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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AVONDALE MILLS, INC.
(Exact name of co registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
ALABAMA 2228 63-0936782
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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AVONDALE INCORPORATED
(Exact name of co registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
GEORGIA 2228 58-0477150
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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506 SOUTH BROAD STREET
MONROE, GEORGIA 30655
(770) 267-2226
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
G. STEPHEN FELKER
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
AVONDALE MILLS, INC.
506 SOUTH BROAD STREET
MONROE, GEORGIA 30655
(770) 267-2226
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH A COPY TO:
MARY A. BERNARD, ESQ.
KING & SPALDING
120W 45TH STREET
NEW YORK, NEW YORK 10036-4003
(212) 556-2100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. / /
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF CLASS OF SECURITIES TO BE TO BE AGGREGATE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
10 1/4% Senior Subordinated Notes Due
2006...................................... $125,000,000 100% $125,000,000 $43,104
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Guarantees of 10 1/4% Senior Subordinated
Notes Due 2006............................ -- -- -- None(2)
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933.
(2) No fee required pursuant to Rule 457(h).
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
AVONDALE MILLS, INC.
CROSS REFERENCE TABLE
LOCATION IN PROXY STATEMENT/PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-4 LOCATION IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus............... Outside Front Cover Page of Prospectus; Cover
Page of the Registration Statement
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page; Outside Back Cover
Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information................ Prospectus Summary; Risk Factors; The Company;
Selected Historical Consolidated Financial
Data
4. Terms of the Transaction....................... Prospectus Summary; The Exchange Offer;
Description of the Notes; Certain Federal
Income Tax Consequences
5. Pro Forma Financial Information................ Summary; Selected Financial Information
6. Material Contacts with the Company Being
Acquired..................................... Not Applicable
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters................................. Not Applicable
8. Interests of Named Experts and Counsel......... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants.... Not Applicable
11. Incorporation of Certain Information by
Reference.................................... Not Applicable
12. Information With Respect to S-2 or S-3
Registrants.................................. Not Applicable
13. Incorporation of Certain Information by
Reference.................................... Not Applicable
14. Information With Respect to Registrants Other
Than S-3 or S-2 Registrants.................. Prospectus Summary; Risk Factors;
Capitalization; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Selected Historical
Consolidated Financial Data; Business -- The
Company; Business -- Graniteville; The
Exchange Offer; The Transactions; Management;
Security Ownership of Certain Beneficial
Owners and Management; Description of Certain
Indebtedness; Description of the Notes;
Financial Statements
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies...... Not Applicable
16. Information With Respect to S-2 or S-3
Companies.................................... Not Applicable
17. Information With Respect to Companies Other
Than S-2 or S-3 Companies.................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited........... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or in
an Exchange Offer............................ Not Applicable
</TABLE>
<PAGE> 3
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 AN 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 JUNE 7, 1996
AVONDALE MILLS, INC.
OFFER TO EXCHANGE ALL OF ITS OUTSTANDING
10 1/4% SENIOR SUBORDINATED NOTES DUE 2006
FOR 10 1/4% SENIOR SUBORDINATED NOTES DUE 2006
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
---------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1996, UNLESS EXTENDED.
---------------------
Avondale Mills, Inc., an Alabama corporation (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 relating to the
Exchange Offer (the "Letter of Transmittal"), to exchange $1,000 principal
amount of its 10 1/4% Senior Subordinated Notes Due 2006 (the "New Notes"),
which will be registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, for $1,000 principal amount of its outstanding 10 1/4% Senior
Subordinated Notes Due 2006 (the "Old Notes", and, together with the New Notes,
the "Notes"), of which an aggregate of $125,000,000 in principal amount is
outstanding as of the date of this Prospectus. The form and terms of the New
Notes are identical in all material respects to the form and terms of the Old
Notes, except for certain transfer restrictions and registration rights relating
to the Old Notes and except that, if the Exchange Offer is not consummated by
October 28, 1996, the rate at which the Old Notes bear interest will be 10 3/4%
per annum from and including October 28, 1996 until but excluding the date of
consummation of the Exchange Offer.
The New Notes are not redeemable prior to May 1, 2001, except that, until
May 1, 1999, the Company may redeem, at its option, up to $25 million of the
principal amount of the Notes at the redemption price set forth herein plus
accrued interest to the date of redemption with the net proceeds of one or more
Public Equity Offerings (as defined) if at least $100 million of the principal
amount of the Notes remains outstanding after each such redemption. On or after
May 1, 2001, the New Notes are redeemable at the option of the Company, in whole
or in part, at the redemption prices set forth herein plus accrued interest to
the date of redemption. Upon a Change of Control (as defined), each holder of
New Notes may require the Company to repurchase such Notes at 101% of the
principal amount thereof plus accrued interest to the date of repurchase. See
"Description of the Notes".
The New Notes will be unsecured and subordinated to all existing and future
Senior Indebtedness (as defined) of the Company and will be effectively
subordinated to all obligations of any subsidiaries of the Company as may exist
from time to time. As of May 24, 1996, the Company had approximately $193.4
million of Senior Indebtedness outstanding. The New Notes will rank pari passu
in right of payment with all existing and future senior subordinated
indebtedness of the Company and senior to any other subordinated indebtedness of
the Company issued after April 29, 1996. The New Notes will be fully and
unconditionally guaranteed on a senior subordinated basis by Avondale
Incorporated, the sole shareholder of the Company. Contemporaneously with the
closing of the offering of the Old Notes, the Company entered into an amended
and restated revolving credit facility (the "New Credit Facility") with a group
of lenders providing for up to $225 million of loans. The indebtedness under the
New Credit Facility has been guaranteed on a senior basis by Avondale
Incorporated and secured by substantially all of the assets of the Company. See
"Capitalization" and "Pro Forma Financial Information".
The Company will accept for exchange any and all validly tendered Old Notes
on or prior to 5:00 p.m., New York City time, on , 1996, unless
extended (if and as extended, 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. See "The Exchange Offer".
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement (as
defined). Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than broker-dealers, as set forth
below, and any such holder that is an "affiliate" of the Company or Avondale
Incorporated within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business and that such holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes. Any holder who tenders in the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution of the New
Notes or who is an affiliate of the Company or Avondale Incorporated may not
rely upon such interpretations by the staff of the Commission and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. Holders of Old Notes wishing to accept the
Exchange Offer must represent to the Company in the Letter of Transmittal that
such conditions have been met.
Each broker-dealer (other than an affiliate of the Company or Avondale
Incorporated) 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.
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 activities or other trading activities. The Company
has agreed that, for a period of 180 days 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." Any broker-dealer who is an
affiliate of the Company or Avondale Incorporated may not rely on such no-action
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
The Company will not receive any proceeds from this Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BEFORE TENDERING OLD NOTES IN THE EXCHANGE OFFER.
THESE 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
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 1996.
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (the "Registration
Statement", which term shall encompass all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder,
covering the New Notes being offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement. For further
information with respect to the Company and the Exchange Offer, reference is
made to the Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the document or matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference. The Registration Statement, including the exhibits thereto, can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the
Regional Offices of the Commission at 75 Park Place, New York, New York 10007
and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
As a result of the filing of the Registration Statement with the
Commission, the Company and Avondale Incorporated will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. The Company intends
to request the Commission to conditionally exempt the Company from the
informational requirements of the Exchange Act pursuant to Staff Accounting
Bulletin No. 53 and Rule 12(h) of the Exchange Act. In the event that neither
the Company nor Avondale Incorporated is subject to the informational
requirements of the Exchange Act, the Company or Avondale Incorporated will be
required under the Indenture to continue to file with the Commission the annual
and quarterly reports, information, documents or other reports, including,
without limitation, reports on Forms 10-K, 10-Q and 8-K, which would be required
pursuant to the information requirements of the Exchange Act.
i
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and historical and pro forma
financial statements and notes thereto appearing elsewhere in this Prospectus.
Unless the context otherwise requires, all references to (i) the Company or
Avondale are to Avondale Mills, Inc. (the issuer of the Notes) and its
subsidiaries, (ii) Graniteville are to substantially all of the assets and
certain of the liabilities of the textile business of Graniteville Company and
its subsidiaries, (iii) historical or pro forma financial statements or data of
the Company are to the historical or pro forma financial statements or data of
Avondale Incorporated, the sole shareholder of the Company, and the Company on a
consolidated basis and (iv) historical financial statements or data of
Graniteville are to the historical financial statements or data of the textile
business of Graniteville Company. Unless the context otherwise requires, any
reference to a "fiscal" year of the Company or Graniteville, as the case may be,
refers to (i) the Company's fiscal year ended or ending on the last Friday of
August in such year and (ii) Graniteville's fiscal year ended or ending on the
Sunday in December or January nearest the last day of December in such year.
OVERVIEW
On March 31, 1996, Avondale entered into an asset purchase agreement (the
"Asset Purchase Agreement") with Triarc Companies, Inc. ("Triarc") and
Graniteville Company pursuant to which the Company acquired Graniteville on
April 29, 1996. Avondale is one of the largest domestic manufacturers and
marketers of cotton and cotton-blend yarns and is a leading domestic producer of
denim. Graniteville is a leading manufacturer and marketer of cotton and
cotton-blend finished fabrics and is believed by the Company to be the largest
domestic manufacturer of utility wear fabrics in the markets in which it
competes as well as a leading producer of denim. Avondale and Graniteville had
net sales of $538.7 million and $505.7 million, respectively, and EBITDA (as
defined) of $75.1 million and $34.1 million, respectively, during their
respective 1995 fiscal years. Both Avondale and Graniteville have operated in
the textile industry for over 100 years.
The Graniteville Acquisition has increased significantly the size of the
Company. Pro forma for the Graniteville Acquisition, the Company's net sales and
EBITDA in fiscal 1995 would have been $1.0 billion and $119.2 million,
respectively. Avondale believes that the Graniteville Acquisition has or will
(as the case may be), among other things, (i) significantly enhance its presence
in the denim market, establishing it as one of the world's largest producers of
enhanced denim fabrics, (ii) expand substantially its denim customer base,
giving rise to various cross-selling opportunities, (iii) expand its existing
product lines as well as provide entry into new markets, (iv) enhance the
vertical integration of its operations, (v) result in substantial raw material
purchasing leverage, (vi) provide important raw material sourcing opportunities
that the Company believes should enhance capacity utilization and improve
Graniteville's profit margins, (vii) better position Avondale to take advantage
of market opportunities as they arise within the textile industry as the trend
towards consolidation of textile manufacturing operations continues and (viii)
result in certain cost savings and business synergies.
AVONDALE
GENERAL
Avondale is one of the largest domestic manufacturers of cotton and
cotton-blend yarns and is a leading domestic producer of denim. Avondale markets
its products primarily in the United States to the apparel market and, to a
lesser extent, the home furnishings and industrial products markets. The
Company's three operating divisions -- yarns, finished fabrics and greige
(unfinished, undyed) fabrics -- operate 14 modern manufacturing facilities in
the Southeast. The Company's yarn, finished fabric and greige fabric products
accounted for 54.5%, 37.9% and 7.6%, respectively, of the Company's net sales of
$538.7 million in fiscal 1995.
Avondale Incorporated's predecessor was founded in 1895 by the family of G.
Stephen Felker, the Company's Chairman, President and Chief Executive Officer.
Prior to 1986, Avondale Incorporated's predecessor primarily manufactured and
marketed greige fabrics. In July 1986, Avondale Incorporated's
1
<PAGE> 6
predecessor, together with Mr. Felker and certain other investors, acquired the
Company (the "1986 Acquisition"). The 1986 Acquisition expanded the Company's
product line to include yarns and finished fabrics and significantly increased
the Company's revenue base. In their respective last full fiscal years preceding
the 1986 Acquisition, Avondale Incorporated's predecessor and Avondale had net
sales of $40.5 million and $238.3 million, respectively.
Since the 1986 Acquisition, the Company's management team has implemented a
strategy focused on producing high quality, value-added yarns and fabrics,
reducing incremental manufacturing unit costs, maximizing manufacturing
flexibility, optimizing raw material sourcing and utilization and providing
superior customer service. Over the past 11 years, through acquisitions and
improved performance, management has increased net sales from the $40.5 million
achieved by Avondale Incorporated's predecessor in fiscal 1985 (the last full
fiscal year prior to the 1986 Acquisition) to $538.7 million in fiscal 1995, a
compound annual growth rate of 29.5%. Since the 1986 Acquisition, the Company's
EBITDA margin has averaged 15.0% per year from fiscal 1987 through fiscal 1995.
The Company's operations have been expanded through acquisitions, an
ongoing capital improvements program and management's ability to optimize the
productive output of the Company's manufacturing facilities. The Company's
ongoing capital improvements program focuses on modernizing and expanding the
Company's operations to maximize manufacturing flexibility, increase capacity
and reduce incremental unit costs. Avondale has invested over $100 million
during the past five fiscal years in connection with this capital improvements
program. Avondale is currently implementing a $31 million expansion of its denim
manufacturing operations. Avondale expects this project, which should be
completed by the end of fiscal 1997, will expand its denim manufacturing
capacity by 25%. This expansion follows a previous 15% denim expansion completed
in fiscal 1995 during which the Company installed indigo-dyeing capacity in
excess of its weaving and finishing capacity. The Company's current denim
expansion program will allow the Company to fully utilize the previously
installed indigo-dyeing capacity, which should enhance cash flow returns on the
current investment. Avondale has also successfully redeployed capital by closing
certain manufacturing facilities and, in other cases, moving manufacturing
equipment among its locations.
PRODUCTS
Yarns. Avondale is one of the largest domestic producers and marketers of
cotton and cotton-blend yarns and believes it is the largest supplier of
open-end yarns to the domestic knitting and weaving industry. The Company's
yarns are used in the manufacture of a broad range of items, including apparel
(primarily T-shirts, underwear, hosiery, knitted outerwear, denim, and woven and
fleece sportswear) and home furnishings. Avondale competes with other yarn
manufacturers by being a low-cost producer due to its high volume production
capability and by using its manufacturing flexibility to respond quickly and
efficiently to shifts in customer demand. Yarn sales were $293.5 million in
fiscal 1995.
Finished Fabrics. Avondale is a leading producer of woven cotton finished
fabrics, principally denim, used in the manufacture of jeans, sportswear and
activewear. The Company develops and manufactures a broad range of high quality,
value-added denim fabrics. Avondale competes with other fabric manufacturers by
providing its customers superior product development and service, together with
a wide variety of denim styles and finishes. Avondale believes that, as a result
of its competitive focus, it has become the leading supplier of denim fabrics to
VF Corporation, the manufacturer of Lee(R), Rider(R), Wrangler(R), Rustler(R),
Girbaud(R) and HealthTex(TM) brand jeans. Finished fabric sales were $204.0
million in fiscal 1995.
Greige Fabrics. Avondale produces undyed, unfinished cotton and
cotton-blend fabrics that are marketed to apparel, home furnishings and
industrial products manufacturers. Avondale capitalizes on its manufacturing
flexibility within its greige fabrics division by altering its overall product
mix to meet changing customer needs while maintaining high production
efficiencies. Greige fabric sales were $41.2 million in fiscal 1995.
Avondale is incorporated under the laws of the State of Alabama. Avondale
Incorporated is incorporated under the laws of the State of Georgia. The
Company's and Avondale Incorporated's principal executive
2
<PAGE> 7
offices are located at 506 South Broad Street, Monroe, Georgia 30655, and their
telephone number is (770) 267-2226.
GRANITEVILLE
GENERAL
Graniteville, founded over 150 years ago, is a leading manufacturer and
marketer of cotton and cotton-blend finished fabrics. Graniteville markets its
products, which include utility wear fabrics, sportswear fabrics, denim and
specialty fabrics, primarily in the United States to the apparel and industrial
products markets. Graniteville operates 10 manufacturing facilities, including a
modern piece-dyeing and finishing plant believed by the Company to be the
largest in the United States (in terms of pounds processed), all within a
20-mile radius of Graniteville, South Carolina. Graniteville's utility wear
fabrics, sportswear fabrics, denim and specialty fabrics accounted for 47.8%,
16.9%, 27.2% and 8.1%, respectively, of Graniteville's net sales of $505.7
million in fiscal 1995.
Over the past 10 years, Graniteville's net sales have increased on a scale
similar to the Company's sales growth, increasing from $279.5 million in fiscal
1986 to $505.7 million in fiscal 1995, a compound annual growth rate of 6.8%.
PRODUCTS
Utility Wear Fabrics. Avondale believes Graniteville is the largest
domestic manufacturer and marketer of fabrics used in the manufacture of utility
wear (principally uniforms and other occupational apparel) for the U.S. rental
and retail markets in which it competes. Graniteville's utility wear fabric
customers require durable fabrics characterized by long wear and easy care.
Graniteville works closely with customers to develop fabrics with these and
other enhanced performance characteristics. Graniteville's utility wear fabric
customers include, among others, Red Kap Industries, Inc., Williamson-Dickie
Mfg. Co., Inc., Carhartt, Inc., Cintas Corporation and American Uniform Company,
Inc. Utility wear fabric sales were $241.7 million in fiscal 1995.
Sportswear Fabrics. Graniteville is a leading manufacturer and marketer of
woven cotton piece-dyed fabrics used primarily in the manufacture of men's,
women's and children's sportswear, casual wear and outerwear. Graniteville's
sportswear fabric customers include, among others, Liz Claiborne Inc., Farah
Incorporated, Disenos De Alta Moda, S.A. (a Mexican Guess(TM) licensee), Levi
Strauss & Co. Inc. (Dockers(TM) and Brittania(TM)) and Wrangler, Inc. Sportswear
fabric sales were $85.6 million in fiscal 1995.
Denim. Graniteville is a leading manufacturer of indigo-dyed denim fabrics
used in the production of branded and private label men's, women's and
children's fashion apparel as well as casual jeans, sportswear and outerwear.
Graniteville develops and manufactures new and innovative colors, textures,
weaves and finishes for its customers, which has helped make Graniteville's
denim fabrics leaders in the branded and private label, fashion-oriented segment
of the apparel market. Graniteville's denim customers include, among others,
Stuffed Shirt Inc., Michael Caruso & Company Inc. (Bongo(R)), The Gap Stores,
Inc. and Levi Strauss & Co. Inc. Denim sales were $137.4 million in fiscal 1995.
Specialty Fabrics. Graniteville produces a variety of fabrics that are
marketed to recreational, industrial and military products manufacturers.
Graniteville's specialty fabrics include coated fabrics for awnings, tents, boat
covers and camper tops. Graniteville also dyes customers' finished apparel
products, which enables customers to meet short delivery schedules while
minimizing inventories. Specialty fabric sales were $41.0 million in fiscal
1995.
3
<PAGE> 8
PURPOSE OF THE GRANITEVILLE ACQUISITION
Avondale believes that the Graniteville Acquisition will significantly
enhance its competitive position and business prospects. Avondale expects the
Graniteville Acquisition will provide it with the following benefits:
- Leading Position in Denim. As a result of the consummation of the
Graniteville Acquisition, Avondale believes that it is one of the world's
largest producers of enhanced denim fabrics (based on the current
manufacturing capacity of Avondale and Graniteville). Pro forma for the
Graniteville Acquisition, the Company's fiscal 1995 denim sales would have
been $308.6 million. The U.S. denim market is highly concentrated, and the
Company believes that approximately four denim manufacturers currently
supply 65% of the market. The high cost of building new manufacturing
capacity and the expertise required in indigo-dyeing operations are
generally barriers to entry. The Graniteville Acquisition has
approximately doubled the Company's current denim manufacturing capacity
and market share, and Avondale believes that, pro forma for the
Graniteville Acquisition, it would have supplied approximately 15% of the
denim market in fiscal 1995 and that it would have been among five denim
manufacturers supplying approximately 80% of the market. In addition,
Avondale is currently implementing a 25% expansion of its denim
manufacturing capacity, which should be completed by the end of fiscal
1997. Avondale believes that its significantly enhanced presence in the
denim market will improve its competitive position. Further, the
Graniteville Acquisition has significantly expanded the Company's denim
customer base, which the Company believes will enable it to increase denim
sales due to cross-selling opportunities because Avondale and Graniteville
generally do not sell denim to the same customers.
