ................................................................. 3818 2,139,422 1.e.
2. Financial standby letters of credit and foreign office guarantees ........................... 3819 516,195 2.
-------------------- //////////////////
a. Amount of financial standby letters of credit conveyed to others RCFD 3820 171,744 ////////////////// 2.a.
-------------------- //////////////////
3. Performance standby letters of credit and foreign office guarantees ......................... 3821 93,956 3.
-------------------- //////////////////
a. Amount of performance standby letters of credit conveyed to others RCFD 3822 41,342 ////////////////// 3.a.
-------------------- //////////////////
4. Commercial and similar letters of credit .................................................... 3411 47,232 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by the //////////////////
reporting bank .............................................................................. 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting //////////////////
(nonaccepting) bank ......................................................................... 3429 0 6.
7. Securities borrowed ......................................................................... 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is indemnified //////////////////
against loss by the reporting bank) ......................................................... 3433 0 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for //////////////////
Call Report purposes: //////////////////
a. FNMA and FHLMC residential mortgage loan pools: //////////////////
(1) Outstanding principal balance of mortgages transferred as of the report date ......... 3650 0 9.a.(1)
(2) Amount of recourse exposure of these mortgages as of the report date ................. 3651 0 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: //////////////////
(1) Outstanding principal balance of mortgages transferred as of the report date ......... 3652 0 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................. 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: //////////////////
(1) Outstanding principal balance of mortgages transferred as of the report date ......... 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................. 3655 0 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the //////////////////
Riegle Community Development and Regulatory Improvement Act of 1994: //////////////////
(1) Outstanding principal balance of small business obligations transferred //////////////////
as of the report date ................................................................ A249 0 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date ............... A250 0 9.d.(2)
10. When-issued securities: //////////////////
a. Gross commitments to purchase ............................................................ 3434 0 10.a.
b. Gross commitments to sell ................................................................ 3435 0 10.b.
11. Spot foreign exchange contracts ............................................................. 8765 11,569 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize //////////////////
and describe each component of this item over 25% of Schedule RC, item 28, "Total equity //////////////////
capital") ................................................................................... 3430 0 12.
----------- -------------------- //////////////////
a. TEXT 3555 RCFD 3555 ////////////////// 12.a.
----------------------------------------------------------------------- //////////////////
b. TEXT 3556 RCFD 3556 ////////////////// 12.b.
----------------------------------------------------------------------- //////////////////
c. TEXT 3557 RCFD 3557 ////////////////// 12.c.
----------------------------------------------------------------------- //////////////////
d. TEXT 3558 RCFD 3558 ////////////////// 12.d.
---------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-15
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 0 6 5 5 9
SCHEDULE RC-L--CONTINUED
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize //////////////////
and describe each component of this item over 25% of Schedule RC, item 28, "Total equity //////////////////
capital") ................................................................................... 5591 147,097 13.
----------- -------------------- //////////////////
a. TEXT 5592 RCFD 5592 ////////////////// 13.a.
----------------------------------------------------------------------- //////////////////
b. TEXT 5593 RCFD 5593 ////////////////// 13.b.
----------------------------------------------------------------------- //////////////////
c. TEXT 5594 RCFD 5594 ////////////////// 13.c.
----------------------------------------------------------------------- //////////////////
d. TEXT 5595 RCFD 5595 ////////////////// 13.d.
---------------------------------------------------------------------------------------------------------------
------
C461
----------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
- ------------------------------------------- Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives ----------------------------------------------------------------------------
Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
14. Gross amounts (e.g., notional ///////////////// ///////////////// ///////////////// /////////////////
amounts) (for each column, sum of ///////////////// ///////////////// ///////////////// /////////////////
items 14.a through 14.e must equal ///////////////// ///////////////// ///////////////// /////////////////
sum of items 15, 16.a, and 16.b): ///////////////// ///////////////// ///////////////// /////////////////
----------------------------------------------------------------------------
a. Futures contracts.................. 0 0 0 0 14.a.
----------------------------------------------------------------------------
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
----------------------------------------------------------------------------
b. Forward contracts ................. 0 61,416 0 0 14.b.