- Expanded Product Line. The Graniteville Acquisition has expanded the
Company's existing product lines as well as provided entry into new
markets. Graniteville is a leading manufacturer of piece-dyed fabrics used
primarily in the manufacture of sportswear, casual wear, outerwear and
utility wear. Avondale currently has no piece-dyeing capabilities. As a
result of the Graniteville Acquisition, Avondale now operates what it
believes is the largest (in terms of pounds processed) piece-dyeing and
finishing plant in the United States.
Avondale believes that Graniteville is the largest domestic manufacturer
and marketer of fabrics used in the manufacture of utility wear
(principally uniforms and other occupational apparel) for the U.S. rental
and retail markets in which it competes. Prior to the Graniteville
Acquisition the Company did not participate in those markets. The utility
wear fabric segment of the textile industry is generally less cyclical
than the industry as a whole as its end-markets are not as sensitive to
changes in prevailing fashion trends or discretionary consumer spending.
Pro forma for the Graniteville Acquisition, utility wear fabric sales
would have accounted for 23.0% of the Company's net sales in fiscal 1995.
As a result, Avondale believes that the addition of utility wear fabrics
to its product line will help reduce the cyclicality of the Company's
results of operations.
- Enhanced Vertical Integration. Graniteville's manufacturing operations
consume substantial amounts of yarn. Although Graniteville produces a
significant portion of its yarn requirements, it purchases large
quantities from outside suppliers (which currently include the Company).
In fiscal 1995, Graniteville purchased approximately 13 million pounds of
yarn from outside suppliers. Pro forma for the Graniteville Acquisition,
during fiscal 1995, Avondale would have produced approximately 431 million
pounds of yarn for internal consumption and sale to outside customers.
Avondale expects that its option to supply Graniteville's yarn needs will
enhance its ability to maintain high operating rates within its yarns
division during periods of reduced demand. The Company's focus on
maintaining high capacity utilization helps to lower unit production costs
generally and to maintain relatively constant unit production costs during
periods of weak economic conditions within the textile industry. Further,
the Company's yarn manufacturing operations are more cost-efficient than
those of Graniteville. Consequently, Avondale believes that it will be
able to improve Graniteville's profit margins by reducing raw material
costs to the extent the Company supplies an increased portion of
Graniteville's yarn needs as well as through productivity and cost
improvements as discussed below.
4
<PAGE> 9
- Greater Critical Mass. The Graniteville Acquisition has significantly
increased the Company's revenue base. Pro forma for the Graniteville
Acquisition, the Company's net sales for fiscal 1995 would have been over
$1.0 billion. Avondale believes that the trend towards consolidation
within the textile industry will continue. Avondale believes that its
increased size and presence in the textile industry will better position
it to take advantage of market opportunities as they arise.
- Cost Savings and other Business Synergies. As a result of the
consummation of the Graniteville Acquisition, Avondale expects to realize
cost savings from, among other things, general and administrative expense
consolidation and improvements in Graniteville's cost of goods sold.
Avondale intends to implement a multi-year capital improvements program to
improve Graniteville's manufacturing operations by modernizing and
reconfiguring Graniteville's manufacturing processes consistent with the
Company's own modernization strategy. Avondale expects these improvements
will significantly increase Graniteville's manufacturing flexibility and
productivity while reducing costs. Avondale also believes that the
Graniteville Acquisition will involve business synergies including, among
others, (i) enhanced vertical integration, (ii) greater raw material
purchasing leverage, (iii) enhanced raw material sourcing flexibility due
to Graniteville's substantial consumption of greige fabrics, which can be
sourced in world markets when price differentials between domestic and
world greige fabric prices exist and (iv) substantial cross-selling
opportunities, which may enable the Company to increase its sales and
improve its cost structure. However, there can be no assurance that the
Company will achieve the foregoing cost savings or business synergies. See
"Risk Factors -- Integration of the Graniteville Acquisition".
BUSINESS STRATEGY
Avondale's business strategy seeks to maximize profitability over complete
business cycles. As part of this strategy, Avondale generally maintains high
levels of capacity utilization and capitalizes on its manufacturing flexibility
through all phases of the business cycle. By adjusting its product mix quickly
in response to changes in consumer demand, Avondale is able to operate its
manufacturing facilities at substantially full capacity even during weak phases
in the business cycle, thereby maintaining lower labor turnover and better
control over manufacturing costs per unit. As a result, management believes that
profit margins recover faster as strong demand returns.
The principal components of the Company's strategy include the following:
- Cost Improvement. Avondale generally uses the most advanced
manufacturing technologies, runs its facilities at substantially full
capacity and enhances operational efficiencies to maximize productivity
and minimize manufacturing costs per unit. As a result, Avondale has
developed a strong record of reducing incremental unit costs and
generating a high average EBITDA margin.
- Value-Added Products. Avondale focuses on developing, manufacturing and
marketing value-added yarns and fabrics, particularly in its finished
fabrics division, to complement its low-cost, volume-oriented yarn
manufacturing capability.
- Manufacturing Flexibility. Avondale designs and equips its facilities to
increase manufacturing flexibility, which enables it to adjust its product
mix quickly in response to changes in customer demand.
- Raw Material Sourcing and Utilization. Avondale, which believes it will
be the largest U.S. consumer of raw cotton as a result of the Graniteville
Acquisition, employs strategic buying practices intended to manage its
cotton costs and ensure a continuous supply. Avondale also conducts
comprehensive testing and classification of its cotton to help ensure
cost-efficient utilization.
- Customer Service. Avondale is committed to being an industry leader in
providing superior customer service through innovative product
development, the manufacture of high quality, value-added yarns and
fabrics, just-in-time delivery and quick response manufacturing.
5
<PAGE> 10
THE TRANSACTIONS
On March 31, 1996, Avondale entered into the Asset Purchase Agreement with
Triarc and Graniteville Company pursuant to which Avondale acquired Graniteville
on April 29, 1996 for aggregate consideration of $255 million in cash less the
"deficit amount". The deficit amount, if any, will be equal to the excess of
$242 million over the net book value, as of April 29, 1996, of assets acquired
and liabilities assumed in connection with the Graniteville Acquisition. The
parties are in the process of determining the deficit amount, if any. If there
is a deficit amount, Graniteville Company (or Triarc as guarantor) will be
required to repay to the Company an amount equal to the deficit amount, plus
interest thereon from April 29, 1996. On May 21, 1996, Triarc, on behalf of
Graniteville Company, paid to the Company $5.0 million, which amount will be
applied to the deficit amount, if any. Interest will not accrue on such $5.0
million after the date of such payment. In addition, Avondale paid (or will pay)
$5.4 million in acquisition costs, which include, among other things, $2.6
million in prepayment penalties that were incurred by Graniteville Company and
reimbursed by the Company in connection with the repayment by Graniteville
Company of certain of its outstanding indebtedness.
The purchase price for the Graniteville Acquisition was financed with the
net proceeds of the following concurrent financing transactions (collectively,
the "Financings"):
(i) the offer and sale of $125.0 million principal amount of Old Notes
(the "Offering");
(ii) borrowings of $173.4 million under the New Credit Facility (which
included amounts used to refinance $130.0 million of borrowings outstanding
as of April 29, 1996 under the Old Credit Facility and $45.0 million to
repay in full the Company's 5.65% Payment-In-Kind Subordinated Notes (the
"5.65% Subordinated Notes")), which when combined with the Receivables
Securitization Facility (as defined below), replaced the Company's then
existing credit facility (the "Old Credit Facility"). Wachovia Bank of
Georgia, N.A. ("Wachovia") and The First National Bank of Chicago ("First
Chicago") act as agents under the New Credit Facility;
(iii) proceeds of $104.0 million from the sale of certain trade
receivables in connection with a securitization facility (the "Receivables
Securitization Facility") of certain trade receivables originated by the
Company. First Chicago provided the Receivables Securitization Facility to
the Company through a special purpose vehicle administered by it; and
(iv) an equity private placement of 2,222,223 shares of Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), of Avondale
Incorporated for an aggregate purchase price of $40.0 million (the "Equity
Private Placement"). Such shares were purchased by affiliates
(collectively, the "Clipper Group") of Clipper Capital Partners, L.P.
("Clipper") and represent 16.7% of the outstanding shares of all classes of
common stock of Avondale Incorporated and 7.0% of the combined outstanding
voting power thereof. In March 1994, the Company repurchased all of the
Class A Common Stock of Avondale Incorporated owned by certain entities
that participated in the 1986 Acquisition, some of which are affiliates of
certain purchasers in the Equity Private Placement.
The Graniteville Acquisition and the Financings and the application of the
net proceeds of each of the Financings (including repayment of all borrowings
outstanding under the Old Credit Facility and the 5.65% Subordinated Notes) are
herein collectively referred to as the "Transactions".
6
<PAGE> 11
The following table sets forth the sources and uses of funds in connection
with the Transactions:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Old Notes........................................................... $ 125.0
New Credit Facility................................................. 173.4
Receivables Securitization Facility................................. 104.0
Equity Private Placement............................................ 40.0
-------------
Total sources.................................................. $ 442.4
=========
USES OF FUNDS:
Graniteville Acquisition(a)......................................... $ 260.4
Repayment of Old Credit Facility.................................... 130.0
Redemption of 5.65% Subordinated Notes.............................. 45.0
Fees and expenses(b)................................................ 7.0
-------------
Total uses..................................................... $ 442.4
=========
</TABLE>
- ---------------
(a) Includes $255.0 million, the purchase price for the Graniteville Acquisition
(unadjusted for the deficit amount, if any), and $5.4 million of acquisition
costs, which include, among other things, $2.6 million of prepayment
penalties that were incurred by Graniteville Company and reimbursed by
Avondale in connection with the repayment by Graniteville Company of certain
of its outstanding indebtedness in connection with the Graniteville
Acquisition.
(b) Includes (i) the discount of $3.1 million paid by the Company to the Initial
Purchaser in connection with the Offering, (ii) closing and other fees
aggregating $0.7 million paid in connection with the Equity Private
Placement and (iii) estimated legal, accounting and other fees aggregating
$3.2 million paid or payable in connection with the Transactions.
7
<PAGE> 12
The Exchange Offer
Securities Offered......... $125,000,000 aggregate principal amount of 10 1/4%
Senior Subordinated Notes due 2006, which have been
registered under the Securities Act (the "New
Notes", and, together with the Old Notes, the
"Notes").
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"), the Company hereby offers to
exchange (the "Exchange Offer"), $1,000 principal
amount of New Notes in exchange for each $1,000
principal amount of Old Notes that are validly
tendered and not withdrawn on or prior to the
Expiration Date (as defined). Holders of Old Notes
whose Old Notes are not tendered and accepted in
the Exchange Offer will continue to hold such Old
Notes and will be entitled to all the rights and
preferences and will be subject to the limitations
applicable thereto under the Indenture governing
the Old Notes and the New Notes.
Resale..................... Based on interpretations by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes the New Notes
issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other
than broker-dealers, as set forth below, and any
such holder that is an "affiliate" of the Company
or Avondale Incorporated within the meaning of Rule
405 under the Securities Act) without compliance
with the registration and prospectus delivery
requirements of the Securities Act, provided that
such New Notes are acquired in the ordinary course
of such holder's business and that such holder has
no arrangement or understanding with any person to
participate in the distribution of such New Notes.
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the New Notes
or who is an affiliate of the Company or Avondale
Incorporated may not rely upon such interpretations
by the staff of the Commission and, in the absence
of an exemption therefrom, must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any
secondary resale transaction. Failure to comply
with such requirements in such instance may result
in such holder incurring liabilities under the
Securities Act for which the holder is not
indemnified by the Company. Each broker-dealer
(other than an affiliate of the Company or Avondale
Incorporated) 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. The Company has agreed that, for a
period of 180 days after the Expiration Date (as
defined herein), it will make this Prospectus
available to any broker-dealer for use in
connection with any such resale. See "Plan of
Distribution". Any broker-dealer who is an
affiliate of the Company or Avondale Incorporated
may not rely on such no-action letters and must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with a secondary resale transaction. The
Exchange Offer is not being made to, nor will the
Company accept surrenders for exchange from,
8
<PAGE> 13
holders of Old Notes in any jurisdiction in which
this Exchange Offer or the acceptance thereof would
not be in compliance with the securities or blue
sky laws of such jurisdiction.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1996, unless
extended, in which case the term "Expiration Date"
shall mean the latest date and time to which the
Exchange Offer is extended.
Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Conditions of the Exchange
Offer." The Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes being
tendered.
Procedures for Tendering
Old Notes................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or facsimile thereof,
together with such Old Notes and any other required
documentation to The Bank of New York, the Exchange
Agent, at the address set forth herein and therein.
By executing the Letter of Transmittal, each holder
will represent to the Company that, among other
things, the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New
Notes, whether or not such person is the holder,
that neither the holder nor any such other person
has an arrangement or understanding with any person
to participate in the distribution of such New
Notes and that neither the holder nor any such
other person is an "affiliate" of the Company or
Avondale Incorporated within the meaning of Rule
405 under the Securities Act or, that if such
holder or other person is an affiliate of the
Company or Avondale Incorporated, such holder or
other person will comply with the registration and
prospectus delivery requirements of the Securities
Act to the extent applicable. See "The Exchange
Offer -- Terms of the Exchange Offer -- Procedures
for Tendering Old Notes" and "The Exchange
Offer -- Terms of the Exchange Offer -- Guaranteed
Delivery Procedures".
Special Procedures for
Beneficial Owners........ Any 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 such 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 on his own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal and delivering his Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such beneficial
owner's name or obtain a properly completed bond
power from the registered holder.
The transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date. See "The
Exchange Offer -- Terms of the Exchange
Offer -- Procedures for Tendering Old Notes".
9
<PAGE> 14
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date, or who
cannot complete the procedure for book-entry
transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Terms of the Exchange Offer -- Guaranteed
Delivery Procedures".
Acceptance of Old Notes and
Delivery of New Notes.... Subject to certain conditions (as described more
fully in "The Exchange Offer -- Conditions of the
Exchange Offer"), the Company will accept for
exchange any and all Old Notes which are properly
tendered in the Exchange Offer and not withdrawn,
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 as promptly as
practicable following the Expiration Date.
Withdrawal Rights.......... Except as otherwise provided herein, 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 -- Terms of the Exchange
Offer -- Withdrawal of Tenders of Old Notes".
Certain Federal Income Tax
Considerations........... For a discussion of certain federal income tax
considerations relating to the exchange of the New
Notes for the Old Notes, see "Certain Federal
Income Tax Considerations".
Exchange Agent............. The Bank of New York is the Exchange Agent. The
address, telephone number and facsimile number of
the Exchange Agent are set forth in "The Exchange
Offer -- Exchange Agent".
Consequences of Failure to
Exchange Old Notes....... Holders of Old Notes who do not exchange their Old
Notes for New Notes pursuant to the Exchange Offer
will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the
legend thereon as a consequence of the issuance of
the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration
requirements of the Securities Act and applicable
state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws. The Company does not currently anticipate
that it will register Old Notes under the
Securities Act. See "Description of the
Notes -- Registration Rights".
SUMMARY OF TERMS OF NEW NOTES
The Exchange Offer applies to $125,000,000 aggregate principal amount of
Old 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
will be registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof and (ii) holders of the New Notes will
not be entitled to certain rights of holders of Old Notes under the Registration
Rights Agreement, which will terminate upon consummation of the Exchange Offer.
The New Notes will evidence the same debt as the Old Notes, will be entitled to
the
10
<PAGE> 15
benefits of the Indenture and will be treated as a single class thereunder with
any Old Notes that remain outstanding.
Securities Offered......... $125,000,000 aggregate principal amount of 10 1/4%
Senior Subordinated Notes Due 2006, which have been
registered under the Securities Act.
Maturity Date.............. May 1, 2006.
Interest Payment Dates..... May 1 and November 1 of each year, commencing
November 1, 1996.
Optional Redemption........ The Notes are not redeemable prior to May 1, 2001,
except that, until May 1, 1999, the Company may
redeem, at its option, up to an aggregate of $25
million of the principal amount of the Notes at the
redemption price set forth herein plus accrued
interest to the date of redemption with the net
proceeds of one or more Public Equity Offerings if
at least $100 million of the principal amount of
the Notes remain outstanding after each such
redemption. On or after May 1, 2001, the Notes are
redeemable at the option of the Company, in whole
or in part, at the redemption prices set forth
herein plus accrued interest to the date of
redemption. See "Description of the
Notes -- Optional Redemption".
Change of Control.......... Upon a Change of Control, each holder of the Notes
may require the Company to repurchase the Notes
held by such holder at 101% of the principal amount
thereof plus accrued interest to the date of
repurchase. See "Description of the Notes -- Change
of Control".
Ranking.................... The Notes are unsecured and subordinated to all
existing and future Senior Indebtedness of the
Company and are effectively subordinated to all
obligations of any subsidiaries of the Company as
may exist from time to time. As of May 24, 1996,
the Company had approximately $193.4 million of
Senior Indebtedness outstanding. The Notes rank
pari passu in right of payment with all existing
and future senior subordinated indebtedness of the
subordinated indebtedness of the Company issued
after April 29, 1996. See "Description of the
Notes -- Ranking" and "Pro Forma Financial
Information".
Guaranty................... The payment of principal and interest on the Old
Notes is, and, with respect to the New Notes, will
be, fully and unconditionally guaranteed on a
senior subordinated basis by Avondale Incorporated.
The guarantee by Avondale Incorporated is
subordinated to all existing and future Senior
Indebtedness of Avondale Incorporated, including
Avondale Incorporated's guarantee of the Company's
obligations under the New Credit Facility. Avondale
Incorporated currently conducts no business and has
no significant assets other than the capital stock
of the Company, all of which is pledged to secure
Avondale Incorporated's obligations under the New
Credit Facility. See "Description of the Notes --
Guaranty".
Restrictive Covenants...... The indenture under which the Old Notes were, and
the New Notes will be, issued (the "Indenture")
limits (i) the issuance of additional debt by the
Company and its subsidiaries, (ii) the payment of
dividends on capital stock of the Company and the
purchase, redemption or retirement of capital stock
or indebtedness, (iii) investments, (iv) certain
transactions with affiliates, (v) sales of assets,
including capital stock of subsidiaries, and (vi)
certain consolidations, mergers and transfer of
assets. The Indenture also prohibits certain
restrictions on distributions from subsidiaries.
All of these limitations and prohibitions, however,
are
11
<PAGE> 16
subject to a number of important qualifications.
See "Description of the Notes -- Certain
Covenants".
Use of Proceeds............ The Company will not receive any proceeds from the
Exchange Offer. The net proceeds from the Offering
were used, together with a portion of the net
proceeds of the other Financings, to finance the
purchase price of the Graniteville Acquisition.
Exchange Offer;
Registration Rights........ Holders of New Notes (other than as set forth
below) are not entitled to any registration rights
with respect to the New Notes. Pursuant to the
Registration Rights Agreement, the Company agreed,
for the benefit of the holders of Old Notes, to
file an Exchange Offer Registration Statement (as
defined). The Registration Statement of which this
Prospectus is a part constitutes the Exchange Offer
Registration Statement. Under certain
circumstances, certain holders of Notes (including
holders who may not participate in the Exchange
Offer or who may not freely resell New Notes
received in the Exchange Offer) may require the
Company to file, and cause to become effective, a
shelf registration statement under the Securities
Act, which would cover resales of Notes by such
Holders. See "Description of the
Notes -- Registered Exchange Offer; Registration
Rights".
Book-Entry; Delivery
and Form................. Transfers of Notes between participants in The
Depository Trust Company ("DTC") will be effected
in the ordinary way in accordance with DTC rules
and will be settled in same-day funds. See
"Description of the Notes -- Book-Entry; Delivery
and Form."
RISK FACTORS
Holders of Old Notes should consider carefully the information set forth
under the caption "Risk Factors" and all other information set forth in this
Prospectus before making a decision to tender their Old Notes in the Exchange
Offer.
12
<PAGE> 17
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables set forth a summary of selected consolidated financial
data of (i) Avondale for each of the five fiscal years in the period ended
August 25, 1995, which were derived from the audited Consolidated Financial
Statements of the Company, and for the twenty-six weeks ended February 24, 1995
and February 23, 1996, which were derived from the unaudited Consolidated
Financial Statements of the Company and (ii) Graniteville for the ten months
ended January 2, 1994 and each of the two fiscal years in the period ended
December 31, 1995, which were derived from the audited Financial Statements of
Graniteville, and for the two months ended February 28, 1993, the twelve months
ended January 2, 1994 and the thirteen weeks ended April 2, 1995 and March 31,
1996, which were derived from the unaudited Financial Statements of
Graniteville.
AVONDALE
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
FISCAL YEAR ---------------------------
------------------------------------------ FEBRUARY 24, FEBRUARY 23,
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIO)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales...................... $457.3 $528.4 $495.5 $481.6 $538.7 $265.6 $243.5
Gross profit................... 26.5 107.2 99.5 51.0 71.2 36.4 25.3
Operating income............... 7.0 85.9 76.8 28.9 47.6 24.2 12.0
Interest expense, net.......... 9.8 4.5 2.1 6.5 14.3 7.3 6.0
Income (loss) before
extraordinary item and
cumulative effect of
accounting change........... (2.2) 50.4 45.2 14.0 20.9 10.5 4.0
Net income (loss)(a)........... (5.7) 50.4 42.4 14.0 20.9 10.5 4.0
Net income (loss) per common
share(a).................... (.27) 2.40 2.06 .85 1.88 .95 .36
OTHER DATA:
Capital expenditures........... $ 12.1 $ 25.2 $ 36.4 $ 17.6 $ 15.8 $ 7.0 $ 13.3
Depreciation and
amortization................ 21.3 20.3 22.4 23.3 23.8 11.7 12.6
EBITDA(b)...................... 28.1 101.8 98.3 57.8 75.1 37.2 25.2
Ratio of earnings to fixed
charges(c).................. (d) 19.0x 37.2x 4.5x 3.4x 3.4x 2.1x
</TABLE>
GRANITEVILLE
<TABLE>
<CAPTION>
TWO MONTHS
ENDED TEN MONTHS TWELVE MONTHS THIRTEEN WEEKS ENDED
FEBRUARY ENDED ENDED FISCAL YEAR --------------------
28, JANUARY 2, JANUARY 2, --------------- APRIL 2, MARCH 31,
1993(E) 1994(E) 1994(E) 1994 1995 1995 1996
---------- ---------- ------------- ------ ------ -------- ---------
(IN MILLIONS, EXCEPT RATIO)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $ 84.9 $416.4 $ 501.3 $497.1 $505.7 $ 134.4 $ 121.0
Gross profit............ 14.7 53.8 68.5 53.0 44.3 14.1 11.7
Operating income(f)..... 9.1 21.5 30.6 21.1 14.2 6.1 3.2
Net income (loss)(f).... 4.7 2.7 7.4 3.1 (6.3) 1.4 (1.4)
OTHER DATA:
Capital expenditures.... $ 4.3 $ 21.9 $ 26.2 $ 21.4 $ 11.7 $ 1.7 $ 0.7
Depreciation and
amortization......... 1.8 10.4 12.2 13.2 14.4 3.8 3.8
EBITDA(g)............... 8.9 30.0 38.9 36.5 34.1 12.0 7.5
Ratio of earnings to
fixed charges(h)..... 5.6x 1.6x 2.1x 1.3x (i) 1.6x (i)
</TABLE>
13
<PAGE> 18
- ---------------
(a) Reflects a charge of $3.5 million (net of income taxes) ($.16 per share)
for the cumulative effect of a change in accounting for postretirement
benefits in fiscal 1991 and an extraordinary loss of $2.8 million (net of
income taxes) ($.14 per share) on retirement of debt in fiscal 1993.
(b) EBITDA for Avondale is defined as net income plus (i) the extraordinary
item and cumulative effect of accounting change, (ii) provision for income
taxes, (iii) interest expense, net and (iv) depreciation and amortization
and, plus or minus, as the case may be, adjustments to cost of goods sold
made under the last in, first out (LIFO) inventory valuation method. EBITDA
is presented not as an alternative measure of operating results or cash
flow from operations (as determined in accordance with generally accepted
accounting principles), but because it is a widely accepted financial
indicator of a company's ability to incur and service debt.
(c) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, "earnings" include operating income (loss)
before income taxes, extraordinary item and cumulative effect of accounting
change plus fixed charges. Fixed charges include interest, whether expensed
or capitalized, amortization of deferred financing costs and the portion of
rental expense that is representative of the interest factor in these
rentals.
(d) In fiscal 1991, earnings were insufficient to cover fixed charges as fixed
charges exceeded earnings by $3.6 million.
(e) On October 27, 1993, the board of directors of Triarc approved a change in
Graniteville's fiscal year from a 52-53 week period ending on the Sunday
nearest the last day of February to a 52-53 week fiscal year ending on the
Sunday nearest the last day of December. Therefore, Graniteville's selected
financial data for the two months ended February 28, 1993 and the twelve
months ended January 2, 1994 are being presented for comparative purposes
only. The selected financial data for the two months ended February 28,
1993 is compiled from Graniteville's monthly unaudited financial
statements, and the selected financial data for the twelve months ended
January 2, 1994 is a compilation of the unaudited financial data for the
two months ended February 28, 1993 and the audited financial data for the
ten months ended January 2, 1994. As a result, such selected financial data
include estimates inherent in preparing interim financial statements, which
estimates were based on Graniteville's actual fiscal years. Such estimates
include LIFO adjustments resulting from interim and year-end calculations
based on Graniteville's actual fiscal years. Had such calculations been
based on the twelve months ended January 2, 1994, such calculations, and
the adjustments resulting therefrom, would have been different.
(f) Reflects management and other fees paid by Graniteville to Triarc of $0.6
million, $7.7 million, $8.3 million, $4.7 million, $4.6 million, $1.1
million and $1.2 million for the two months ended February 28, 1993, the
ten months ended January 2, 1994, the twelve months ended January 2,
1994, fiscal 1994, fiscal 1995 and the thirteen weeks ended April 2, 1995
and March 31, 1996, respectively.
(g) EBITDA for Graniteville is defined as net income plus (i) provision for
income taxes, (ii) interest expense with affiliate, (iii) interest expense
and (iv) depreciation and amortization and, plus or minus, as the case may
be, adjustments to cost of goods sold made under the LIFO inventory
valuation method. EBITDA is presented not as an alternative measure of
operating results or cash flow from operations (as determined in accordance
with generally accepted accounting principles), but because it is a widely
accepted financial indicator of a company's ability to incur and service
debt.
(h) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, "earnings" include operating income (loss)
before income taxes plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of deferred financing costs
and the portion of rental expense that is representative of the interest
factor in these rentals.
(i) In fiscal 1995 and the thirteen weeks ended March 31, 1996, earnings were
insufficient to cover fixed charges as fixed charges exceeded earnings by
$5.5 million and $2.2 million, respectively.
14
<PAGE> 19
SUMMARY PRO FORMA FINANCIAL DATA
The following table sets forth summary pro forma financial data of the
Company, which data are derived from the Pro Forma Combined Statements of Income
for the year ended August 25, 1995 and the twenty-six weeks ended February 23,
1996 and the Pro Forma Combined Balance Sheet as of February 23, 1996 appearing
elsewhere in this Prospectus. The pro forma statement of income data and other
data give effect to the Transactions as if they had occurred at the beginning of
the periods presented and the pro forma balance sheet data gives effect to the
Transactions as if they had occurred on February 23, 1996. See "Pro Forma
Financial Information".
<TABLE>
<CAPTION>
FISCAL 1995(A)
--------------------------------------------------
AVONDALE GRANITEVILLE ADJUSTMENTS PRO FORMA
-------- ------------ ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales...................................... $538,652 $504,097 $ (2,665) $1,040,084
Gross profit................................... 71,217 52,387 2,496 126,100
Operating income............................... 47,611 22,228 7,042 76,881
Interest expense, net.......................... 14,333 18,499 2,739 35,571
Net income..................................... 20,939 2,848 2,647 26,434
Net income per common share.................... 1.88 1.98
OTHER DATA:
Capital expenditures........................... $ 15,823 $ 12,815 $ -- $ 28,638
Depreciation and amortization.................. 23,849 13,820 (2,496) 35,173
EBITDA......................................... 75,124 39,568 4,546 119,238(b)
Pro forma ratio of EBITDA to interest expense,
net......................................... 3.4x
Pro forma ratio of earnings to fixed
charges(c).................................. 2.2x
</TABLE>
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED FEBRUARY 23, 1996(D)
--------------------------------------------------
AVONDALE GRANITEVILLE ADJUSTMENTS PRO FORMA
-------- ------------ ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales...................................... $243,496 $244,569 $ (2,903) $ 485,162
Gross profit................................... 25,324 18,161 1,243 44,728
Operating income............................... 12,032 3,020 3,523 18,575
Interest expense, net.......................... 6,036 10,790 (886) 15,940
Net income (loss).............................. 3,996 (7,484) 2,712 (776)
Net income (loss) per common share............. .36 (.06)
OTHER DATA:
Capital expenditures........................... $ 13,275 $ 6,645 $ -- $19,920
Depreciation and amortization.................. 12,629 6,905 (1,243) 18,291
EBITDA......................................... 25,201 13,251 2,280 40,732(b)
Pro forma ratio of EBITDA to interest expense,
net......................................... 2.6x
Pro forma ratio of earnings to fixed
charges(c).................................. 1.2x
</TABLE>
<TABLE>
<CAPTION>
AT FEBRUARY 23, 1996(E)
--------------------------------------------------
AVONDALE GRANITEVILLE ADJUSTMENTS PRO FORMA
-------- ------------ ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................ $ 89,428 $122,018 $ (78,032) $ 133,414
Total assets................................... 275,508 304,568 (106,552) 473,524
Long-term debt, including current portion...... 187,972 210,371 (86,284) 312,059
Shareholders' equity........................... 20,421 21,434 17,866 59,721
</TABLE>
15
<PAGE> 20
- ---------------
(a) The pro forma statement of income data for fiscal 1995 are derived from the
unaudited Pro Forma Combined Statement of Income for the year ended August
25, 1995, which is based on Avondale's audited Consolidated Statement of
Income for the year ended August 25, 1995 and Graniteville's unaudited
Statement of Operations for the twelve months ended July 2, 1995. See "Pro
Forma Financial Information".
(b) Pro forma EBITDA for Avondale is defined as pro forma net income plus, on a
pro forma basis, (i) provision for income taxes, (ii) interest expense,
net, (iii) depreciation and amortization and, plus or minus, as the case
may be, adjustments to cost of goods sold of Avondale and/or Graniteville
made under the LIFO inventory valuation method. EBITDA is presented not as
an alternative measure of operating results or cash flow from operations
(as determined in accordance with generally accepted accounting
principles), but because it is a widely accepted financial indicator of a
company's ability to incur and service debt.
(c) The pro forma ratio of earnings to fixed charges is computed by dividing pro
forma earnings by pro forma fixed charges. For this purpose, "pro forma
earnings" include pro forma operating income (loss) before income taxes
plus pro forma fixed charges. Pro forma fixed charges include pro forma
interest, whether expensed or capitalized, amortization of deferred
financing costs and the portion of rental expense that is representative of
the interest factor in these rentals.
(d) The pro forma statement of income data for the twenty-six weeks ended
February 23, 1996 are derived from the unaudited Pro Forma Combined
Statement of Income for the twenty-six weeks ended February 23, 1996, which
is based on Avondale's unaudited Consolidated Statement of Income for the
twenty-six weeks ended February 23, 1996 and Graniteville's unaudited
Statement of Operations for the six months ended December 31, 1995. See
"Pro Forma Financial Information".
(e) The pro forma balance sheet data at February 23, 1996 are derived from the
unaudited Pro Forma Combined Balance Sheet as of February 23, 1996, which
is based on Avondale's unaudited Consolidated Balance Sheet as of February
23, 1996 and Graniteville's audited Balance Sheet as of December 31, 1995.
See "Pro Forma Financial Information".
16
<PAGE> 21
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully before tendering Old Notes in the
Exchange Offer, although the risk factors set forth below (other than
"-- Consequences of Failure to Exchange and Requirements for Transfer of New
Notes") are generally applicable to the Old Notes as well as the New Notes.
CYCLICAL AND COMPETITIVE NATURE OF TEXTILE INDUSTRY
The demand for textile products, including those offered by the Company as
a result of the Graniteville Acquisition, tends to fluctuate with the general
business cycle of the U.S. economy. In addition, the popularity, supply and
demand for particular textile products may change significantly from year to
year based on prevailing fashion trends and other factors. These factors have
contributed to fluctuations in the sales and profitability of certain textile
products and in the Company's results of operations. A decline in the demand for
textile products, an increase in the supply of textile products due to expansion
of capacity within the textile industry, changes in fashion trends or
deteriorating economic conditions could have a material adverse effect on the
Company's results of operations and financial condition. Pro forma for the
Graniteville Acquisition, a substantial portion of the Company's pro forma net
sales in fiscal 1995 were attributable to sales of yarn or fabrics to the
apparel market.
Reflecting the cyclical nature of the textile industry, many textile
producers tend to increase capacity during years in which sales are strong. Such
increases in capacity tend to accelerate a general economic downturn in the
Company's textile markets. New yarn production capacity which became operational
in the last three years was one of the significant factors that negatively
impacted the results of Avondale's yarn division in fiscal 1994 and 1995 and
will adversely impact results for fiscal 1996. In North America, new production
capacity could negatively impact the Company's results in its denim and yarn
business. The Company believes that capital investment plans in calendar 1996
will increase industry capacity for denim by approximately 11% over the next
three years. Such increases and any future capacity increases in the yarn and
denim industries could influence future pricing depending upon market
conditions.
The textile industry is highly competitive, and no single company is
dominant. The Company's competitors include large, vertically integrated textile
companies and numerous smaller companies. Increases in domestic capacity and
imports of foreign-made textile and apparel products are a significant source of
competition for many domestic textile manufacturers. Competition in the form of
imported textile and apparel products, pricing strategies of domestic
competitors and the proliferation of newly styled fabrics competing for fashion
acceptance have been factors affecting the Company's business environment. The
primary competitive factors in the textile industry are price, product styling
and differentiation, quality, manufacturing flexibility, delivery time and
customer service. The importance of these factors is determined by the needs of
particular customers and the characteristics of particular products. The failure
of the Company to compete effectively with respect to any of these key factors
or to keep pace with rapidly changing markets could have a material adverse
effect on the Company's business. See "Business -- The Company -- Competition"
and "Business -- Graniteville -- Competition".
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
As a result of the consummation of the Transactions, Avondale has
substantial indebtedness and significant debt service requirements. As of May
24, 1996, the Company's total indebtedness was $318.4 million. The degree to
which the Company is leveraged will have important consequences to holders of
the Notes, including the following: (i) the ability of the Company to obtain
additional financing in the future, whether for working capital, capital
expenditures, acquisitions or other purposes, may be impaired; (ii) a
substantial portion of the Company's cash flow from operations will be required
to be dedicated to the payment of principal and interest on its indebtedness,
thereby reducing funds available to the Company for other purposes; (iii) the
Company's flexibility in planning for or reacting to changes in market
conditions may be limited; (iv) the Company may be more vulnerable in the event
of a downturn in its business; and (v) to the extent that the Company incurs any
indebtedness under the New Credit Facility, which indebtedness will be at
17
<PAGE> 22
variable rates, the Company will be vulnerable to increases in interest rates.
See "Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- The Company". As of May 24, 1996, $174.4
million in aggregate borrowings were outstanding under the New Credit Facility
and available borrowings thereunder were $50.6 million. All borrowings under the
New Credit Facility will mature on April 28, 2001. See "Description of Certain
Indebtedness".
The ability of the Company to meet its debt service obligations will depend
on the future operating performance and financial results of the Company, which
will be subject in part to factors beyond the control of the Company. Although
management believes that the Company's cash flow will be adequate to meet its
interest and principal payments, there can be no assurance that the Company will
continue to generate earnings in the future sufficient to cover its fixed
charges. If the Company is unable to generate earnings in the future sufficient
to cover its fixed charges and is unable to borrow sufficient funds under either
the New Credit Facility or from other sources, it may be required to refinance
all or a portion of its existing debt (including the Notes) or to sell all or a
portion of its assets. There can be no assurance that a refinancing would be
possible, nor can there be any assurance as to the timing of any asset sales or
the proceeds which the Company could realize therefrom. In addition, the terms
of the New Credit Facility and the Indenture restrict the Company's ability to
sell assets and the use of the proceeds therefrom. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- The
Company -- Liquidity and Capital Resources".
If for any reason, including a shortfall in anticipated operating results
or proceeds from asset sales, the Company were unable to meet its debt service
obligations, it would be in default under the terms of its indebtedness. In the
event of such a default, the holders of such indebtedness could elect to declare
all of such indebtedness immediately due and payable, including accrued and
unpaid interest, and to terminate their commitments (if any) with respect to
funding obligations under such indebtedness. In addition, such holders could
proceed against their collateral (if any) which, in the case of certain
indebtedness, consists of substantially all of the assets of the Company. Any
default with respect to any of the Company's indebtedness could result in a
default under other indebtedness or result in a bankruptcy of the Company. Such
defaults or any bankruptcy of the Company could result in a default under the
Indenture and could delay or preclude payment of principal of, or interest on,
the Notes. See "Description of the Notes -- Ranking".
RAW MATERIALS
The primary raw material used in the Company's manufacturing processes is
cotton, and the cost of cotton is one of the most significant factors affecting
the Company's cost of sales. Prior to 1991, from time to time, domestic cotton
prices exceeded world prices, which created a competitive disadvantage for the
Company and other domestic textile manufacturers. The U.S. government has taken
legislative action to improve this price imbalance, but there can be no
assurance that this will continue to be the case. To the extent that U.S. cotton
prices exceed world cotton prices, the Company's competitiveness may be
materially, adversely affected. Cotton prices are also affected by general
economic conditions as well as the demand for U.S. cotton in world markets and
may increase or decrease depending on other market variables at the time.
Prevailing cotton prices significantly impact the Company's results of
operations, and price increases could have a material adverse effect on the
Company's results of operations and financial condition. In connection with its
purchase of cotton, Avondale substantially covers open order requirements
through direct purchases and hedging transactions. Although the Company believes
it acts prudently in hedging its cotton requirements, there can be no assurance
that such transactions will not result in higher costs to the Company or will
protect the Company from fluctuations in cotton prices. Further, since cotton is
an agricultural product, its supply and quality are subject to forces of nature.
Although the Company has always obtained sufficient supplies of cotton, any
material shortage or interruption in the supply, or variations in the quality of
cotton by reason of weather, disease or other factors could have a material
adverse effect on the Company's results of operations and financial condition.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- The Company" and "Business -- The Company -- Raw Materials".
18
<PAGE> 23
GOVERNMENT POLICY; IMPORT REGULATIONS
The domestic textile market is subject to various U.S. governmental
policies affecting raw material costs and product supply. In addition, the
policies of foreign governments may, directly or indirectly, affect the domestic
market. Because U.S. textile companies are generally prohibited from importing
cotton, Avondale must purchase its cotton in the domestic market. Prior to 1991,
from time to time, price imbalances between world and domestic cotton prices
existed. A series of U.S. legislative initiatives has resulted in the reduction
of the Company's effective cotton costs to near world levels. Because the
availability and cost of cotton are affected by U.S. agricultural policies,
Avondale may experience increased cotton costs that cannot be entirely passed on
to its customers.