----------------------------------------------------------------------------
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
----------------------------------------------------------------------------
c. Exchange-traded option contracts: ///////////////// ///////////////// ///////////////// /////////////////
----------------------------------------------------------------------------
(1) Written options ............... 0 0 0 0 14.c.(1)
----------------------------------------------------------------------------
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
----------------------------------------------------------------------------
(2) Purchased options ............. 0 0 0 0 14.c.(2)
----------------------------------------------------------------------------
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708
----------------------------------------------------------------------------
d. Over-the-counter option contracts: ///////////////// ///////////////// ///////////////// /////////////////
----------------------------------------------------------------------------
(1) Written options ............... 1,313,625 0 0 0 14.d.(1)
----------------------------------------------------------------------------
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
----------------------------------------------------------------------------
(2) Purchased options ............. 1,539,625 0 0 0 14.d.(2)
----------------------------------------------------------------------------
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
----------------------------------------------------------------------------
e. Swaps ............................. 17,484,349 0 0 0 14.e.
----------------------------------------------------------------------------
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
----------------------------------------------------------------------------
15. Total gross notional amount of ///////////////// ///////////////// ///////////////// /////////////////
derivative contracts held for trading. 0 0 0 0 15.
----------------------------------------------------------------------------
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724
----------------------------------------------------------------------------
16. Total gross notional amount of ///////////////// ///////////////// ///////////////// /////////////////
derivative contracts held for ///////////////// ///////////////// ///////////////// /////////////////
purposes other than trading: ///////////////// ///////////////// ///////////////// /////////////////
----------------------------------------------------------------------------
a. Contracts marked to market ........ 340,455 61,416 0 0 16.a.
----------------------------------------------------------------------------
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
----------------------------------------------------------------------------
b. Contracts not marked to market .... 19,997,144 0 0 0 16.b.
----------------------------------------------------------------------------
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
----------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-16
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 0 6 5 5 9
SCHEDULE RC-L--CONTINUED
----------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
- ------------------------------------------- Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives ----------------------------------------------------------------------------
Position Indicators RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
17. Gross fair values of ///////////////// ///////////////// ///////////////// /////////////////
derivative contracts: ///////////////// ///////////////// ///////////////// /////////////////
a. Contracts held for trading: ///////////////// ///////////////// ///////////////// /////////////////
(1) Gross positive fair value ..... 8733 0 8734 0 8735 0 8736 0 17.a.(1)
(2) Gross negative fair value ..... 8737 0 8738 0 8739 0 8740 0 17.a.(2)
b. Contracts held for purposes ///////////////// ///////////////// ///////////////// /////////////////
other than trading that are marked ///////////////// ///////////////// ///////////////// /////////////////
to market: ///////////////// ///////////////// ///////////////// /////////////////
(1) Gross positive fair value ..... 8741 1,045 8742 921 8743 0 8744 0 17.b.(1)
(2) Gross negative fair value ..... 8745 995 8746 861 8747 0 8748 0 17.b.(2)
c. Contracts held for purposes other ///////////////// ///////////////// ///////////////// /////////////////
than trading that are not marked ///////////////// ///////////////// ///////////////// /////////////////
to market: ///////////////// ///////////////// ///////////////// /////////////////
(1) Gross positive fair value ..... 8749 53,265 8750 0 8751 0 8752 0 17.c.(1)
(2) Gross negative fair value ..... 8753 66,018 8754 0 8755 0 8756 0 17.c.(2)
----------------------------------------------------------------------------
-------------------
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
1.-2. Not applicable /////////////////
3. Unused commitments with an original maturity exceeding one year that are reported in /////////////////
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments /////////////////
that are fee paid or otherwise legally binding) ................................................ 3833 1,440,912 M.3.
---------------------
a. Participations in commitments with an original maturity /////////////////
exceeding one year conveyed to others ................................... RCFD 3834 189,492 ///////////////// M.3.a.
---------------------
4. To be completed only by banks with $1 billion or more in total assets: /////////////////
Standby letters of credit and foreign office guarantees (both financial and performance) issued /////////////////
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above .............. 3377 732 M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that /////////////////
have been securitized and sold without recourse (with servicing retained), amounts outstanding /////////////////
by type of loan: /////////////////
a. Loans to purchase private passenger automobiles (to be completed for the /////////////////
September report only) ...................................................................... 2741 0 M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY) .................................. 2742 4,499,388 M.5.b.
c. All other consumer installment credit (including mobile home loans) (to be completed for the /////////////////
September report only) ...................................................................... 2743 53,328 M.5.c.