The extent of import protection afforded by the U.S. government to domestic
textile producers has been, and is likely to remain, subject to considerable
domestic political deliberation. In view of the labor cost advantages and the
number of foreign producers of textile products that compete with certain of the
Company's products, substantial elimination of import protection for domestic
textile manufacturers could have a material adverse effect on the Company's
business. In January 1995, a new multilateral trade organization, the World
Trade Organization ("WTO"), was formed by the members of the General Agreement
on Tariffs and Trade ("GATT") to replace GATT. This new body has set forth the
mechanisms by which world trade in textiles and clothing will be progressively
liberalized with the elimination of quotas and the reduction of duties. The
implementation began in January 1995 with the phasing-out of quotas and the
reduction of duties to take place over a 10-year period. The selection of
products at each phase is made by each importing country and must be drawn from
each of the four main textile groups: yarns, fabrics, made-up textiles and
apparel. As it implements the WTO mechanisms, the U.S. government is negotiating
bilateral trade agreements with developing countries (which are generally
exporters of textile products) that are members of the WTO to get them to reduce
their tariffs on imports of textiles and apparel. The elimination of quotas and
the reduction of tariffs under the WTO may result in increased imports of
certain textile products and apparel into North America. These factors could
make the Company's products less competitive against low cost imports from third
world countries. See "Business -- The Company -- Description of the
Business -- Competition".
The North American Free Trade Agreement ("NAFTA") among Canada, Mexico and
the United States, which became effective on January 1, 1994, has created the
world's largest free-trade zone. The agreement contains safeguards that were
sought by the U.S. textile industry, including a rule of origin requirement that
products be processed in one of the three countries in order to benefit from
NAFTA. NAFTA will phase out all trade restrictions and tariffs on textiles and
apparel among the three countries. Although management believes that the Company
has benefited from NAFTA, there can be no assurance that the removal of these
barriers to trade will not have a material adverse effect on the Company's
results of operations and financial condition. See "Business -- The
Company -- Description of the Business -- Competition".
RELIANCE ON SIGNIFICANT CUSTOMERS
VF Corporation, which has been a significant customer of the Company for
over five years, accounted for approximately 28% and 26% of the Company's net
sales in fiscal 1995 and the twenty-six weeks ended February 23, 1996,
respectively. Pro forma for the Graniteville Acquisition, VF Corporation would
have accounted for 20.6% and 17.8% of the Company's net sales in fiscal 1995 and
the twenty-six weeks ended February 23, 1996, respectively. No other single
customer accounted for more than 9% of the Company's net sales in these periods.
The loss of VF Corporation as a customer, or a significant reduction in its
purchases from the Company (substantially all of which are finished fabrics),
could have a material adverse effect on the Company's business. See
"Business -- The Company -- Description of the Business -- Sales and Marketing".
19
<PAGE> 24
INTEGRATION OF THE GRANITEVILLE ACQUISITION
With the exception of the 1986 Acquisition, the Graniteville Acquisition
was significantly larger than the Company's previous acquisitions and has
substantially increased the scope of the Company's business. Graniteville's net
sales for fiscal 1995 were $505.7 million, and the Company's net sales for
fiscal 1995 were $538.7 million. Successful integration of Graniteville's
operations will depend primarily on the Company's ability to manage
Graniteville's manufacturing operations (which will add 10 additional
manufacturing facilities to the Company's existing 14 manufacturing facilities)
and to eliminate redundancies and excess costs. There can be no assurance that
the Company can successfully integrate Graniteville and any failure or any
inability to do so may have a material adverse effect on the Company's results
of operations and financial condition. In addition, the Company expects to
realize certain cost savings and other business synergies as a result of the
Graniteville Acquisition. Realization of such cost savings and other business
synergies could be affected by a number of factors beyond the Company's control,
such as general economic conditions, increased operating costs, the response of
competitors or customers and regulatory developments. There can be no assurance
that the Company will achieve the expected cost savings and other business
synergies.
RANKING OF THE NOTES AND GUARANTY
The indebtedness evidenced by the Notes constitutes senior subordinated
obligations of the Company. The payment of the principal of, premium (if any)
and interest on the Notes is subordinate in right of payment, as set forth in
the Indenture, to the prior payment in full of all Senior Indebtedness of the
Company. At May 24, 1996, the Company's Senior Indebtedness was approximately
$193.4 million. In addition, the Notes are effectively subordinated to all
obligations of any subsidiaries of the Company as may exist from time to time,
including any obligation of a Receivables Subsidiary (as defined) under the
Receivables Securitization Facility. Although the Indenture contains limitations
on the amount of additional indebtedness that the Company may incur, under
certain circumstances the amount of such indebtedness could be substantial and,
in any case, such indebtedness may be Senior Indebtedness. See "Description of
the Notes -- Certain Covenants -- Limitation on Indebtedness". As of May 24,
1996, the Company had approximately $50.6 million of borrowing availability
under the New Credit Facility. Any such amounts, when borrowed, will constitute
Senior Indebtedness of the Company.
In the event of the bankruptcy, liquidation or reorganization of the
Company, the assets of the Company will be available to pay the Notes only after
all Senior Indebtedness of the Company has been paid in full. Sufficient funds
may not exist to pay amounts due on the Notes in such event. In addition, the
subordination provisions of the Indenture provide that no cash payment may be
made with respect to the Notes during the continuance of a payment default under
any Senior Indebtedness of the Company. Furthermore, if certain non-payment
defaults exist with respect to certain Senior Indebtedness of the Company, the
holders of such Senior Indebtedness will be able to prevent payments on the
Notes for certain periods of time. See "Description of the Notes -- Ranking".
Avondale Incorporated has guaranteed the Notes on a senior subordinated
basis. Avondale Incorporated currently conducts no business and has no
significant assets other than the capital stock of the Company, all of which is
pledged to secure Avondale Incorporated's obligations under the New Credit
Facility. Thus, currently there are no resources supporting Avondale
Incorporated's guarantee of the Notes that are incremental to those to which
holders of the Notes already have access as direct creditors of the Company.
Avondale Incorporated's guarantee of the Notes is subordinate in right of
payment to the guarantee by Avondale Incorporated of the Company's obligations
under the New Credit Facility. See "Description of the Notes -- Guaranty".
CONTROL BY PRINCIPAL SHAREHOLDER
Avondale Incorporated owns 100% of the outstanding capital stock of the
Company. Consequently, Avondale Incorporated has the ability to exercise control
over the business and affairs of the Company through its ability to elect all of
the directors of the Company and control the vote on all matters requiring
shareholder approval, including mergers, the sale of substantially all of the
assets of the Company and other
20
<PAGE> 25
business combinations involving the Company. As of the date of this Prospectus,
G. Stephen Felker, the Chairman of the Board of Directors, President and Chief
Executive Officer of Avondale Incorporated, controls approximately 71% of the
outstanding combined voting power of all classes of common stock of Avondale
Incorporated. As a result, Mr. Felker is able to elect Avondale Incorporated's
directors and control (with limited exception) the vote on all matters submitted
to a vote of holders of common stock of Avondale Incorporated. Consequently, Mr.
Felker effectively controls Avondale Incorporated and, indirectly, the Company.
RELIANCE ON KEY PERSONNEL
The Company is heavily dependent upon the skills, talents and abilities of
G. Stephen Felker and Jack R. Altherr, Jr., and the loss of the services of
either Mr. Felker or Mr. Altherr could have a material adverse effect on the
business of the Company.
CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register Old Notes under the Securities Act. Based on interpretations by
the staff of the Commission, set forth in no-action letters issued to third
parties, the Company believes the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than broker-dealers, as set forth
below, and any such holder that is an "affiliate" of the Company or Avondale
Incorporated within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business and such holder has no arrangement or understanding
with any person to participate in the distribution of such New Notes. Any holder
who tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the New Notes or who is an
affiliate of the Company or Avondale Incorporated may not rely upon such
interpretations by the staff of the Commission and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company in the Letter of Transmittal that such conditions have
been met. Each broker-dealer (other than an affiliate of the Company or Avondale
Incorporated) 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.
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 activities or other trading activities. The Company
has agreed that, for a period of 180 days 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". Any broker-dealer who is an
affiliate of the Company or Avondale Incorporated may not rely on such no-action
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
RESTRICTIONS IMPOSED BY THE NEW CREDIT FACILITY AND THE INDENTURE
The New Credit Facility and the Indenture contain a number of significant
covenants that, among other things, restrict the ability of the Company to
dispose of assets, incur additional indebtedness, repay other indebtedness, pay
dividends, enter into certain investments or acquisitions, repurchase or redeem
capital stock,
21
<PAGE> 26
engage in mergers or consolidations, or engage in certain transactions with
subsidiaries and affiliates and otherwise restrict corporate activities. There
can be no assurance that such restrictions will not adversely affect the
Company's ability to finance its future operations or capital needs or engage in
other business activities that may be in the interest of the Company. In
addition, the New Credit Facility also requires the Company to maintain
compliance with certain financial ratios. The ability of the Company to comply
with such ratios may be affected by events beyond the Company's control. A
breach of any of these covenants or the inability of the Company to comply with
the required financial ratios could result in a default under the New Credit
Facility. In the event of any such default, the lenders under the New Credit
Facility could elect to declare all borrowings outstanding under the New Credit
Facility, together with accrued interest and other fees, to be due and payable,
to require the Company to apply all of its available cash to repay such
borrowings or to prevent the Company from making debt service payments on the
Notes. If the Company were unable to repay any such borrowings when due, the
lenders could proceed against their collateral. If the indebtedness under the
New Credit Facility or the Notes were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay such
indebtedness in full. See "Description of the Notes" and "Description of Certain
Indebtedness -- The New Credit Facility".
LIMITATION ON CHANGE OF CONTROL
The Indenture requires the Company, in the event of a Change of Control, to
make an offer to purchase all outstanding Notes at a price equal to 101% of the
principal amount thereof, plus accrued interest to the date of repurchase. The
New Credit Facility will restrict such a purchase and such an offer would
require the approval of the lenders thereunder. In addition, certain events
involving a Change of Control may be an event of default under the New Credit
Facility or other indebtedness of the Company that may be incurred in the
future. Accordingly, the right of the holders of the Notes to require the
Company to repurchase the Notes may be of limited value if the Company cannot
obtain the required approval under the New Credit Facility. There can be no
assurance that the Company will have the financial resources necessary to
purchase the Notes upon a Change of Control. Failure to offer to repurchase the
Notes under such circumstances, however, would constitute an event of default
under the Indenture. See "Description of the Notes -- Change of Control".
LACK OF PUBLIC MARKET FOR THE NEW NOTES
The New Notes will constitute a new issue of securities with no established
trading market. The Company does not intend to list the New Notes on any
national securities exchange or to seek approval for quotation through any
automated quotation system. The Company has been advised by CS First Boston
Corporation, the initial purchaser of the Old Notes in the Offering (the
"Initial Purchaser"), that following completion of the Exchange Offer, the
Initial Purchaser intends to make a market in the New Notes. However, the
Initial Purchaser is not obligated to do so and any market-making activities
with respect to the New Notes may be discontinued at any time without notice.
Accordingly, 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 difficultly 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 cease to continue 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 and other
factors, including the financial condition of the Company.
ENVIRONMENTAL LIABILITIES; OTHER GOVERNMENTAL REGULATION
Avondale is subject to various federal, state and local environmental laws
and regulations limiting the discharge, storage, handling and disposal of a
variety of substances and wastes used in or resulting from its operations and
potential remediation obligations thereunder. Certain of the facilities of
Graniteville acquired in connection with the Graniteville Acquisition also are
subject to such laws and regulations. Pursuant to the Asset Purchase Agreement,
Avondale assumed all environmental liabilities of Graniteville arising with
respect to such facilities. However, Graniteville Company (and Triarc as
guarantor) is obligated to indemnify the
22
<PAGE> 27
Company with respect to these environmental liabilities, subject to certain
limitations. See "The Transactions -- Terms of the Asset Purchase
Agreement -- Indemnification". The Company's operations and the operations of
Graniteville also are governed by laws and regulations relating to workplace
safety and worker health which, among other things, establish cotton dust,
formaldehyde, asbestos and noise standards, and regulate the use of hazardous
chemicals in the workplace. There can be no assurance that compliance with the
foregoing environmental or health and safety laws and regulations will not
adversely affect the Company's or Graniteville's operations. Avondale cannot
predict what environmental or health and safety legislation or regulations will
be enacted in the future or how existing or future laws or regulations will be
enforced, administered or interpreted, nor can it predict the amount of future
expenditures which may be required in order to comply with any such
environmental or health and safety laws or regulations. See "Business -- The
Company -- Description of the Business -- Governmental Regulation" and
"Business -- Graniteville -- Description of the Business -- Legal Proceedings".
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the Offering were approximately $121.3 million. The Company used
these net proceeds, together with a portion of the net proceeds of the other
Financings, to finance the purchase price of the Graniteville Acquisition. See
"The Transactions". The following table sets forth the sources and uses of funds
in connection with the Transactions:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Old Notes...................................................................... $ 125.0
New Credit Facility............................................................ 173.4
Receivables Securitization Facility............................................ 104.0
Equity Private Placement(a).................................................... 40.0
-------------
Total sources.......................................................... $ 442.4
=========
USES OF FUNDS:
Graniteville Acquisition(b).................................................... $ 260.4
Repayment of Old Credit Facility............................................... 130.0
Redemption of 5.65% Subordinated Notes......................................... 45.0
Fees and expenses(c)........................................................... 7.0
-------------
Total uses............................................................. $ 442.4
=========
</TABLE>
- ---------------
(a) Certain of the purchasers in the Equity Private Placement are affiliates of
certain entities that participated in the 1986 Acquisition. In March 1994,
Avondale repurchased all of the Class A Common Stock of Avondale
Incorporated owned by such affiliated entities as a result of their
participation in the 1986 Acquisition. See "Management's Discussion and
Analysis of Financial Condition and Results -- The Company -- Liquidity and
Capital Resources".
(b) Includes $255.0 million, the purchase price for the Graniteville Acquisition
(unadjusted for the deficit amount, if any), and $5.4 million of
acquisition costs, which include, among other things, $2.6 million of
prepayment penalties that were incurred by Graniteville Company and
reimbursed by Avondale in connection with the repayment by Graniteville
Company of certain of its outstanding indebtedness in connection with the
Graniteville Acquisition.
(c) Includes (i) the discount of $3.1 million paid by the Company to the Initial
Purchaser in connection with the Offering, (ii) closing and other fees
aggregating $0.7 million paid in connection with the Equity Private
Placement and (iii) estimated legal, accounting and other fees aggregating
$3.2 million paid or payable in connection with the Transactions.
23
<PAGE> 28
CAPITALIZATION
The following table sets forth as of February 23, 1996 the consolidated
short-term debt and consolidated capitalization (i) of the Company on an
historical basis and (ii) of the Company pro forma for the Transactions. See
"Use of Proceeds" and "Pro Forma Financial Information". This table should be
read in conjunction with the Consolidated Financial Statements and Notes thereto
of the Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT FEBRUARY 23, 1996
----------------------
ACTUAL PRO FORMA
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt(a)............................................. $ 4,000 $ 4,000
======== ========
Long-term debt(a):
Old Credit Facility.......................................... $124,400 $ --
New Credit Facility.......................................... -- 167,059
Old Notes.................................................... -- 125,000
Other long-term debt......................................... 16,000 16,000
5.65% Subordinated Notes..................................... 43,572 --
-------- ---------
Total long-term debt................................. 183,972 308,059
-------- ---------
Shareholders' equity:
Preferred Stock, $.01 par value, 10,000 shares authorized; no
shares issued or outstanding.............................. -- --
Class A Common Stock, $.01 par value, 100,000 authorized;
10,090 issued and outstanding............................. 101 123
Class B Common Stock, $.01 par value per share; 5,000
authorized; 979 issued and outstanding.................... 10 10
Capital in excess of par..................................... 2,566 41,844
Retained earnings............................................ 17,744 17,744
-------- ---------
Total shareholders' equity........................... 20,421 59,721
-------- ---------
Total capitalization................................. $204,393 $ 367,780
======== ========
</TABLE>
- ---------------
(a) See Note 4 to Consolidated Financial Statements of the Company for a
discussion of the Company's outstanding debt.
24
<PAGE> 29
PRO FORMA FINANCIAL INFORMATION
The following unaudited Pro Forma Combined Statements of Income for the
year ended August 25, 1995 and the twenty-six weeks ended February 23, 1996 give
effect to the Transactions as if they had occurred at the beginning of the
periods presented, and the following unaudited Pro Forma Combined Balance Sheet
gives effect to the Transactions as if they had occurred on February 23, 1996.
The unaudited (i) Pro Forma Combined Statement of Income for the year ended
August 25, 1995 is based on Avondale's audited Consolidated Statement of Income
for the year ended August 25, 1995 and Graniteville's unaudited Statement of
Operations for the twelve months ended July 2, 1995, (ii) Pro Forma Combined
Statement of Income for the twenty-six weeks ended February 23, 1996 is based on
Avondale's unaudited Consolidated Statement of Income for the twenty-six weeks
ended February 23, 1996 and Graniteville's unaudited Statement of Operations for
the six months ended December 31, 1995 and (iii) Pro Forma Combined Balance
Sheet as of February 23, 1996 is based on Avondale's unaudited Consolidated
Balance Sheet as of February 23, 1996 and Graniteville's audited Balance Sheet
as of December 31, 1995.
The Graniteville Acquisition will be accounted for under the purchase
method of accounting. The total purchase price for the Graniteville Acquisition
has been allocated to tangible and identifiable intangible assets and
liabilities based upon management's preliminary estimates of their fair values
with the excess of cost over net assets acquired allocated to goodwill. Each of
such allocations is subject to revision when additional information concerning
asset and liability valuations is obtained. In the opinion of the Company's
management, the asset and liability valuation for the Graniteville Acquisition
is not expected to be materially different from the pro forma information
presented herein. For purposes of presenting pro forma results, no changes in
revenues and expenses, except for the elimination of management and other fees
paid by Graniteville to Triarc (as described in Note (d) of Notes to Pro Forma
Combined Statements of Income), have been made to reflect the results of any
modification to operations that might have been made had the Graniteville
Acquisition been consummated on the assumed effective dates as set forth above.
The pro forma combined expenses include the recurring costs which are
attributable to these transactions, such as interest expense, depreciation
expense, amortization of debt issuance costs, losses on sales of receivables
under the Receivables Securitization Facility and amortization of the excess of
the cost over net assets acquired.
The pro forma financial information does not purport to represent what the
Company's results of operations or financial position would actually have been
had the Transactions actually occurred on the dates set forth above or to
project the Company's results of operations or financial condition for any
future period or as of any date, respectively. The pro forma financial
information set forth below should be read in conjunction with the Consolidated
Financial Statements and Notes thereto of the Company and the Financial
Statements and Notes thereto of Graniteville included elsewhere in this
Prospectus and "Management's Discussion and Results of Operations -- The
Company" and "-- Graniteville".
25
<PAGE> 30
PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED AUGUST 25, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
AVONDALE GRANITEVILLE
(YEAR (TWELVE MONTHS
ENDED ENDED
8/25/95) 7/2/95)(A) ADJUSTMENTS PRO FORMA
----------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales................................... $ 538,652 $504,097 $(2,665)(b) $1,040,084
Operating costs and expenses:
Cost of goods sold........................ 443,726 437,890 (2,665)(b) 878,951
Depreciation.............................. 23,709 13,820 (2,496)(c) 35,033
Selling and administrative expenses....... 23,606 30,159 (4,546)(d) 49,219
----------- -------------- ----------- ----------
Operating income............................ 47,611 22,228 7,042 76,881
Interest expense, net....................... 14,333 18,499 2,739(e) 35,571
Other income, net........................... (761) (1,683) -- (2,444)
----------- -------------- ----------- ----------
Income before income taxes.................. 34,039 5,412 4,303 43,754
Provision for income taxes.................. 13,100 2,564 1,656(f) 17,320
----------- -------------- ----------- ----------
Net income.................................. $ 20,939 $ 2,848 $ 2,647 $ 26,434
=========== ============== =========== ===========
Earnings per common share................... $ 1.88 $ 1.98
=========== ===========
Weighted average number of shares
outstanding............................... 11,133 2,222(g) 13,355
=========== =========== ===========
OTHER DATA:
Capital expenditures...................... $ 15,823 $ 12,815 $ -- $ 28,638
Depreciation and amortization............. 23,849 13,820 (2,496) 35,173
EBITDA.................................... 75,124 39,568 4,546 119,238(h)
Pro forma ratio of EBITDA to interest
expense, net............................ 3.4x
Pro forma ratio of earnings to fixed
charges................................. 2.2x(i)
</TABLE>
PRO FORMA COMBINED STATEMENT OF INCOME
TWENTY-SIX WEEKS ENDED FEBRUARY 23, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
AVONDALE
(TWENTY-SIX GRANITEVILLE
WEEKS (SIX MONTHS
ENDED ENDED
2/23/96) 12/31/95)(A) ADJUSTMENTS PRO FORMA
----------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales................................... $ 243,496 $244,569 $(2,903)(b) $ 485,162
Operating costs and expenses:
Cost of goods sold........................ 205,565 219,503 (2,903)(b) 422,165
Depreciation.............................. 12,607 6,905 (1,243)(c) 18,269
Selling and administrative expenses....... 13,292 15,141 (2,280)(d) 26,153
----------- -------------- ----------- ----------
Operating income............................ 12,032 3,020 3,523 18,575
Interest expense, net....................... 6,036 10,790 (886)(e) 15,940
Other (income) expense, net................. (540) 242 -- (298)
----------- -------------- ----------- ----------
Income (loss) before income taxes........... 6,536 (8,012) 4,409 2,933
Provision for (benefit of) income taxes..... 2,540 (528) 1,697(f) 3,709
----------- -------------- ----------- ----------
Net income (loss)........................... $ 3,996 $ (7,484) $ 2,712 $ (776)
=========== ============== =========== ==========
Earnings (loss) per common share............ $ 0.36 $ (0.06)
=========== ==========
Weighted average number of shares
outstanding............................... 11,133 2,222(g) 13,355
=========== =========== ===========
OTHER DATA:
Capital expenditures...................... $ 13,275 $ 6,645 $ -- $ 19,920
Depreciation and amortization............. 12,629 6,905 (1,243) 18,291
EBITDA.................................... 25,201 13,251 2,280 40,732(h)
Pro forma ratio of EBITDA to interest
expense, net............................ 2.6x
Pro forma ratio of earnings to fixed
charges................................. 1.2x(i)
</TABLE>
(footnotes appear on following page)
26
<PAGE> 31
NOTES TO PRO FORMA COMBINED STATEMENTS OF INCOME
(a) Graniteville's Statements of Operations for the twelve months ended July 2,
1995 and the six months ended December 31, 1995 represent a compilation of
Graniteville's Statements of Operations for each quarterly period in the
twelve-month period ended July 2, 1995 and the six months ended December
31, 1995. As a result, such Statements of Operations include estimates
inherent in preparing interim financial statements, which estimates were
based on Graniteville's actual fiscal years. Such estimates include LIFO
adjustments resulting from interim and year-end calculations based on
Graniteville's actual fiscal years. Had such calculations been based on the
twelve months ended July 2, 1995 and June 30, 1996, such calculations, and
the adjustments resulting therefrom, would have been different.
(b) Reflects elimination of intercompany sales between the Company and
Graniteville during the periods presented.
(c) Reflects a decrease in depreciation and amortization expense as a result of
the use of the straight-line method over the estimated useful lives set
forth below applied to the allocated purchase cost of property, plant and
equipment and intangible assets acquired as follows:
<TABLE>
<CAPTION>
PRO FORMA DEPRECIATION
AND AMORTIZATION
----------------------------
ESTIMATED TWENTY-SIX
ALLOCATED USEFUL YEAR ENDED WEEKS ENDED
PURCHASE LIFE AUGUST 25, FEBRUARY 23,
COST (YEARS) 1995 1996
--------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Land improvements.......................... $ 200 20 $ 10 $ 5
Buildings.................................. 27,500 20 1,375 687
Machinery and equipment (9 years).......... 50,250 9 5,583 2,792
Machinery and equipment (7 years).......... 26,000 7 3,713 1,856
Automotive equipment....................... 1,000 3 333 167
Other...................................... 750 3 to 8 146 73
Patents and trademarks..................... 500 20 25 12
Goodwill................................... 2,785 20 139 70
----------- ------------
Pro forma depreciation and
amortization of acquired assets..... 11,324 5,662
Pro forma depreciation and
amortization adjustment............. 2,496 1,243
----------- ------------
Historical depreciation and
amortization of Graniteville..... $13,820 $6,905
========= =========
</TABLE>
(d) Reflects elimination of management and other fees paid by Graniteville to
Triarc.
27
<PAGE> 32
NOTES TO PRO FORMA COMBINED STATEMENTS OF INCOME -- (CONTINUED)
(e) Reflects the pro forma adjustment to interest expense, net with respect to
the following:
<TABLE>
<CAPTION>
TWENTY-SIX
YEAR ENDED WEEKS ENDED
AUGUST 25, 1995 FEBRUARY 23, 1996
--------------- -----------------
<S> <C> <C>
Interest and amortization of issuance costs on the New
Credit Facility, based upon pro forma weighted average
outstanding principal amounts of $167,739 and
$153,865, respectively, at assumed average annual
interest rates of 8.27% and 7.38%, respectively, for
the year ended August 25, 1995 and for the twenty-six
weeks ended February 23, 1996......................... $ 14,358 $ 5,924
Losses on sales of receivables under the Receivable
Securitization Facility at assumed effective interest
rates of 6.97% and 6.08%, respectively, for the year
ended August 25, 1995 and for the twenty-six weeks
ended February 23, 1996............................... 7,416 3,245
Interest expense and amortization of deferred financing
costs incurred in connection with the Old Notes....... 13,186 6,592
Elimination of Graniteville historical gross interest
expense............................................... (19,144) (11,133)
Reduction in interest expense and fees on borrowings
incurred under the New Credit Facility to refinance
borrowings outstanding under the Old Credit Facility
and to repay in full the 5.65% Subordinated Notes..... (13,077) (5,514)
--------------- -----------------
Net increase (decrease) in interest expense,
net......................................... $ 2,739 $ (886)
=========== =============
</TABLE>
For purposes of computing pro forma amortization of debt issuance and
facility costs in the above table, the following summarizes the estimated
amounts and amortization periods:
<TABLE>
<CAPTION>
AMORTIZATION
AMORTIZATION PRO FORMA TWENTY-SIX
ESTIMATED PERIOD YEAR ENDED WEEKS ENDED
COST (YEARS) AUGUST 25, 1995 FEBRUARY 23, 1996
--------- ------------ --------------- -----------------
<S> <C> <C> <C> <C>
Cost incurred in connection with:
New Credit Facility............... $ 2,450 5 $ 490 $ 245
Receivables Securitization
Facility....................... 835 5 167 83
Old Notes......................... 3,730 10 373 186
--------- ------- -------
$ 7,015 $ 1,030 $ 514
======= =========== =============
</TABLE>
(f) Reflects income tax effect of the pro forma adjustments to pre-tax income
at an assumed effective tax rate of 38.5%.
(g) Reflects increase in weighted average shares outstanding as a result of the
issuance of shares in connection with the Equity Private Placement.
(h) Pro forma EBITDA for Avondale is defined as pro forma net income plus, on a
pro forma basis, (i) provision for income taxes, (ii) interest expense, net
and (iii) depreciation and amortization and, plus or minus, as the case may
be, adjustments to cost of goods sold of Avondale and/or Graniteville made
under the LIFO inventory valuation method. EBITDA is presented not as an
alternative measure of operating results or cash flow from operations (as
determined in accordance with generally accepted accounting principles),
but because it is a widely accepted financial indicator of a company's
ability to incur and service debt.
(i) The pro forma ratio of earnings to fixed charges is computed by dividing
pro forma earnings by pro forma fixed charges. For this purpose, "pro forma
earnings" include pro forma operating income (loss) before income taxes
plus pro forma fixed charges. Pro forma fixed charges include pro forma
interest, whether expensed or capitalized, amortization of deferred
financing costs and the portion of rental expense that is representative of
the interest factor in these rentals.
28
<PAGE> 33
PRO FORMA COMBINED BALANCE SHEET
AS OF FEBRUARY 23, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GRANITEVILLE
AVONDALE (AS OF
(AS OF 2/23/96) 12/31/95) ADJUSTMENTS PRO FORMA
--------------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash................................. $ 2,885 $ 3,401 $ (3,401)(a) $ 2,885
Accounts receivable, net............. 80,810 104,374 (104,000)(b) 81,184
Inventories.......................... 45,714 65,040 10,093(c) 120,847
Prepaid expenses..................... 833 3,783 (1,697)(a) 2,919
--------------- --------------- ----------- ---------
Total current assets......... 130,242 176,598 (99,005) 207,835
Real estate held for sale.............. 11,483 -- -- 11,483
Investment in debt securities.......... 7,500 -- -- 7,500
Property, plant and equipment
Land................................. 970 1,737 2,763(c) 5,470
Buildings............................ 38,182 45,756 (18,256)(c) 65,682
Machinery and equipment.............. 255,287 140,763 (62,763)(c) 333,287
--------------- --------------- ----------- ---------
294,439 188,256 (78,256) 404,439
Less accumulated depreciation........ (173,236) (73,480) 73,480(c) (173,236)
--------------- --------------- ----------- ---------
121,203 114,776 (4,776) 231,203
Other assets........................... 5,080 13,194 (13,071)(a) 15,503
7,015(b)
3,285(c)
--------------- --------------- ----------- ---------
$ 275,508 $ 304,568 $(106,552) $ 473,524
============ ============ =========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable..................... $ 19,068 $ 22,031 $ -- $ 41,099
Accrued compensation, benefits and
related expenses.................. 7,291 1,404 -- 8,695
Other accrued expenses............... 7,682 9,698 (2,026)(a) 17,854
2,500(c)
Long-term debt due in one year....... 4,000 13,701 (13,701)(a) 4,000
Income taxes payable................. 950 -- -- 950
Deferred income taxes................ 1,823 7,746 (7,746)(a) 1,823
--------------- --------------- ----------- ---------
Total current liabilities.... 40,814 54,580 (20,973) 74,421
Long-term debt......................... 183,972 196,670 (196,670)(a) 308,059
124,087(b)
Deferred income taxes and other
long-term liabilities................ 30,301 31,884 (30,862)(a) 31,323
Shareholders' equity:
Common Stock......................... 111 -- 22(b) 133
Capital in excess of par value....... 2,566 -- 39,278(b) 41,844
Retained earnings.................... 17,744 -- -- 17,744
Net Equity of Textile Business....... -- 21,434 232,836(a) --
6,102(c)
(260,372)(b)
--------------- --------------- ----------- ---------
Total shareholders' equity............. 20,421 21,434 17,866 59,721
--------------- --------------- ----------- ---------
$ 275,508 $ 304,568 $(106,552) $ 473,524
============ ============ ========== =========
</TABLE>
(footnotes appear on following page)
29
<PAGE> 34
NOTES TO PRO FORMA COMBINED BALANCE SHEET
(a) Reflects the elimination of certain assets and liabilities of the textile
business of Graniteville Company not acquired or assumed, respectively, by
the Company pursuant to the Asset Purchase Agreement.
(b) Reflects consummation of the Financings and the application of the proceeds
therefrom and the payment of debt issuance costs as follows:
<TABLE>
<S> <C>
Par value of shares issued in Equity Private Placement................ $ 22
Capital in excess of par value resulting from Equity Private
Placement........................................................... 39,278
--------
Net proceeds from Equity Private Placement.................. 39,300
Proceeds from issue and sale of Old Notes............................. 125,000
Initial borrowings under New Credit Facility.......................... 167,059
Proceeds from sale of trade receivables in connection with the
Receivables Securitization Facility (management believes this
transaction will qualify as a sale under generally accepted
accounting principles).............................................. 104,000
--------
Gross proceeds.............................................. 435,359
Repayment of Old Credit Facility...................................... (124,400)
Repayment of 5.65% Subordinated Notes................................. (43,572)
Payment of debt issuance costs........................................ (7,015)
--------
Net effect of the Financings and repayment of debt.......... $260,372
========
</TABLE>
(c) The Graniteville Acquisition will be accounted for under the purchase
method of accounting. The preliminary allocation of the purchase price
($255,000 plus acquisition costs of $5,372, which includes, among other
things, $2.6 million of prepayment penalties that were incurred by
Graniteville Company and reimbursed by Avondale in connection with the
repayment by Graniteville Company of certain of its outstanding
indebtedness in connection with the Graniteville Acquisition) and the fair
value of Graniteville's assets and the liabilities assumed by Avondale in
connection with the Graniteville Acquisition is summarized below:
<TABLE>
<S> <C>
Current assets........................................................ $181,593
Property, plant and equipment......................................... 110,000
Other non-current assets.............................................. 123
Goodwill, patents and trademarks...................................... 3,285
--------
Total assets acquired....................................... 295,001
Fair value of assumed liabilities..................................... (34,629)
--------
Net purchase price and costs................................ $260,372
========
</TABLE>
For purposes of the purchase price allocation, Graniteville's inventories
have been increased by $10,093 to eliminate Graniteville's historical LIFO
reserve and to increase the value of finished goods inventories to their
estimated selling prices less the estimated costs of disposal and a
reasonable profit allowance for the selling effort. Graniteville's raw
materials, work-in-process and certain greige fabric inventories (a
substantial portion of which are purchased from outside suppliers) have not
been adjusted because the carrying amount approximates current replacement
costs. The cost of the acquired inventory, including the adjustment
described above, will be charged to cost of goods sold in the future, when
the current year LIFO layer is liquidated or to the extent that inventory
prices decline from the levels implicit in the purchase price allocation.
However, such potential future charge has not been considered in the
preparation of the Pro Forma Combined Financial Statements and management
is not able to currently estimate the amount of any such charge.
In addition, the assumed liabilities of Graniteville have been increased by
$2,500 to reflect management's estimate of certain costs to be incurred as
a result of the Graniteville Acquisition, principally consisting of costs
associated with rationalization of redundant facilities and other costs.
30
<PAGE> 35
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
AVONDALE
The following table sets forth selected consolidated statement of income
data and selected consolidated balance sheet data of Avondale for each of the
five fiscal years in the period ended August 25, 1995. Such data were derived
from the Consolidated Financial Statements of the Company, which have been
audited by Ernst & Young LLP, independent auditors. The audited Consolidated
Financial Statements and Notes thereto of the Company for each of the three
fiscal years in the period ended August 25, 1995 are included elsewhere in this
Prospectus. The following table also sets forth selected consolidated financial
data of Avondale for the twenty-six weeks ended February 24, 1995 and February
23, 1996. Such data were derived from the unaudited Consolidated Financial
Statements of the Company included elsewhere in this Prospectus which unaudited
Consolidated Financial Statements, in the opinion of the Company's management,
include all adjustments (consisting of only normal recurring accruals) necessary
for a fair presentation of the financial position and results of operations for
such periods. The results of operations for the twenty-six weeks ended February
23, 1996 are not necessarily indicative of results that may be expected for
fiscal 1996. The selected consolidated financial data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- The Company" and the Consolidated
Financial Statements and Notes thereto of the Company included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
FISCAL YEAR ---------------------------
------------------------------------------ FEBRUARY 24, FEBRUARY 23,
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.............................. $457.3 $528.4 $495.5 $481.6 $538.7 $265.6 $243.5
Gross profit........................... 26.5 107.2 99.5 51.0 71.2 36.4 25.3
Operating income....................... 7.0 85.9 76.8 28.9 47.6 24.2 12.0
Interest expense, net.................. 9.8 4.5 2.1 6.5 14.3 7.3 6.0
Other (income) expense, net............ 0.9 (0.1) 0.5 (0.2) (0.8) (0.3) (0.5)
Income (loss) before income taxes,
extraordinary item and cumulative
effect of accounting change.......... (3.7) 81.5 74.2 22.6 34.0 17.2 6.5
Provision for (benefit of) income
taxes................................ (1.4) 31.1 29.0 8.5 13.1 6.7 2.5
Income (loss) before extraordinary item
and cumulative effect of accounting
change............................... (2.2) 50.4 45.2 14.0 20.9 10.5 4.0
Net income (loss)(a)................... (5.7) 50.4 42.4 14.0 20.9 10.5 4.0
PER SHARE DATA:
Income (loss) before extraordinary item
and cumulative effect of accounting
change............................... $ (.11) $ 2.40 $ 2.20 $ .85 $ 1.88 $ .95 $ .36
Net income (loss)...................... (.27) 2.40 2.06 .85 1.88 .95 .36
Dividends declared..................... .06 .32 .96 .28 .28 .14 .14
Weighted average number of shares
outstanding.......................... 21.1 21.0 20.6 16.6 11.1 11.1 11.1
BALANCE SHEET DATA (AT PERIOD END):
Total assets........................... $242.0 $267.0 $255.8 $267.6 $257.4 $272.5 $275.5
Long-term debt, including current
portion.............................. 93.7 57.0 37.1 200.0 169.9 194.6 188.0
Shareholders' equity................... 90.1 132.4 154.1 0.1 18.0 9.1 20.4
OTHER DATA:
Capital expenditures................... $ 12.1 $ 25.2 $ 36.4 $ 17.6 $ 15.8 $ 7.0 $ 13.3
Depreciation and amortization.......... 21.3 20.3 22.4 23.3 23.9 11.7 12.6
EBITDA(b).............................. 28.1 101.8 98.3 57.8 75.1 37.2 25.2
Ratio of EBITDA to interest expense,
net.................................. 2.9x 22.6x 46.8x 8.9x 5.2x 5.1x 4.2x
Ratio of earnings to fixed
charges(c)........................... (d) 19.0x 37.2x 4.5x 3.4x 3.4x 2.1x
</TABLE>
31
<PAGE> 36
- ---------------
(a) Reflects a charge of $3.5 million (net of income taxes) ($.16 per share) for
the cumulative effect of a change in accounting for postretirement benefits
in fiscal 1991 and an extraordinary loss of $2.8 million (net of income
taxes) ($.14 per share) on retirement of debt in fiscal 1993.
(b) EBITDA for Avondale is defined as net income plus (i) extraordinary item and
cumulative effect of accounting change, (ii) provision for income taxes,
(iii) interest expense, net and (iv) depreciation and amortization and,
plus or minus, as the case may be, adjustments to cost of goods sold made
under the LIFO inventory valuation method. EBITDA is presented not as an
alternative measure of operating results or cash flow from operations (as
determined in accordance with generally accepted accounting principles),
but because it is a widely accepted financial indicator of a company's
ability to incur and service debt.
(c) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, "earnings" include operating income (loss)
before income taxes, extraordinary item and cumulative effect of accounting
change plus fixed charges. Fixed charges include interest, whether expensed
or capitalized, amortization of deferred financing costs and the portion of
rental expense that is representative of the interest factor in these
rentals.
(d) In fiscal 1991, earnings were insufficient to cover fixed charges as fixed
charges exceeded earnings by $3.6 million.
32
<PAGE> 37
GRANITEVILLE
The following table sets forth the selected statement of operations data
and selected balance sheet data for Graniteville for the two months ended
February 28, 1993, the ten months ended January 2, 1994, the twelve months ended
January 2, 1994, each of the two fiscal years in the period ended December 31,
1995 and the thirteen weeks ended April 2, 1995 and March 31, 1996. The data for
the ten months ended January 2, 1994 and each of the two fiscal years in the
period ended December 31, 1995 were derived from the Financial Statements of
Graniteville, which have been audited by Deloitte & Touche LLP, independent
auditors. The data for the two months ended February 28, 1993, the twelve months
ended January 2, 1994 and the thirteen weeks ended April 2, 1995 and March 31,
1996 were derived from the unaudited Financial Statements of Graniteville. The
selected financial data set forth below should be read in conjunction with the
Financial Statements and Notes thereto of Graniteville included elsewhere in
this Prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Graniteville".