-----------------
</TABLE>
26
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK:39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-17
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-M--MEMORANDA
---------
C465
-------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- ------------------
<S> <C> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal //////////////////
shareholders, and their related interests as of the report date: //////////////////
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal //////////////////
shareholders, and their related interests ................................................... 6164 186,422 1.a.
b. Number of executive officers, directors, and principal shareholders to whom //////////////////
the amount of all extensions of credit by the reporting bank (including Number //////////////////
extensions of credit to related interests) equals or exceeds the lesser ------------------ //////////////////
of $500,000 or 5 percent of total capital as defined for this purpose RCFD 6165 14 ////////////////// 1.b.
in agency regulations. ------------------ //////////////////
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches //////////////////
and agencies of foreign banks(1) (included in Schedule RC, items 3.a. and 3.b) .................. 3405 0 2.
3. Not applicable. //////////////////
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others //////////////////
(include both retained servicing and purchased servicing): //////////////////
a. Mortgages serviced under a GNMA contract .................................................... 5500 0 4.a.
b. Mortgages serviced under a FHLMC contract: //////////////////
(1) Serviced with recourse to servicer ..................................................... 5501 0 4.b.(1)
(2) Serviced without recourse to servicer .................................................. 5502 0 4.b.(2)
c. Mortgages serviced under a FNMA contract: //////////////////
(1) Serviced under a regular option contract ............................................... 5503 0 4.c.(1)
(2) Serviced under a special option contract ............................................... 5504 0 4.c.(2)
d. Mortgages serviced under other servicing contracts .......................................... 5505 0 4.d.
5. To be completed only by banks with $1 billion or more in total assets: //////////////////
Customers' liability to this bank on acceptances outstanding (sum of items 5.a. and 5.b must //////////////////
equal Schedule RC, item 9): //////////////////
a. U.S. addressees (domicile) .................................................................. 2103 5,171 5.a.
b. Non-U.S. addressees (domicile) .............................................................. 2104 0 5.b.
6. Intangible assets: //////////////////
a. Mortgage servicing rights ................................................................... 3164 0 6.a.
b. Other identifiable intangible assets: //////////////////
(1) Purchased credit card relationships .................................................... 5506 21,314 6.b.(1)
(2) All other identifiable intangible assets ............................................... 5507 2,423 6.b.(2)
c. Goodwill .................................................................................... 3163 11,959 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ...................... 2143 35,696 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or //////////////////
are otherwise qualifying for regulatory capital purposes .................................... 6442 0 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to //////////////////
redeem the debt ................................................................................. 3295 0
-------------------
_____________________
(1) Do not report federal funds sold and securities purchased under agreements to resell with other
commercial banks in the U.S. in this item.
27
</TABLE>
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK:39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-18
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-M--CONTINUED
------------------
Dollar Amounts in Thousands Bil Mil Thou
- ---------------------------------------------------------------------------------------------------- -----------------
<S> <C> <C> <C>
8. a. Other real estate owned: /////////////////
(1) Direct and indirect investments in real estate ventures .............................. RCFD 5372 0 8.a.(1)
(2) All other real estate owned: /////////////////
(a) Construction and land development in domestic offices ........................... RCON 5508 0 8.a.(2)(a)
(b) Farmland in domestic offices .................................................... RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ........................... RCON 5510 328 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .............. RCON 5511 0 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ........................... RCON 5512 5,580 8.a.(2)(e)
(f) In foreign offices .............................................................. RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ............ RCFD 2150 5,908 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: /////////////////
(1) Direct and indirect investments in real estate ventures .............................. RCFD 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ........ RCFD 5375 857 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ............ RCFD 2130 857 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ...................... RCFD 5376 19,071 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, ////////////////
item 23, "Perpetual preferred stock and related surplus" ...................................... RCFD 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include /////////////////
proprietary, private label, and third party products): /////////////////
a. Money market funds ........................................................................ RCON 6441 13,867 10.a.
b. Equity securities funds ................................................................... RCON 8427 19,956 10.b.
c. Debt securities funds ..................................................................... RCON 8428 8,088 10.c.
d. Other mutual funds ........................................................................ RCON 8429 0 10.d.
e. Annuities ................................................................................. RCON 8430 10,510 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through /////////////////
10.e above) ............................................................................... RCON 8784 35,131 10.f.