<TABLE>
<CAPTION>
TWO MONTHS TEN MONTHS TWELVE MONTHS THIRTEEN WEEKS ENDED
ENDED ENDED ENDED FISCAL YEAR --------------------
FEBRUARY 28, JANUARY 2, JANUARY 2, --------------- APRIL 2, MARCH 31,
1993(A) 1994(A) 1994(A) 1994 1995 1995 1996
------------ ---------- ------------- ------ ------ -------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................... $ 84.9 $416.4 $ 501.3 $497.1 $505.7 $134.4 $ 121.0
Gross profit................ 14.7 53.8 68.5 53.0 44.3 14.1 11.7
Operating income(b)......... 9.1 21.5 30.6 21.0 14.2 6.1 3.2
Interest expense, net....... 1.6 12.1 13.7 16.0 21.1 4.9 5.3
Other expense (income),
net....................... -- 1.9 1.9 (0.1) (1.4) (1.9) 0.1
Income (loss) before income
taxes..................... 7.5 7.5 15.0 5.2 (5.5) 3.2 (2.2)
Provision for (benefit from)
income taxes.............. 2.8 4.8 7.6 2.1 0.9 1.7 (0.8)
Net income (loss)(b)........ 4.7 2.7 7.4 3.1 (6.4) 1.4 (1.4)
BALANCE SHEET DATA (AT PERIOD
END):
Total assets................ $233.6 $276.5 $ 276.5 $296.1 $304.6 $307.7 $ 301.6
Long-term debt, including
current portion........... 62.7 163.1 163.1 171.2 210.4 168.9 207.1
OTHER DATA:
Capital expenditures........ $ 4.3 $ 21.9 $ 26.2 $ 21.4 $ 11.7 $ 1.7 $ 0.7
Depreciation and
amortization.............. 1.8 10.4 12.2 13.2 14.4 3.8 3.8
EBITDA(c)................... 8.9 30.0 38.9 36.5 34.1 12.0 7.5
Ratio of EBITDA to interest
expense, net.............. 5.6x 2.5x 2.8x 2.3x 1.6x 2.5x 1.4x
Ratio of earnings to fixed
charges(d)................ 5.6x 1.6x 2.1x 1.3x (e) 1.6x (e)
</TABLE>
- ---------------
(a) On October 27, 1993, the board of directors of Triarc approved a change in
Graniteville's fiscal year from a 52-53 week period ending on the Sunday
nearest the last day of February to a 52-53 week fiscal year ending on the
Sunday nearest the last day of December. Therefore, Graniteville's selected
financial data for the two months ended February 28, 1993 and the twelve
months ended January 2, 1994 are being presented for comparative purposes
only. The selected financial data for the two months ended February 28,
1993 is compiled from Graniteville's monthly unaudited financial
statements, and the selected financial data for the twelve months ended
January 2, 1994 is a compilation of the unaudited financial data for the
two months ended February 28, 1993 and the audited financial data for the
ten months ended January 2, 1994. As a result, such selected financial data
include estimates inherent in preparing interim financial statements, which
estimates were based on Graniteville's actual fiscal years. Such estimates
include LIFO adjustments resulting from interim and year-end calculations
based on Graniteville's actual fiscal years. Had such calculations been
based on the twelve months ended January 2, 1994, such calculations, and
the adjustments resulting therefrom, would have been different.
(b) Reflects management and other fees paid by Graniteville to Triarc of $0.6
million, $7.7 million, $8.3 million, $4.7 million, $4.6 million, $1.1
million and $1.2 million for the two months ended February 28, 1993, the
ten months ended January 2, 1994, the twelve months ended January 2, 1994,
fiscal 1994, fiscal 1995 and the thirteen weeks ended April 2, 1995 and
March 31, 1996, respectively.
(c) EBITDA for Graniteville is defined as net income plus (i) provision for
income taxes, (ii) interest expense with affiliate, (iii) interest expense,
net and (iv) depreciation and amortization and plus or minus, as the case
may be, adjustments to cost of goods sold made under the LIFO inventory
valuation method. EBITDA is presented not as an alternative measure of
operating results or cash flow from operations (as determined in accordance
with generally accepted accounting principles), but because it is a widely
accepted financial indicator of a company's ability to incur and service
debt.
(d) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, "earnings" include operating income (loss)
before income taxes plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of deferred financing costs
and the portion of rental expense that is representative of the interest
factor in these rentals.
(e) In fiscal 1995 and the thirteen weeks ended March 31, 1996, earnings were
insufficient to cover fixed charges as fixed charges exceeded earnings by
$5.5 million and $2.2 million, respectively.
33
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and Notes thereto of the Company and the
Financial Statements and Notes thereto of Graniteville included elsewhere in
this Prospectus.
OVERVIEW
Avondale and Graniteville produce and dye cotton and cotton-blend yarns and
fabrics used in the manufacture of low cost/high intrinsic value apparel and, to
a lesser extent, home furnishings, recreational, military and industrial
products. Avondale's and Graniteville's results of operations have been
impacted, in part, by general business cycles of the U.S. economy, trends toward
more casual dress, especially high cotton content casual apparel, raw material
costs, and government legislation. See "Business -- The Company -- Description
of the Business -- Raw Materials" and "-- Competition".
THE COMPANY
GENERAL
Avondale Incorporated's predecessor was founded in 1895 by the family of G.
Stephen Felker, the Company's Chairman, President and Chief Executive Officer.
Yarn, finished fabrics and greige fabrics accounted for 54.5%, 37.9% and 7.6%,
respectively, of the Company's net sales of $538.7 million in fiscal 1995. Prior
to 1986, Avondale Incorporated's predecessor primarily manufactured and marketed
greige fabrics. In July 1986, Avondale Incorporated's predecessor, together with
Mr. Felker and certain other investors, acquired Avondale for approximately $126
million. In their respective last full fiscal years preceding the 1986
Acquisition, Avondale Incorporated's predecessor and Avondale had net sales of
$40.5 million and $238.3 million, respectively.
Since the 1986 Acquisition, the Company's management team has implemented a
strategy focused on producing high quality, value-added yarns and fabrics,
reducing incremental manufacturing unit costs, maximizing manufacturing
flexibility, optimizing raw material sourcing and utilization and providing
superior customer service. Avondale has also successfully redeployed capital by
closing certain manufacturing facilities and, in other cases, moving
manufacturing equipment among its locations. Over the past 11 years, through
acquisitions and improved performance, management has increased net sales from
the $40.5 million achieved by Avondale's predecessor in fiscal 1985 (the last
full fiscal year prior to the 1986 Acquisition) to $538.7 million in fiscal
1995.
Avondale's expansion and modernization efforts since the 1986 Acquisition
have included, among other things, the following initiatives:
- 1986 -- Expanded its greige fabrics manufacturing facility and installed
more new looms in its greige fabrics division
- 1987 -- Constructed a new dye range in its finished fabrics division
- 1988, 1989 and 1990 -- Upgraded a portion of its existing open-end
spinning technology and converted a ring-spun yarn manufacturing facility
to open-end spinning technology
- 1989 -- Acquired the property, plant and equipment of three yarn
manufacturing facilities
- 1990 -- Sold an acrylic yarn manufacturing facility (that was not
compatible with the Company's production and manufacturing strategy) and
closed a greige fabrics manufacturing facility
- 1991 -- Sold a ring-spun yarn manufacturing facility as the Company
continued to focus on open-end spinning technology
34
<PAGE> 39
- 1991, 1992 and 1993 -- Replaced earlier generation open-end spinning
equipment (which generally was less than 10 years old) in the yarns
division with the most technologically advanced equipment available
- 1992 and 1993 -- Replaced all remaining fly shuttle looms in the greige
fabrics division and replaced some earlier generation projectile looms
with technologically advanced, high speed looms and began construction of
a new state-of-the-art indigo-dye range in the finished fabrics division
- 1994 and 1995 -- Completed construction of state-of-the-art indigo-dye
range in the finished fabrics division and replaced open-end spinning
equipment with new generation, advanced spinning technology
- 1996 -- Replaced earlier generation projectile looms and rapier looms
with high speed airjet looms and rapier looms and replaced carding
equipment at two plants with modern carding and drawing systems and
replaced older winders at a third plant with fully automated winders
Avondale is currently implementing a $31 million expansion of its denim
manufacturing operations. Avondale expects this project, which should be
completed by the middle of fiscal 1997, to expand its denim manufacturing by
25%. The current expansion will allow the Company to fully utilize the
previously installed indigo-dyeing capacity, which should provide enhanced cash
flow returns on the current investment. The Company expects the program to have
a positive impact on its financial results beginning in 1997. See "-- The
Company -- Liquidity and Capital Resources".
On March 31, 1996 Avondale entered into the Asset Purchase Agreement
pursuant to which the Company acquired Graniteville on April 29, 1996. The
Graniteville Acquisition has significantly increased the size of the Company.
Pro forma for the Graniteville Acquisition, the Company's net sales and EBITDA
in fiscal 1995 would have been $1.0 billion and $119.2 million, respectively.
Avondale believes that the Graniteville Acquisition has or will (as the case may
be), among other things, (i) significantly enhance its presence in the denim
market, establishing it as one of the world's largest producers of enhanced
denim fabrics, (ii) expand substantially its denim customer base, giving rise to
various cross-selling opportunities, (iii) expand its existing product lines as
well as provide entry into new markets, (iv) enhance the vertical integration of
its operations, (v) result in substantial raw material purchasing leverage, (vi)
provide important raw material sourcing opportunities that the Company believes
should enhance capacity utilization and improve Graniteville's profit margins,
(vii) better position Avondale to take advantage of market opportunities as they
arise within the textile industry as the trend towards consolidation of textile
manufacturing operations continues and (viii) result in certain cost savings and
business synergies. However, there can be no assurance that any of these
expected savings can be achieved or that they will not be offset by unexpected,
unforeseen increases in other costs not directly related to the Graniteville
Acquisition. See "Risk Factors -- Integration of the Graniteville Acquisition".
35
<PAGE> 40
RESULTS OF OPERATIONS
The table below sets forth for the periods indicated statement of income
data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
FISCAL YEAR ---------------------------
--------------------- FEBRUARY 24, FEBRUARY 23,
1993 1994 1995 1995 1996
----- ----- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Yarn sales............................... 55.6 53.8 54.5 55.1 50.3
Finished fabric sales.................... 37.2 38.4 37.9 37.6 40.8
Greige fabric sales...................... 7.2 7.8 7.6 7.3 8.9
Cost of goods sold:
Raw materials............................ 40.1 46.8 49.2 48.8 51.1
Conversion costs......................... 35.3 37.8 33.2 33.1 33.3
Total............................ 75.4 84.6 82.4 81.9 84.4
Depreciation............................... 4.5 4.8 4.4 4.4 5.2
Selling and administrative expenses........ 4.6 4.6 4.4 4.6 5.5
Operating income........................... 15.5 6.0 8.8 9.1 4.9
Interest expense, net...................... 0.4 1.4 2.7 2.8 2.5
Provision for income taxes................. 5.9 1.8 2.4 2.5 1.0
Income before extraordinary item........... 9.1 2.9 3.9 4.0 1.6
Net income................................. 8.6 2.9 3.9 4.0 1.6
</TABLE>
Twenty-Six Weeks Ended February 23, 1996 Compared to Twenty-Six Weeks Ended
February 24, 1995
Net Sales. Net sales decreased 8.3% to $243.5 million in the twenty-six
weeks ended February 23, 1996 from $265.6 million for the twenty-six weeks ended
February 24, 1995.
Yarn sales decreased 16.3% to $122.4 million for the twenty-six weeks ended
February 23, 1996 from $146.3 million for the twenty-six weeks ended February
24, 1995. This decrease resulted from a 15.6% decrease in pounds sold due to
weak demand resulting from poor market conditions in the apparel market and
excess production capacity in the yarn industry. Average selling prices remained
relatively constant.
Finished fabric sales decreased 0.5% to $99.4 million for the twenty-six
weeks ended February 23, 1996 from $99.9 million for the twenty-six weeks ended
February 24, 1995. This decrease resulted from a 7.4% decrease in yards sold
within the division, which was partially offset by a 7.5% increase in average
selling prices. Denim sales increased 1.6% during the twenty-six weeks ended
February 23, 1996 while fashion fabric sales decreased 21.5% during such period
reflecting higher sales during the twenty-six weeks ended February 24, 1995 of
greige goods.
Greige fabric sales increased 11.6% to $21.6 million for the twenty-six
weeks ended February 23, 1996 from $19.4 million for the twenty-six weeks ended
February 24, 1995. This increase resulted from a 12.5% increase in yards sold,
reflecting a shift in product mix and increased sales to the home furnishings
and industrial products markets, which was partially offset by an 0.8% decrease
in average selling prices.
Cost of Goods Sold. Cost of goods sold decreased 5.5% to $205.6 million in
the twenty-six weeks ended February 23, 1996 from $217.5 million in the
twenty-six weeks ended February 24, 1995. Cost of goods sold as a percentage of
net sales increased to 84.4% in the twenty-six weeks ended February 23, 1996
from 81.9% in the twenty-six weeks ended February 24, 1995, primarily due to
increased cotton costs and a decrease in absorption of fixed manufacturing costs
due to lower levels of capacity utilization during the twenty-six weeks ended
February 23, 1996. Raw material costs as a percentage of net sales increased to
51.1% in the twenty-six weeks ended February 23, 1996 from 48.8% in the
twenty-six weeks ended February 24, 1995, while conversion costs increased
slightly to 33.3% from 33.1% during the same periods.
Selling and Administrative Expenses. Selling and administrative expenses
increased 9.5% to $13.3 million in the twenty-six weeks ended February 23, 1996
from $12.1 million in the twenty-six weeks ended
36
<PAGE> 41
February 24, 1995. This increase includes $0.5 million in severance expenses
associated with certain sales and administrative staff reductions and a $0.3
million increase in legal and professional fees during the twenty-six weeks
ended February 23, 1996.
Interest Expense, Net. Net interest expense decreased 17.7% to $6.0
million in the twenty-six weeks ended February 23, 1996 from $7.3 million in the
twenty-six weeks ended February 24, 1995. This decrease reflected more favorable
interest rates and a decrease in aggregate borrowings outstanding during the
twenty-six weeks ended February 23, 1996.
Provision for Income Taxes. Provision for income taxes decreased 62.0% to
$2.5 million in the twenty-six weeks ended February 23, 1996 from $6.7 million
in the twenty-six weeks ended February 24, 1995. The Company's effective tax
rate was 38.9% in the twenty-six weeks ended February 23, 1996 compared to 38.8%
in the twenty-six weeks ended February 24, 1995.
Fiscal 1995 Compared to Fiscal 1994
Net Sales. Net sales increased 11.9% to $538.7 million in fiscal 1995 from
$481.6 million in fiscal 1994, primarily reflecting higher average selling
prices as a result of the Company's ability to pass on to customers higher raw
material costs and strong demand for high-end denim, other apparel products and
home furnishing fabrics.
Yarn sales increased 13.2% to $293.4 million in fiscal 1995 from $259.2
million in fiscal 1994 due to a 13.1% increase in average selling prices. This
increase resulted from strong consumer demand in the knit and woven apparel
markets and the ability of the Company to pass on higher raw material costs to
its customers during fiscal 1995.
Finished fabric sales increased 10.2% to $204.0 million in fiscal 1995 from
$185.1 million in fiscal 1994. This increase resulted primarily from a 3.0%
increase in average selling prices and a 7.0% increase in yards sold due to
increased consumer demand for denim and other apparel products during fiscal
1995.
Greige fabric sales increased 10.7% to $41.2 million in fiscal 1995 from
$37.2 million in fiscal 1994. This increase resulted primarily from a 7.1%
increase in average selling prices and a 3.4% increase in yards sold, reflecting
price increases in the apparel and home furnishings markets and a shift in the
Company's product mix to serve those markets.
Cost of Goods Sold. Cost of goods sold increased 8.9% to $443.7 million in
fiscal 1995 from $407.4 million in fiscal 1994. This increase reflected a
substantial increase in cotton costs, which were partially offset by improved
absorption of fixed manufacturing costs due to high levels of capacity
utilization during fiscal 1995. Cost of goods sold as a percentage of net sales
declined to 82.4% in fiscal 1995 from 84.6% in fiscal 1994. Raw material costs
as a percentage of net sales increased to 49.2% in fiscal 1995 from 46.8% in
fiscal 1994 as average cotton costs increased 15.7% during fiscal 1995. Total
conversion costs as a percentage of net sales decreased to 33.2% in fiscal 1995
from 37.8% in fiscal 1994.
Selling and Administrative Expenses. Selling and administrative expenses
increased 7.0% to $23.6 million in fiscal 1995 from $22.1 million in fiscal
1994, reflecting higher profit sharing and incentive payments.
Interest Expense, Net. Net interest expense increased 119.1% to $14.3
million in fiscal 1995 from $6.5 million in fiscal 1994. This increase reflected
a substantial increase in aggregate borrowings outstanding during fiscal 1995
due to the repurchase of shares of outstanding common stock in March 1994.
Provision for Income Taxes. Provision for income taxes increased to $13.1
million in fiscal 1995 from $8.5 million in fiscal 1994. The Company's effective
tax rate was 38.5% in fiscal 1995 compared to 37.8% in fiscal 1994.
37
<PAGE> 42
Fiscal 1994 Compared to Fiscal 1993
Net Sales. Net sales decreased 2.8% to $481.6 million in fiscal 1994 from
$495.5 million in fiscal 1993 primarily as a result of a decline in consumer
demand within the apparel market during fiscal 1994 from high levels of demand
in fiscal 1993.
Yarn sales decreased 5.9% to $259.2 million in fiscal 1994 from $275.6
million in fiscal 1993 due to a 9.6% decrease in average selling price and a
4.1% increase in pounds sold. This decrease was attributable to weakening demand
and competitive pricing in the tee shirt, jersey and fleece markets.
Finished fabric sales increased 0.5% to $185.1 million in fiscal 1994 from
$184.1 million in fiscal 1993. This increase resulted primarily from a 2.2%
increase in yards sold, which was partially offset by a 1.6% decrease in average
selling prices. The decrease in average selling prices reflected decreased
demand for bottomweight fabrics within the apparel market during fiscal 1994.
Greige fabric sales increased 3.8% to $37.2 million in fiscal 1994 from
$35.8 million in fiscal 1993. This increase resulted primarily from a 5.1%
increase in average selling prices, which reflected increased demand in the home
furnishings and industrial products markets. This increase was partially offset
by a 1.2% decrease in yards sold as demand declined in the apparel market during
fiscal 1994.
Cost of Goods Sold. Cost of goods sold increased 9.0% to $407.4 million in
fiscal 1994 from $373.7 million in fiscal 1993. Cost of goods sold as a
percentage of net sales increased to 84.6% in fiscal 1994 from 75.4% in fiscal
1993 principally due to increased raw material costs. Raw material costs as a
percentage of net sales increased to 46.8% in fiscal 1994 from 40.1% in fiscal
1993 primarily due to a 12.5% increase in average cotton costs during fiscal
1994.
Selling and Administrative Expenses. Selling and administrative expenses
decreased 2.7% to $22.1 million in fiscal 1994 from $22.7 million in fiscal
1993, which reflected lower profit sharing and incentive payments.
Interest Expense, Net. Net interest expense increased 218.9% to $6.5
million in fiscal 1994 from $2.1 million in fiscal 1993. This increase reflected
a substantial increase in aggregate borrowings outstanding during fiscal 1994
due to the repurchase of shares of outstanding common stock in March 1994.
Provision for Income Taxes. Provision for income taxes decreased 70.6% to
$8.5 million in fiscal 1994 from $29.0 million in fiscal 1993. The Company's
effective tax rate was 37.8% in fiscal 1994 compared to 39.1% in fiscal 1993.
LIQUIDITY AND CAPITAL RESOURCES
Avondale has funded its working capital requirements and capital
expenditures from net cash provided by operating activities, borrowings under
its bank credit facilities, borrowings under subordinated notes and proceeds
received in connection with the issuance of equity and debt securities and
industrial revenue bonds. See "Capitalization". At May 24, 1996, Avondale had
borrowings of $174.4 million outstanding under the New Credit Facility and $50.6
million of borrowing availability thereunder. See "Capitalization". Such
borrowings bore interest at a weighted average of 7.3% per annum.