------------------
====================================================================================================================================
-------------------
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------- ------------------
<S> <C> <C> <C>
1. Interbank holdings of capital instruments (to be completed for the December report only): //////////////////
a. Reciprocal holdings of banking organizations' capital instruments ......................... 3836 N/A M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments ...................... 3837 N/A M.1.b.
====================================================================================================================================
28
</TABLE>
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-19
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES, AND OTHER ASSETS
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10,
column A, and in Memorandum items 2 through 4,
column A, as confidential.
---------
C470
---------------------------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
---------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate: ///////////////// ///////////////// /////////////////
a. To U.S. addressees (domicile).................... 1245 1246 4,386 1247 10,590 1.a.
b. To non-U.S. addressees (domicile)................ 1248 1249 0 1250 0 1.b.
2. Loans to depository institutions and acceptances of ///////////////// ///////////////// /////////////////
other banks: ///////////////// ///////////////// /////////////////
a. To U.S. banks and other U.S. depository ///////////////// ///////////////// /////////////////
institutions..................................... 5377 5378 5379 0 2.a.
b. To foreign banks................................. 5380 5381 5382 0 2.b.
3. Loans to finance agricultural production and other ///////////////// ///////////////// /////////////////
loans to farmers..................................... 1594 1597 1583 42 3.
4. Commerical and industrial loans: ///////////////// ///////////////// /////////////////
a. To U.S. addressees (domicile).................... 1251 1252 7,234 1253 4,946 4.a.
b. To non-U.S. addressees (domicile)................ 1254 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and ///////////////// ///////////////// /////////////////
other personal expenditures: ///////////////// ///////////////// /////////////////
a. Credit cards and related plans................... 5383 5384 5385 15 5.a.
b. Other (includes single payment, installment, and ///////////////// ///////////////// /////////////////
all student loans)............................... 5386 5387 8,632 5388 3,848 5.b.
6. Loans to foreign governments and official ///////////////// ///////////////// /////////////////
institutions......................................... 5389 5390 0 5391 0 6.
7. All other loans...................................... 5459 5460 1,649 5461 71 7.
8. Lease financing receivables: ///////////////// ///////////////// /////////////////
a. Of U.S. addressees (domicile).................... 1257 1258 1259 3,173 8.a.
b. Of non-U.S. addressees (domicile)................ 1271 1272 1791 0 8.b.
9. Debt securities and other assets (exclude other real ///////////////// ///////////////// /////////////////
estate owned and other repossessed assets)........... 3505 3506 0 3507 0 9.
---------------------------------------------------------
==================================================================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.
---------------------------------------------------------
10. Loans and leases reported in items 1 RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
through 8 above which are wholly or partially ---------------------------------------------------------
guaranteed by the U.S. Government..................... 5612 5613 4,811 5614 173 10.
a. Guaranteed portion of loans and leases included ///////////////// ///////////////// /////////////////
in item 10 above.................................. 5615 5616 4,811 5617 144 10.a.
---------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-20
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-N--CONTINUED
---------
C473
---------------------------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
---------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Restructured loans and leases included in Schedule ///////////////// ///////////////// /////////////////
RC-N, items 1 through 8, above (and not reported in ///////////////// ///////////////// /////////////////
Schedule RC-C, part I, Memorandum item 2)............ 1658 1659 1661 M.1.
2. Loans to finance commercial real estate, ///////////////// ///////////////// /////////////////
construction, and land development activities (not ///////////////// ///////////////// /////////////////
secured by real estate) included in Schedule RC-N, ///////////////// ///////////////// /////////////////
items 4 and 7, above................................. 6558 6559 250 6560 0 M.2.