In connection with the Graniteville Acquisition, Avondale entered into the
New Credit Facility, which consists of a five-year revolving credit facility of
up to $225 million. Borrowings under the New Credit Facility consist of
revolving loans to be provided by the lenders ("Revolver Loans") and up to $5
million of revolving swing loans to be provided by Wachovia ("Swing Revolver
Loans"). The aggregate commitment under the New Credit Facility will be reduced
by an amount equal to the net cash proceeds from certain specified asset sales
(including accounts receivable sold pursuant to the Receivables Securitization
Facility). Interest accrues on Revolver Loans (i) at the Company's option at
either LIBOR (adjusted for reserves) plus a specified number of basis points or
the base rate, which is the higher of Wachovia's prime rate and the overnight
federal funds rate plus 0.5%, or (ii) if the Company and the lenders under the
New Credit Facility (the "Lenders") agree, at the "set" rate, which shall be an
interest rate agreed to by the Company and the Lenders at the time such Revolver
Loan is made. In addition, the Company is required to pay certain structuring,
administration
38
<PAGE> 43
and funding fees under the New Credit Facility. The New Credit Facility is
secured by a security interest in substantially all of the Company's assets
(including the assets acquired pursuant to the Graniteville Acquisition) and is
guaranteed by Avondale Incorporated. In addition, the New Credit Facility
contains customary covenants, including requirements to maintain certain
financial ratios.
The Company has used interest rate swap agreements to effectively fix the
interest rate with respect to a portion of its outstanding borrowings, which
bear interest at floating rates. Such agreements involve the receipt of floating
rate amounts in exchange for fixed rate interest payments for the term of such
agreements without an exchange of the underlying principal amounts. The
differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the outstanding
Revolver Loans. The related amount payable to or receivable from counterparties
is included in other liabilities or assets. At May 24, 1996, the Company had
swap agreements with notional amounts aggregating $100.0 million, providing an
effective interest rate of 7.6% on that equivalent portion of the outstanding
Revolver Loans.
The Company's capital expenditures aggregated $13.3 million for the
twenty-six weeks ended February 23, 1996. These expenditures were primarily for
the expansion of the Company's denim manufacturing operations. This project
involves the replacement of earlier generation projectile looms with high speed
air jet looms and the addition of two integrated finishing ranges. The Company
anticipates these improvements will increase the capacity of its denim
operations by 25%. The Company also acquired and installed new high speed rapier
looms in the greige fabrics division and completed other modernization projects
at other manufacturing facilities. Management estimates that capital
expenditures for the balance of fiscal 1996 will be approximately $20.0 million
and that such amounts will be used primarily for the finished fabrics division
expansion program and card modernization in the yarns division. Management also
estimates that capital expenditures for fiscal 1997 will be approximately $75.0
million, and that such amounts will be used primarily for the replacement of
yarn spinning equipment, upgrading of Graniteville's weaving equipment and
completion of the finished fabrics expansion program.
Net cash provided by operating activities was $5.4 million in the
twenty-six weeks ended February 23, 1996. Principal working capital changes
included a $9.3 million increase in inventories and a $3.1 million decrease in
accounts payable. The Company's investing activities included the capital
improvements described above and a $7.5 million subordinated loan to Oneita
Industries, Inc. ("Oneita"), a yarn customer of the Company. Net cash provided
by financing activities aggregated $15.3 million, including $1.5 million used to
pay dividends on outstanding capital stock.
In February 1996, the Company made a $7.5 million subordinated loan to
Oneita that bears interest at the rate of 10% per annum and is due and payable
on February 26, 1999 (the "Oneita Note"). Although Oneita intended to repay the
Oneita Note with a portion of the proceeds from an offering (the "Oneita Rights
Offering") of its common stock (the "Oneita Common Stock") to its existing
shareholders and the Company had agreed, along with a shareholder of Oneita, to
purchase at $7.00 per share any such shares of Oneita Common Stock not so
purchased, the Company does not believe that Oneita will effect the Oneita
Rights Offering. The Company believes that it will have the right under certain
circumstances to convert and exchange the Oneita Note for shares of Oneita
common stock at a purchase price to be agreed upon by the Company and Oneita.
Oneita incurred a net loss of $25.3 million in its second fiscal quarter ending
March 31, 1996 and has announced that it does not expect to be profitable for
its current fiscal year ending September 30, 1996. There can be no assurance
that Oneita will be able to repay the Oneita Note, which is unsecured and
subordinated in right of payment to Oneita's other outstanding indebtedness.
Net cash provided by operating activities was $50.4 million in fiscal 1995.
Principal working capital changes included a $6.1 million decrease in accounts
receivable, a $4.9 million increase in inventories and a $2.0 million decrease
in prepaid expenses. The Company's investing activities included the investment
of $15.8 million in capital improvements, as well as the receipt of proceeds
from the sale of equipment that was replaced in connection with the ongoing
modernization of the Company's manufacturing facilities and a non-refundable
deposit in connection with the possible sale of undeveloped beach property on
the Florida Gulf
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<PAGE> 44
owned by the Company. Net cash used in financing activities aggregated $35.5
million, including $32.4 million used to repay long-term indebtedness and $3.1
million used to pay dividends on outstanding capital stock.
Net cash provided by operating activities was $22.9 million in fiscal 1994.
Principal working capital changes included a $18.1 million increase in accounts
receivable and a $3.5 million reduction in inventories. The Company's investing
activities included the investment of $17.6 million in capital improvements and
the receipt of proceeds from the sale of property and equipment relating to
equipment being replaced in the ongoing modernization of the Company's
manufacturing facilities. Net cash used in financing activities aggregated $5.5
million, including $124.7 million used to repurchase an aggregate of 9,413,080
shares of Class A Common Stock of Avondale Incorporated in March 1994 in a
negotiated transaction from Metropolitan Life Insurance Company, certain
affiliates of CS First Boston Corporation, John F. Maypole and The George and
Sandra Weiksner Foundation (the "Stock Repurchase"), $2.0 million used to repay
outstanding long-term indebtedness and $3.8 million used to pay dividends on
outstanding capital stock.
Net cash provided by operating activities was $61.4 million in fiscal 1993.
Principal working capital changes included a $11.2 million decrease in accounts
payable, a $9.3 million decrease in accounts receivable and a $4.3 million
decrease in income taxes payable. The Company's investing activities included
the investment of $36.4 million in capital improvements and the receipt of
proceeds from the sale of equipment that was replaced in connection with the
ongoing modernization of the Company's manufacturing facilities, offset by $3.8
million in restricted funds held for the purchase of property, plant and
equipment. Net cash used in financing activities aggregated $43.7 million,
including $33.8 million used to repay outstanding long-term indebtedness, $1.6
million used to repurchase shares of outstanding capital stock and $19.4 million
used to pay dividends on outstanding capital stock, which was offset by the
issuance of $11.1 million of long-term debt.
Management believes that cash generated from operations, together with
borrowings available under the New Credit Facility and proceeds received in
connection with the issuance of industrial revenue bonds, will be sufficient to
meet the Company's working capital and capital expenditure needs in the
foreseeable future. The Company will also continue to consider other options
available to it in connection with funding future working capital and capital
expenditure needs, including the issuance of additional debt and equity
securities.
SEASONALITY
Demand for the Company's yarn products is broadly distributed over markets
with staggered seasonality and, therefore, generally does not exhibit
significant seasonal trends. Demand for the Company's fabric products and the
level of the Company's fabric sales fluctuate moderately during the year, based
upon historical buying trends. Generally there is increased retail demand for
denim garments during the fall (back-to-school) and Christmas holiday selling
seasons. As a result, demand for the Company's fabrics is generally higher
during the Company's second and third fiscal quarters when fabrics are produced
for these selling seasons.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when circumstances indicate that the
carrying amount of an asset may not be recoverable. Avondale will adopt
Statement No. 121 in the first fiscal quarter of 1997 and, based on current
circumstances, does not believe the effect of adoption will be material.
Avondale accounts for its stock compensation arrangements described in Note
6 of Notes to Consolidated Financial Statements under the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and intends to continue to do so.
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<PAGE> 45
GRANITEVILLE
GENERAL
Graniteville, founded over 150 years ago, is a leading manufacturer and
marketer of cotton and cotton-blend finished fabrics. Graniteville is a
vertically integrated manufacturer, capable of converting raw cotton and
polyester into a variety of finished fabrics. However, Graniteville's dyeing and
finishing capacity is greater than its spinning and weaving capacity, requiring
it to purchase yarn and greige fabric from outside suppliers (which currently
include the Company). The Company views dyeing and finishing as Graniteville's
core competencies and its facilities include a modern piece-dyeing and finishing
plant which the Company believes to be the largest (in terms of pounds
processed) in the United States. Graniteville's utility wear, sportswear, denim
and specialty fabrics accounted for 47.8%, 16.9%, 27.2% and 8.1%, respectively,
of Graniteville's net sales of $505.7 million in fiscal 1995.
RESULTS OF OPERATIONS
The table below sets forth for the periods indicated statement of income
data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
TWELVE
MONTHS THIRTEEN WEEKS ENDED
ENDED FISCAL YEAR --------------------
JANUARY 2, ------------- APRIL 2, MARCH 31,
1994 1994 1995 1995 1996
---------- ----- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Utility wear fabric sales.................. 42.3 46.8 47.8 49.6 42.9
Sportswear fabric sales.................... 25.3 22.8 16.9 18.1 18.2
Denim...................................... 23.5 20.8 27.2 22.6 33.0
Specialty fabrics.......................... 8.9 9.6 8.1 9.7 5.9
Cost of goods sold:
Raw materials.............................. 42.1 44.9 46.9 45.1 44.1
Conversion costs........................... 41.8 41.8 41.5 41.6 43.1
Total.............................. 83.9 86.7 88.4 86.7 87.2
Depreciation and amortization................ 2.4 2.7 2.9 2.8 3.1
Selling and administrative expenses.......... 7.6 6.4 6.0 5.9 7.1
Operating income............................. 6.1 4.2 2.8 4.6 2.6
Interest expense, net........................ 2.7 3.1 3.8 3.6 4.4
Provision for (benefit from) income taxes.... 1.5 0.4 0.2 1.3 (0.6)
Net income (loss)............................ 1.5 0.6 (1.3) 1.1 (1.2)
</TABLE>
Thirteen Weeks Ended March 31, 1996 Compared to Thirteen Weeks Ended April 2,
1995
Net Sales. Net sales decreased 9.9% to $121.0 million in the thirteen
weeks ended March 31, 1996 from $134.4 million in the thirteen weeks ended April
2, 1995 due to reduced demand for utility wear, sportswear and specialty
fabrics, partially offset by higher average selling prices for sportswear
fabrics and increased volume and higher average selling prices for denim
fabrics.
Utility wear fabric sales decreased 22.0% to $52.0 million in the thirteen
weeks ended March 31, 1996 from $66.6 million in the thirteen weeks ended April
2, 1995 due to a 22.0% decrease in yards sold and relatively flat average
selling prices.
Sportswear fabric sales decreased 9.5% to $22.0 million in the thirteen
weeks ended March 31, 1996 from $24.3 million in the thirteen weeks ended April
2, 1995 due to a 16.9% decrease in yards sold, which was partially offset by a
9.0% increase in average selling prices.
Denim sales increased 31.4% to $39.9 million in the thirteen weeks ended
March 31, 1996 from $30.4 million in the thirteen weeks ended April 2, 1995 due
to a 23.6% increase in yards sold and a 6.5% increase in average selling prices.
The increase in yards sold and average selling prices reflected strong demand
for denim in the thirteen weeks ended March 31, 1996.
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<PAGE> 46
Specialty fabric sales decreased 45.6% to $7.1 million in the thirteen
weeks ended March 31, 1996 from $13.1 million in the thirteen weeks ended April
2, 1995 due to a 32.4% decrease in yards sold and a 19.6% decrease in average
selling prices. These decreases reflected curtailment in military procurement of
specialty fabric products.
Cost of Goods Sold. Cost of goods sold, excluding depreciation and
amortization, decreased 9.4% to $105.5 million in the thirteen weeks ended March
31, 1996 from $116.5 million in the thirteen weeks ended April 2, 1995. Cost of
goods sold as a percentage of net sales increased to 87.2% in the thirteen weeks
ended March 31, 1996 from 86.7% in the thirteen weeks ended April 2, 1995. Raw
material costs (which includes the cost of purchased greige fabrics) as a
percentage of net sales decreased to 44.1% in the thirteen weeks ended March 31,
1996 from 45.1% in the thirteen weeks ended April 2, 1995 due to improved
average selling prices relative to the cost of raw materials in the thirteen
weeks ended March 31, 1996. Conversion costs as a percentage of net sales
increased to 43.1% in the thirteen weeks ended March 31, 1996 from 41.6% in the
thirteen weeks ended April 2, 1995. This increase reflected a decrease in
absorption of fixed manufacturing costs due to lower levels of capacity
utilization during the thirteen weeks ended March 31, 1996.
Selling and Administrative Expenses. Selling and administrative expenses,
including management and other fees payable by Graniteville to Triarc, increased
6.9% to $8.5 million in the thirteen weeks ended March 31, 1996 from $8.0
million in the thirteen weeks ended April 2, 1995, primarily as a result of
increased bad debt expense and expenditures related to the sale of Graniteville,
which were partially offset by a decrease in incentive compensation expense.
Interest Expense, Net. Interest expense, net increased 8.7% to $5.3
million in the thirteen weeks ended March 31, 1996 from $4.9 million in the
thirteen weeks ended April 2, 1995. This increase reflected increased borrowings
to advance funds to Triarc and for other corporate purposes, which were
partially offset by a decrease in interest rates on outstanding borrowings.
Provision for Income Taxes. A benefit from income taxes was recorded at an
effective tax rate of 35.5% in the thirteen weeks ended March 31, 1996 as
compared to a provision for income taxes at an effective rate of 54.9% in the
thirteen weeks ended April 2, 1995. The provision for income taxes in the
thirteen weeks ended April 2, 1995 was higher than the expected rate due to the
effect of items not deductible for income tax purposes.
Fiscal 1995 Compared to Fiscal 1994
Net Sales. Net sales increased 1.7% to $505.7 million in fiscal 1995
from $497.1 million in fiscal 1994 due to improved demand for denim products and
higher average selling prices for utility wear fabrics, sportswear fabrics and
denim, which were significantly offset by decreased volume in sportswear
fabrics.
Utility wear fabric sales increased 3.8% to $241.7 million in fiscal 1995
from $232.8 million in fiscal 1994 due to a 0.6% increase in yards sold and a
3.2% increase in average selling prices, which reflected in part the ability of
Graniteville to pass on higher raw material costs to customers during fiscal
1995.
Sportswear fabric sales decreased 24.4% to $85.6 million in fiscal 1995
from $113.2 million in fiscal 1994 due to a decrease in yards sold, which
resulted from weak retail demand and Graniteville's decision to forego some
business where acceptable margins could not be achieved.
Denim sales increased 32.8% to $137.4 million in fiscal 1995 from $103.5
million in fiscal 1994. This increase reflected strong demand for indigo-dyed
denim as the number of yards sold increased 20.4% and average selling prices
increased 10.4%.
Specialty fabric sales decreased 13.7% to $41.0 million in fiscal 1995 from
$47.5 million in fiscal 1994 due to a 15.3% decrease in yards sold offset by a
2.0% increase in average selling prices, reflecting curtailment in military
procurement programs resulting in decreased sales of specialty fabrics sold to
military products manufacturers.
Cost of Goods Sold. Cost of goods sold, excluding depreciation and
amortization, increased 3.7% to $446.9 million in fiscal 1995 compared to $430.8
million in fiscal 1994. This increase reflected increases in cotton and
polyester costs and a decrease in absorption of fixed manufacturing costs due to
lower levels of capacity utilization during fiscal 1995. Cost of goods sold as a
percentage of net sales increased to 88.4% in
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<PAGE> 47
fiscal 1995 from 86.7% in fiscal 1994. Raw material costs (which includes the
cost of purchased greige fabrics) as a percentage of net sales increased to
46.9% in fiscal 1995 from 44.9% in fiscal 1994 as average cotton costs increased
16.7% during fiscal 1995. Conversion costs as a percentage of net sales
decreased to 41.5% in fiscal 1995 from 41.8% in fiscal 1994.
Selling and Administrative Expenses. Selling and administrative expenses,
including management and other fees payable by Graniteville to Triarc, decreased
5.6% to $30.2 million in fiscal 1995 from $32.0 million in fiscal 1994,
primarily as a result of lower incentive compensation expense in fiscal 1995 and
the absence of accruals for the cost of relocating Graniteville's marketing
management to headquarters in Graniteville, South Carolina, which was fully
accrued in fiscal 1994.
Interest Expense, Net. Interest expense, net increased 31.9% to $21.1
million in fiscal 1995 from $16.0 million in fiscal 1994. This increase
reflected both higher average levels of outstanding borrowings and higher
interest rates applicable to such borrowings.
Provision for Income Taxes. Provision for income taxes decreased to $0.9
million in fiscal 1995 from $2.1 million in fiscal 1994. This decrease reflected
a $10.7 million decrease in income before income taxes, which was partially
offset by deferred tax items. Graniteville's effective tax rate was (15.7%) in
fiscal 1995 and 40.7% in fiscal 1994. The rate in fiscal 1995 was impacted
significantly by the provision for income tax contingencies of $2.5 million.
Fiscal 1994 Compared to the Twelve Months Ended January 2, 1994 (the "1993
Period")
Net Sales. Net sales decreased 0.8% to $497.1 million in fiscal 1994 from
$501.3 in the 1993 Period reflecting decreased sales of sportswear fabrics and
denim, which were partially offset by increased sales of utility wear fabrics.
Utility wear fabric sales increased 9.9% to $232.8 million in fiscal 1994
from $211.9 million in the 1993 Period. This increase primarily resulted from a
10.5% increase in yards sold, which was partially offset by a 0.9% decrease in
average selling prices. The increase in yards sold reflected increased market
share due to continued high levels of employment, and the decrease in average
selling prices reflected primarily consumer resistance to price increases.
Sportswear fabric sales decreased 10.6% to $113.2 million in fiscal 1994
from $126.6 million in the 1993 Period. This decrease resulted from a 1.0%
decrease in average selling prices, coupled with a 9.7% decrease in yards sold.
Denim sales decreased 12.1% to $103.5 million in fiscal 1994 from $117.8
million in the 1993 Period. This decrease was the result of a 6.4% decrease in
average selling prices coupled with a 6.3% decrease in yards sold reflecting
excess supply in the denim markets.
Specialty product sales increased 5.6% to $47.5 million in fiscal 1994 from
$45.0 million in the 1993 Period, which reflected an increase in average selling
prices of 54.3%, which was offset in part by a 31.6% decrease in yards sold.
This increase reflects a shift in the product mix to higher priced fabrics sold
to military products manufacturers.
Cost of Goods Sold. Cost of goods sold, excluding depreciation and
amortization, increased 2.4% to $430.8 million in fiscal 1994 from $420.6
million in the 1993 Period. Cost of goods sold as a percentage of net sales
increased to 86.7% in fiscal 1994 from 83.9% in the 1993 Period. Raw material
costs (which includes the cost of purchased greige fabrics) as a percentage of
net sales increased to 44.9% in fiscal 1994 from 42.1% in the 1993 Period due in
part to a 16.4% increase in cotton prices.
Selling and Administrative Expenses. Selling and administrative expenses
decreased 15.6% to $31.9 million in fiscal 1994 from $37.9 million in the 1993
Period reflecting a restructuring charge of $1.8 million in the 1993 Period
relating to Graniteville's allocated portion of the cost to terminate the lease
on Triarc's existing corporate headquarters and the allocated cost of a
consulting agreement with the former Vice Chairman of Triarc and a $3.3 million
decrease in administrative charges from Triarc.
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<PAGE> 48
Interest Expense, Net. Interest expense, net increased 16.8% to $16.0
million in fiscal 1994 from $13.7 million in the 1993 Period. This increase
reflected increased borrowings to advance funds to Triarc and to finance capital
expenditures and an increase in the interest rate on outstanding borrowings.