----------------- ----------------- -----------------
3. Loans secured by real estate in domestic offices RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
(included in Schedule RC-N, item 1, above): ----------------- ----------------- -----------------
a. Construction and land development................ 2759 2769 413 3492 2,147 M.3.a.
b. Secured by farmland.............................. 3493 3494 0 3495 0 M.3.b.
c. Secured by 1-4 family residential properties: ///////////////// ///////////////// /////////////////
(1) Revolving, open-end loans secured by 1-4 ///////////////// ///////////////// /////////////////
family residential properties and extended ///////////////// ///////////////// /////////////////
under lines of credit....................... 5398 5399 937 5400 0 M.3.c.(1)
(2) All other loans secured by 1-4 family ///////////////// ///////////////// /////////////////
residential properties...................... 5401 5402 990 5403 2,874 M.3.c.(2)
d. Secured by multifamily (5 or more) residential ///////////////// ///////////////// /////////////////
properties....................................... 3499 3500 222 3501 0 M.3.d.
e. Secured by nonfarm nonresidential properties..... 3502 2503 0 3504 0 M.3.e.
---------------------------------------------------------
-------------------------------------
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
-------------------------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou
-------------------------------------
4. Interest rate, foreign exchange rate, and other ///////////////// /////////////////
commodity and equity contracts: ///////////////// /////////////////
a. Book value of amounts carried as assets.......... 3522 3528 0 M.4.a.
b. Replacement cost of contracts with a positive ///////////////// /////////////////
replacement cost................................. 3529 3530 0 M.4.b.
-------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK:39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-21
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE ASSESSMENTS
---------
C475
-------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- ------------------
<S> <C>
1. Unposted debits (see instructions): //////////////////
a. Actual amount of all unposted debits ....................................................... 0030 0 1.a.
OR //////////////////
b. Separate amount of unposted debits: //////////////////
(1) Actual amount of unposted debits to demand deposits ................................... 0031 0 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... 0032 0 1.b.(2)
2. Unposted credits (see instructions): //////////////////
a. Actual amount of all unposted credits ...................................................... 3510 N/A 2.a.
OR //////////////////
b. Separate amount of unposted credits: //////////////////
(1) Actual amount of unposted credits to demand deposits .................................. 3512 0 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total //////////////////
deposits in domestic offices) .................................................................. 3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in Puerto //////////////////
Rico and U.S. territories and possessions (not included in total deposits): //////////////////
a. Demand deposits of consolidated subsidiaries ............................................... 2211 5,948 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries .................................. 2351 10,762 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ....................... 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: //////////////////
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) ................... 2229 0 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ...... 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches //////////////////
(included in Schedule RC-G, item 1.b) ...................................................... 5515 0 5.c.
-------------------
-------------------
Item 6 is not applicable to state nonmember banks that have not been authorized by the //////////////////
Federal Reserve to act as pass-through correspondents. //////////////////
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on //////////////////
behalf of its respondent depository institutions that are also reflected as deposit liabilities //////////////////
of the reporting bank: //////////////////
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5, //////////////////
column B) .................................................................................. 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, //////////////////
item 4 or 5, column A or C, but not column B) .............................................. 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) //////////////////
a. Unamortized premiums ....................................................................... 5516 0 7.a.
b. Unamortized discounts ...................................................................... 5517 0 7.b.
-------------------
====================================================================================================================================
8. TO BE COMPLETED BY BANKS WITH "OAKAR DEPOSITS." -------------------
Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of //////////////////
the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) ....... 5518 N/A 8.
-------------------
====================================================================================================================================
-------------------
9. Deposits in lifeline accounts .................................................................. 5596 //////////// 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total //////////////////
deposits in domestic offices) .................................................................. 8432 0 10.
-------------------
_____________________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction accounts
and all transaction accounts other than demand deposits.
31
</TABLE>
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK:39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-22
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-O--CONTINUED
-------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- ------------------
<S> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for //////////////////
certain reciprocal demand balances: //////////////////
a. Amount by which demand deposits would be reduced if reciprocal demand balances //////////////////
between the reporting bank and savings associations were reported on a net basis //////////////////
rather than a gross basis in Schedule RC-E ................................................. 8785 0 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances //////////////////
between the reporting bank and U.S. branches and agencies of foreign banks were //////////////////
reported on a gross basis rather than a net basis in Schedule RC-E ......................... A181 0 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of //////////////////
collection were included in the calculation of net reciprocal demand balances between //////////////////
the reporting bank and the domestic offices of U.S. banks and savings associations //////////////////
in Schedule RC-E ........................................................................... A182 0 11.c.
-------------------
Memoranda (to be completed each quarter except as noted) -------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- ------------------
<S> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and //////////////////
1.b.(1) must equal Schedule RC, item 13.a): //////////////////
a. Deposit accounts of $100,000 or less: //////////////////
(1) Amount of deposit accounts of $100,000 or less......................................... 2702 2,445,043 M.1.a.(1)
Number //////////////////
(2) Number of deposit accounts of $100,000 or less (to be ----------------------- //////////////////
completed for the June report only) ........................... RCON 3779 N/A ////////////////// M.1.a.(2)
b. Deposit accounts of more than $100,000: ----------------------- //////////////////
(1) Amount of deposit accounts of more than $100,000 ...................................... 2710 2,217,004 M.1.b.(1)
Number //////////////////
----------------------- //////////////////
(2) Number of deposit accounts of more than $100,000 ............. RCON 2722 3,943 ////////////////// M.1.b.(2)
-------------------------------------------
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or YES NO
procedure for determining a better estimate of uninsured deposits than the -------------------
estimate described above ................................................................... 6861 /// X M.2.a.
-------------------
RCON Bil Mil Thou
b. If the box marked YES has been checked, report the estimate of uninsured deposits -------------------
determined by using your bank's method or procedure ........................................ 5597 N/A M.2.b.
-------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be directed: C477
------
JOHN J. DIBLE, SR. REGULATORY ANALYST (614) 248-8592
- ------------------------------------------------------------------------------------- --------------------------------------------
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)
32
</TABLE>
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-23
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-R--REGULATORY CAPITAL
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1996, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than $1
billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C> <C> <C>
---------------
C480
1. Test for determining the extent to which Schedule RC-R must be completed. To be ---------------
completed only by banks with total assets of less than $1 billion. Indicate in the YES NO
appropriate box at the right whether the bank has total capital greater than or -----------------------------
equal to eight percent of adjusted total assets......................................... RCFD 6056 /////// 1.
-----------------------------
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government agency
obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan and lease losses and
selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked NO has
been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
- ----------------------------------------------------------------
NOTE: All banks are required to complete items 2 and 3 below.
See optional worksheet for items 3.a through 3.f.
- ---------------------------------------------------------------- ---------------------------------------------------
(Column A) (Column B)
Subordinated Debt(1) Other
Dollar Amounts in Thousands and Intermediate Limited-Life
- -------------------------------------------------------------------- Term Preferred Stock Capital Instruments
2. Subordinated debt(1) and other limited-life capital instruments ----------------------- -----------------------
(original weighted average maturity of at least five years) RCFD Bil Mil Thou RCFD Bil Mil Thou
with a remaining maturity of: ----------------------- -----------------------
a. One year or less........................................... 3780 0 3786 0 2.a.
b. Over one year through two years............................ 3781 0 3787 0 2.b.
c. Over two years through three years......................... 3782 0 3788 0 2.c.
d. Over three years through four years........................ 3783 0 3789 0 2.d.
e. Over four years through five years......................... 3784 0 3790 0 2.e.
f. Over five years............................................ 3785 189,305 3791 0 2.f.
---------------------------------------------------
///////////////////////
3. Amounts used in calculating regulatory capital ratios (report -----------------------
amounts determined by the bank for its own internal regulatory RCFD Bil Mil Thou
capital analyses consistent with applicable capital standards): -----------------------
a. Tier 1 capital......................................................................... 8274 582,952 3.a.
b. Tier 2 capital......................................................................... 8275 299,932 3.b.
c. Total risk-based capital............................................................... 3792 882,884 3.c.
d. Excess allowance for loan and lease losses............................................. A222 89,810 3.d.
e. Risk-weighted assets (net of all deductions, including excess allowance)............... A223 8,760,370 3.e.
f. "Average total assets" (net of all assets deducted from Tier 1 capital)(2)............. A224 8,475,443 3.f.
-----------------------
---------------------------------------------------
(Column A) (Column B)
Items 4-9 and Memoranda items 1 and 2 are to be completed by banks Assets Recorded Credit Equivalent
that answered NO to item 1 above and by banks with total assets of on the Amount of Off-Balance
$1 billion or more. Balance Sheet Sheet Items(3)
----------------------- -----------------------
4. Assets and credit equivalent amounts of off-balance sheet items RCFD Bil Mil Thou RCFD Bil Mil Thou
assigned to the Zero percent risk category: ----------------------- -----------------------
a. Assets recorded on the balance sheet: /////////////////////// ///////////////////////
(1) Securities issued by, other claims on, and claims /////////////////////// ///////////////////////
unconditionally guaranteed by, the U.S. Government /////////////////////// ///////////////////////
and its agencies and other OECD central governments... 3794 126,925 /////////////////////// 4.a.(1)
(2) All other............................................. 3795 67,946 /////////////////////// 4.a.(2)
b. Credit equivalent amount of off-balance sheet items........ /////////////////////// 3796 45,409 4.b.
---------------------------------------------------
- ------------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(3) Do not report in column B the risk-weighted amount of assets reported in column A.
</TABLE>
33
<PAGE>
<TABLE>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-24
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 06559
SCHEDULE RC-R--CONTINUED
---------------------------------------------------
(Column A) (Column B)
Assets Recorded Credit Equivalent
on the Amount of Off-Balance
Balance Sheet Sheet Items(1)
----------------------- -----------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items /////////////////////// ///////////////////////
assigned to the 20 percent risk category: /////////////////////// ///////////////////////
a. Assets recorded on the balance sheet: /////////////////////// ///////////////////////
(1) Claims conditionally guaranteed by the U.S. Government /////////////////////// ///////////////////////
and its agencies and other OECD central governments... 3798 162,244 /////////////////////// 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. /////////////////////// ///////////////////////
Government and its agencies and other OECD central /////////////////////// ///////////////////////
governments; by securities issued by U.S. Government- /////////////////////// ///////////////////////
sponsored agencies; and by cash on deposit............ 3799 0 /////////////////////// 5.a.(2)
(3) All other............................................. 3800 1,357,473 /////////////////////// 5.a.(3)
b. Credit equivalent amount of off-balance sheet items........ /////////////////////// 3801 384,478 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items /////////////////////// ///////////////////////
assigned to the 50 percent risk category: /////////////////////// ///////////////////////
a. Assets recorded on the balance sheet....................... 3802 376,171 /////////////////////// 6.a.
b. Credit equivalent amount of off-balance sheet items........ /////////////////////// 3803 80,083 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items /////////////////////// ///////////////////////
assigned to the 100 percent risk category: /////////////////////// ///////////////////////
a. Assets recorded on the balance sheet....................... 3804 7,377,796 /////////////////////// 7.a.
b. Credit equivalent amount of off-balance sheet items........ /////////////////////// 3805 877,800 7.b.
8. On-balance sheet asset values excluded from the calculation /////////////////////// ///////////////////////
of the risk-based capital ratio(2)............................. 3806 (2,056) /////////////////////// 8.
9. Total assets recorded on the balance sheet (sum of items 4.a, /////////////////////// ///////////////////////
5.a, 6.a, 7.a, and 8, column A) (must equal Schedule RC, /////////////////////// ///////////////////////
item 12 plus items 4.b and 4.c)................................ 3807 9,466,499 /////////////////////// 9.
----------------------- -----------------------
Memoranda
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------- -----------------------
1. Current credit exposure across all off-balance sheet derivative contracts covered by the ///////////////////////
risk-based capital standards............................................................... 8764 55,171 M.1.
-----------------------
----------------------------------------------------------------------
With a remaining maturity of
----------------------------------------------------------------------
(Column A) (Column B) (Column C)
One year or less Over one year Over five years
through five years
----------------------------------------------------------------------
2. Notional principal amounts of off-balance RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou
sheet derivative contracts(3): ----------------------------------------------------------------------
a. Interest rate contracts................. 3809 7,683,709 8766 6,092,617 8767 563,194 M.2.a.
b. Foreign exchange contracts.............. 3812 61,220 8769 0 8770 0 M.2.b.
c. Gold contracts.......................... 8771 0 8772 0 8773 0 M.2.c.
d. Other precious metals contracts......... 8774 0 8775 0 8776 0 M.2.d.
e. Other commodity contracts............... 8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative contracts............. A000 0 A001 0 A002 0 M.2.f.
----------------------------------------------------------------------
- -----------
(1) Do not report in column B the risk-weighted amount of assets reported in column A.
(2) Include the difference between the fair value and the amortized cost of available-for-sale securities in item 8 and report
the amortized cost of these securities in items 4 through 7 above. Item 8 also includes on-balance sheet asset values (or
portions thereof) of off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts
(e.g., futures contracts) not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables not
included in the calculation of credit equivalent amounts of off-balance sheet derivatives as well as any portion of the
allowance for loan and lease losses in excess of the amount that may be included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or less and all futures contracts.
</TABLE>
34
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RC-25
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 0 6 5 5 9
</TABLE>
OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS
REPORTED IN THE REPORTS OF CONDITION AND INCOME
at close of business on September 30, 1996
BANK ONE, COLUMBUS, NA COLUMBUS , OHIO
- --------------------------------- -------------- ---------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public. BANKS
CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT
DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK
CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN
SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters
with no notice to the submitting bank and the truncated statement will appear
as the bank's statement both on agency computerized records and in
computer-file releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
- -------------------------------------------------------------------------------
No comment / / (RCON 6979) c471 c472
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
For regulatory purposes, the Bank defers the recognition of certain excess
income relating to securitized loan sales until cash is received. The effect
of this accounting method has decreased net income for the current year
$48,154,000 and decreased retained earnings on a cumulative basis
$157,052,000.
ILLEGIBLE
-------------------------------------- -----------------
Signature of Executive Officer of Bank Date of Signature
35
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 9/30/96 ST-BK: 39-1580
Address: 100 East Broad Street
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: 0 6 5 5 9
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- -------------------------------------------------------------------------------------------------------------
CALL NO. 197 31 09-30-96 OMB No. For OCC: 1557-0081
STBK: 39-1580 00088 STCERT: 39-06559 OMB No. For FDIC: 3064-0052
BANK ONE, COLUMBUS, NATIONAL ASSOCIA OMB No. For Federal Reserve: 7100-0036
100 EAST BROAD STREET Expiration Date: 3/31/99
COLUMBUS, OH 43271
SPECIAL REPORT
(Dollar Amounts in Thousands)
----------------------------------------------------
CLOSE OF BUSINESS FDIC Certificate Number
DATE C-700
9/30/96 0 6 5 5 9
- -------------------------------------------------------------------------------------------------------------
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- -------------------------------------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of
the Report of Condition. With each Report of Condition, these Laws require all banks to furnish a report of
all loans or other extensions of credit to their executive officers made since the date of the previous
Report of Condition. Data regarding individual loans or other extensions of credit are not required. If no
such loans or other extensions of credit were made during the period, insert "none" against subitem (a).
(Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.) See
Sections 215.2 and 215.3 of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation
0) for the definitions of "executive officer" and "extension of credit," respectively. Exclude loans and
other extensions of credit to directors and principal shareholders who are not executive officers.
- -------------------------------------------------------------------------------------------------------------
----------------
a. Number of loans made to executive officers since the previous Call Report date ...... RCFD 3561 2 a.
----------------
b. Total dollar amount of above loans (in thousands of dollars) ........................ RCFD 3562 150 b.
----------------
c. Range of interest charged on above loans --------------------------------------
(example: 9 3/4% = 9.75) ...................................... RCFD 7701 8.75 % to RCFD 7702 9.25 % c.
--------------------------------------
- -------------------------------------------------------------------------------------------------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year)
- -------------------------------------------------------------------------------------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER/EXTENSION
(TEXT 8904)
JOHN J. DIBLE, SR. REGULATORY ANALYST (614) 248-8592
- -------------------------------------------------------------------------------------------------------------
FDIC 8040/53 (6-95)
</TABLE>
36