Provision for Income Taxes. Graniteville's effective tax rate was 40.7% in
fiscal 1994 and 50.6% in the 1993 Period. The effective tax rate was higher in
the 1993 Period because of capital loss carryforwards for which no tax benefit
was recorded and the additional provision for deferred taxes required as a
result of the increase in the federal tax rate to 35%.
LIQUIDITY AND CAPITAL RESOURCES
Graniteville has funded its working capital requirements and capital
expenditures with cash from operations and borrowings under its credit
facilities. At March 31, 1996, Graniteville had borrowings of $195.9 million
outstanding under its credit facilities and borrowing availability of $15.6
million.
Graniteville's capital expenditures aggregated $26.5 million, $21.4
million, $11.7 million and $0.7 million in the 1993 Period, fiscal 1994, fiscal
1995 and the thirteen weeks ended March 31, 1996, respectively. These
expenditures were primarily for ongoing modernization of Graniteville's
manufacturing facilities, including the construction of a new indigo yarn dyeing
facility, which was completed in fiscal 1994.
Net cash provided by operating activities was $3.0 million for the thirteen
weeks ended March 31, 1996 compared to $4.2 million for the thirteen weeks ended
April 2, 1995. Principal working capital changes included a $7.5 million
increase in inventories, a $3.5 million decrease in accounts receivable and $2.2
million increase in accounts payable and accrued items. Graniteville's investing
activities included the investment of $0.7 million in capital improvements. Net
cash used in financing activities aggregated $4.1 million, consisting of $3.2
million used to repay outstanding long-term indebtedness, $0.5 million of net
distributions to affiliates in connection with the carve-out of Graniteville
from Graniteville Company and deferred financing costs of $0.4 million.
Net cash provided by operating activities was $0.5 million in fiscal 1995.
Principal working capital changes included a $14.7 million increase in accounts
receivable and a $4.9 million decrease in inventories. Graniteville's investing
activities included the investment of $11.7 million in capital improvements. Net
cash provided by financing activities aggregated $10.1 million, consisting of
$48.0 million of proceeds from long-term indebtedness, partially offset by the
repayment of $8.8 million of long-term indebtedness, $27.2 million of net
distributions to affiliates in connection with the carve-out of Graniteville
from Graniteville Company and deferred financing costs of $1.9 million.
Net cash provided by operating activities was $17.5 million in fiscal 1994.
Principal working capital changes included an $8.5 million decrease in
inventories and an $8.6 million increase in accounts receivables. Net cash used
in investing activities included the investment of $21.4 million in capital
improvements, which was offset in part by proceeds received in connection with
the sale of property. Net cash provided by financing activities aggregated $5.0
million, consisting of $12.7 million used to repay outstanding long-term
indebtedness and $2.5 million of net distributions to affiliates in connection
with the carve-out of Graniteville from Graniteville Company, which was offset
by the issuance of $20.5 million of long-term indebtedness.
Net cash used in operating activities was $10.3 million in the 1993 Period.
Principal working capital changes included a $24.7 million increase in accounts
receivable (of which a significant portion was due to Graniteville repurchasing
accounts receivables previously sold under a factoring agreement) and a $14.6
million increase in inventories. Net cash used in investing activities included
the investment of $26.2 million in capital improvements. Net cash provided by
financing activities aggregated $35.5 million, consisting of the issuance of
$169.4 million of long-term indebtedness, partially offset by $70.6 million used
to repay outstanding long-term indebtedness, $57.3 million of net distributions
to affiliates in connection with the carve-out of Graniteville from Graniteville
Company and $6.0 million in deferred financing costs.
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<PAGE> 49
INDUSTRY OVERVIEW
The North American textile industry has experienced dramatic changes over
the past decade in response to trends toward more casual dress, rapid changes in
consumer preferences, a decline in retailer and distributor inventories and an
increasingly global market place. North American textile producers have reacted
by (i) investing in modern machinery resulting in flexible, cost-efficient and
high volume operations, (ii) forming partnerships with retailers to better
predict and respond to fashion trends and (iii) with the implementation of NAFTA
(and the Caribbean Basin Initiative), joining with labor intensive apparel
operations in Mexico and the Caribbean to form partnerships that can effectively
compete against companies based in the Pacific Rim.
DENIM
Total domestic demand for denim apparel increased dramatically, 10.4%
compounded annually, from 1992 to 1995. This growth was due primarily to
positive demographic changes, an increase in the variety of products and
fashions incorporating denim and a general trend towards more casual dress
throughout the United States, particularly in the workplace.
The "baby boom" generation, the first generation to include denim apparel
as part of their casual dress, continue to include denim apparel in their
wardrobe as they enter middle age. As their disposable income increases, they
demand higher quality products with more diverse styling, requiring denim
apparel manufacturers to produce higher quality denim in a full range of colors.
Demand for denim has also been impacted by changes in the size of the 15 to 24
year-old segment of the population, traditionally a significant purchaser of
denim products. In recent years, this segment has been declining in size;
however, it is now expanding and is expected to peak around the year 2000.
Internationally, the Company believes demand for denim is expected to grow
in industrialized countries as they continue to adopt U.S. casual fashion
trends. In less industrialized countries, the Company believes demand for denim
will increase as per capita income increases.
The Company believes denim demand has benefited from a trend towards more
casual dress in the workplace. In addition, market growth has been driven by a
dramatic increase in the variety of colors, fabric finishes and constructions in
which denim is available, the popularization of "relaxed-fitting" jeans and a
dramatic increase in nonjeans applications such as shorts, shirts and jackets.
As fashions continue to change and new products are developed at faster
rates, retailers have reduced inventories to decrease the risk of being left
with obsolete inventory. To accommodate this reduction of inventory, denim
manufacturers provide faster turnaround times on orders and seek to increase the
flexibility of manufacturing operations to include a greater variety of denim
products. The ability to provide a rapid turnaround on orders has provided
domestic denim producers with an advantage over foreign denim producers.
YARN
Demand for yarn products is generally dependent on economic conditions and
consumer preferences. Total North American demand for cotton yarn grew at an
annual rate of 13% from 1989 through 1994. The market in 1994 was 1.8 billion
pounds. This growth has been driven by trends to more casual wear such as
T-shirts and fleece sportswear.
Like denim apparel manufacturers, knit apparel manufacturers require yarn
delivery on short notice to enable them to reduce inventories and respond to
fashion changes. The ability to provide a rapid turnaround on orders has
provided domestic yarn producers with an advantage over foreign yarn producers.
The North American yarn industry has capitalized on this opportunity and
invested heavily in modern, low cost, low labor technologies to produce yarns
which are competitive with imports.
Management believes that apparel manufacturers are outsourcing increasing
amounts of their yarn requirements. This outsourcing is a result of the capital
intensive nature of yarn production which enables large modern yarn
manufacturers to produce and sell yarn to apparel manufacturers at a lower price
than their internal cost of production.
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UTILITY WEAR
The utility wear market consists of apparel manufacturers who supply
utility wear to industrial laundries for rental to their customers and to
manufacturers who sell directly to the retail market. The utility wear market is
comprised of the following sectors: basic industrial workwear, image or career
wear, and protective wear. All three sectors demand performance, durability
(withstanding repeated laundering) and affordability. In order to meet such
standards, fabrics for this market are generally piece-dyed. The utility wear
industry is generally dependant on economic conditions, particularly levels of
unemployment.
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BUSINESS -- THE COMPANY
GENERAL
Avondale is one of the largest domestic manufacturers of cotton and
cotton-blend yarns and is a leading domestic producer of denim. Avondale markets
its products primarily in the United States to the apparel market, and, to a
lesser extent, the home furnishings and industrial products markets. The
Company's three operating divisions -- yarns, finished fabrics and greige
(unfinished, undyed) fabrics -- operate 14 modern manufacturing facilities in
the Southeast. The Company's yarn, finished fabric and greige fabric products
accounted for 54.5%, 37.9% and 7.6%, respectively, of the Company's net sales of
$538.7 million in fiscal 1995.
Avondale Incorporated's predecessor was founded in 1895 by the family of G.
Stephen Felker, the Company's Chairman, President and Chief Executive Officer.
Prior to 1986, Avondale Incorporated's predecessor primarily manufactured and
marketed greige fabrics. In July 1986, Avondale Incorporated's predecessor,
together with Mr. Felker and certain other investors, acquired the Company (the
"1986 Acquisition"). The 1986 Acquisition expanded the Company's product line to
include yarns and finished fabrics and significantly increased the Company's
revenue base. In their respective last full fiscal years preceding the 1986
Acquisition, Avondale Incorporated's predecessor and Avondale had net sales of
$40.5 million and $238.3 million, respectively.
Since the 1986 Acquisition, the Company's management team has implemented a
strategy focused on producing high quality, value-added yarns and fabrics,
reducing incremental manufacturing unit costs, maximizing manufacturing
flexibility, optimizing raw material sourcing and utilization, and providing
superior customer service. Over the past 11 years, through acquisitions and
improved performance, management has increased net sales from the $40.5 million
achieved by Avondale Incorporated's predecessor in fiscal 1985 (the last full
fiscal year prior to the 1986 Acquisition) to $538.7 million in fiscal 1995, a
compound annual growth rate of 29.5%. Since the 1986 Acquisition, the Company's
EBITDA margin has averaged 15.0% per year from fiscal 1987 through fiscal 1995.
The Company's operations have been expanded through acquisitions, an
ongoing capital improvements program and management's ability to optimize the
productive output of the Company's manufacturing facilities. The Company's
ongoing capital improvements program focuses on modernizing and expanding the
Company's operations to maximize manufacturing flexibility, increase capacity
and reduce incremental unit costs. Avondale has invested over $100 million
during the past five fiscal years in connection with this capital improvements
program. Avondale is currently implementing a $31 million expansion of its denim
manufacturing operations. Avondale expects this project, which should be
completed by the end of fiscal 1997, will expand its denim manufacturing
capacity by 25%. This expansion follows a previous 15% denim expansion completed
in fiscal 1995 during which the Company installed indigo-dyeing capacity in
excess of its weaving and finishing capacity. The Company's current denim
expansion program will allow the Company to fully utilize the previously
installed indigo-dyeing capacity, which should enhance cash flow returns on the
current investment. Avondale has also successfully redeployed capital by closing
certain manufacturing facilities and, in other cases, moving manufacturing
equipment among its locations.
PURPOSE OF THE GRANITEVILLE ACQUISITION
Avondale believes that the Graniteville Acquisition will significantly
enhance its competitive position and business prospects. Avondale expects the
Graniteville Acquisition will provide it with the following benefits:
- Leading Position in Denim. As a result of the consummation of the
Graniteville Acquisition, Avondale believes that it is one of the world's
largest producers of enhanced denim fabrics (based on the current
manufacturing capacity of Avondale and Graniteville). Pro forma for the
Graniteville Acquisition, the Company's fiscal 1995 denim sales would have
been $308.6 million. The U.S. denim market is highly concentrated, and the
Company believes that approximately four denim manufacturers currently
supply 65% of the market. The high cost of building new manufacturing
capacity and the expertise required in indigo-dyeing operations are
generally barriers to entry. The Graniteville Acquisition approximately
doubled the Company's current denim manufacturing capacity and market
share, and Avondale believes that, pro forma for the Graniteville
Acquisition, it would have supplied
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approximately 15% of the denim market in fiscal 1995 and that it would
have been among five denim manufacturers supplying approximately 80% of
the market. In addition, Avondale is currently implementing a 25%
expansion of its denim manufacturing capacity, which should be completed
by the end of fiscal 1997. Avondale believes that its significantly
enhanced presence in the denim market will improve its competitive
position.
- Expanded Denim Customer Base. Graniteville's denim customer base is
broader and less concentrated than the Company's customer base, and
Avondale and Graniteville generally do not sell denim to the same
customers. During their respective fiscal 1995, Avondale and Graniteville
sold denim products to approximately 130 and 300 customers, respectively.
Avondale believes that it is the leading supplier of denim to VF
Corporation, the maker of Lee(R), Rider(R), Wrangler(R), Rustler(R),
Girbaud(R) and HealthTex(TM) brands. Sales to VF Corporation in fiscal
1995 accounted for approximately 28% of the Company's net sales. None of
Graniteville's denim customers accounted for more than 5% of its denim
sales in fiscal 1995. Avondale believes that this expansion of its denim
customer base will enable it to increase denim sales due to cross-selling
opportunities.
- Expanded Product Line. The Graniteville Acquisition has expanded the
Company's existing product lines as well as provided entry into new
markets. Graniteville is a leading manufacturer of piece-dyed fabrics used
primarily in the manufacture of sportswear, casual wear, outer wear and
utility wear. Avondale currently has no piece-dyeing capabilities. As a
result of the Graniteville Acquisition, Avondale now operates what it
believes is the largest (in terms of pounds processed) piece-dyeing and
finishing plant in the United States.
Avondale believes that Graniteville is the largest domestic manufacturer
and marketer of fabrics used in the manufacture of utility wear
(principally uniforms and other occupational apparel) for the U.S. rental
and retail markets in which it competes. Prior to the Graniteville
Acquisition, the Company did not participate in those markets. The utility
wear fabric segment of the textile industry is generally less cyclical
than the industry as a whole as its end-markets are not as sensitive to
changes in prevailing fashion trends or discretionary consumer spending.
Pro forma for the Graniteville Acquisition, utility wear fabric sales
would have accounted for 23.0% of the Company's net sales in fiscal 1995.
As a result, Avondale believes that the addition of utility wear fabrics
to its product line will help reduce the cyclicality of the Company's
results of operations.
The Graniteville Acquisition has expanded the Company's line of denim
products and fashion fabrics sold to manufacturers of sportswear, casual
wear and outerwear. Graniteville produces enhanced denim fabrics for the
branded and private label segments of the denim market. Although Avondale
produces some fashion fabrics for use in the manufacture of sportswear,
casual wear and outerwear, sales of such fashion fabrics accounted for
only 8.1% of the Company's finished fabric sales in fiscal 1995. Avondale
has been unable in recent years to expand its fashion fabrics business
because it does not own a piece-dyeing and finishing plant and has been
unable to access consistent and reliable dyeing and finishing capacity. As
a result of the Graniteville Acquisition, Avondale believes it will have
significant opportunities to cross-sell Graniteville's fashion fabrics to
the Company's existing denim customers.
- Enhanced Vertical Integration. Graniteville's manufacturing operations
consume substantial amounts of yarn. Although Graniteville produces a
significant portion of its yarn requirements, it purchases large
quantities from outside suppliers (which currently include the Company).
In fiscal 1995, Graniteville purchased approximately 13 million pounds of
yarn from outside suppliers. Pro forma for the Graniteville Acquisition,
during fiscal 1995, the Company would have produced approximately 431
million pounds of yarn for internal consumption and sale to outside
customers.
Avondale expects that its option to supply Graniteville's yarn needs will
enhance its ability to maintain high operating rates within its yarn
division during periods of reduced demand. The Company's focus on
maintaining high capacity utilization helps to lower unit production costs
generally and to maintain relatively constant unit production costs during
periods of weak economic conditions within the textile industry. Further,
the Company's yarn manufacturing operations are more cost-efficient than
those of Graniteville. Consequently, Avondale believes that it will be
able to improve Graniteville's profit
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margins by reducing raw material costs to the extent the Company supplies
an increased portion of Graniteville's yarn needs as well as through
productivity and cost improvements as discussed below.
- Raw Material Purchasing Leverage. As a result of the Graniteville
Acquisition, Avondale believes that it will be the largest U.S. consumer
of raw cotton as well as a substantial consumer of polyester. Avondale
believes this purchasing leverage, together with Avondale's strategic
buying practices developed through significant experience in raw material
markets, will further enhance its ability to manage cotton and polyester
costs and to obtain these raw materials at the most favorable prices
available.
- Global Raw Material Sourcing Flexibility. In fiscal 1995, Graniteville's
operations consumed approximately 199 million yards of greige fabrics,
42.3% of which was purchased from outside suppliers. Currently, the
differential between domestic and world greige fabric prices is not
significant enough to make sourcing greige fabrics in foreign markets
attractive. However, historically there have existed periods of
substantial price differentials between domestic and world greige fabric
prices. As a result of the Graniteville Acquisition, Avondale, as a
substantial consumer of greige fabrics, will be in a position to
capitalize on any such future imbalances.
- Greater Critical Mass. The Graniteville Acquisition has significantly
increased the Company's revenue base. Pro forma for the Graniteville
Acquisition, the Company's net sales for fiscal 1995 would have been over
$1.0 billion. Avondale believes that the trend towards consolidation
within the textile industry will continue. Avondale believes that its
increased size and presence in the textile industry will better position
it to take advantage of market opportunities as they arise.
- Cost Savings and other Business Synergies. As a result of the
consummation of the Graniteville Acquisition, Avondale expects to realize
cost savings from, among other things, general and administrative expense
reductions and improvements in Graniteville's cost of goods sold. Avondale
intends to implement a multi-year capital improvements program to improve
Graniteville's manufacturing operations by modernizing and reconfiguring
its manufacturing processes consistent with the Company's own
modernization strategy. Avondale expects these improvements will
significantly increase Graniteville's manufacturing flexibility and
productivity while reducing costs. Avondale also believes that the
Graniteville Acquisition will involve business synergies including, among
others, enhanced vertical integration and raw material sourcing and
substantial cross-selling opportunities, which may enable the Company to
increase its sales and improve its cost structure. However, there can be
no assurance that Avondale will achieve the foregoing cost savings or
business synergies. See "Risk Factors -- Integration of the Graniteville
Acquisition".
BUSINESS STRATEGY
Avondale's business strategy is to maximize profitability over complete
business cycles. As part of this strategy, Avondale generally maintains high
levels of capacity utilization and capitalizes on its manufacturing flexibility
through all phases of the business cycle. By adjusting its product mix quickly
in response to changes in consumer demand, Avondale is able to operate its
manufacturing facilities at substantially full capacity even during weak phases
in the business cycle, thereby maintaining lower labor turnover and better
control over manufacturing costs per unit. As a result, management believes that
profit margins recover faster as strong demand returns.
The principal components of the Company's strategy include the following:
- Cost Improvement. Avondale generally uses the most advanced
manufacturing technologies, runs its facilities at substantially full
capacity and enhances operational efficiencies to maximize productivity
and minimize manufacturing costs per unit. Management believes that
running the Company's manufacturing facilities at substantially full
capacity enables management to control more effectively manufacturing
costs per unit and positions the Company to maximize profitability during
periods of strong demand. As a result, Avondale has developed a strong
record of reducing incremental unit costs and generating a high average
EBITDA margin.
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- Value-Added Products. Avondale focuses on developing, manufacturing and
marketing value-added yarns and fabrics, particularly in its finished
fabrics division, to complement its low-cost and volume-oriented yarn
manufacturing capability. Avondale has benefitted significantly from the
substantial increase in recent years in consumer demand for moderately
priced, 100% cotton or high cotton content casual apparel for both work
and leisure. The Company's finished fabrics division has a product design
staff devoted to creating new, innovative fabric styles and constructions,
independently and in collaboration with customers of both the finished and
greige fabrics divisions, which enables such customers to respond to
anticipated shifts in consumer demand for apparel products. The finished
fabrics division also devotes significant resources to quality assurance,
which is intended to ensure that fabrics fully satisfy customer
specifications and have consistent characteristics within shipments.
- Manufacturing Flexibility. Avondale designs and equips its facilities to
increase manufacturing flexibility, which enables it to adjust its product
mix quickly in response to changes in customer demand. Management believes
that the Company's ability to manufacture a wide range and significant
volume of cotton and cotton-blend yarns and fabrics on short lead times
enables the Company to improve profit margins and gives the Company a
competitive advantage. In its yarns division, the Company has aggressively
replaced earlier generation open-end spinning equipment (which was
generally less than ten years old) with the most technologically advanced
equipment available. In its greige fabrics division, the Company has
replaced all fly shuttle looms with high speed rapier looms. In its
finished fabrics division, Avondale has installed new projectile looms
with wide-width capability and constructed a large capacity,
state-of-the-art indigo-dyeing facility. Avondale expects these efforts to
enhance flexibility, increase capacity and reduce manufacturing costs.
- Raw Material Sourcing and Utilization. Avondale, which believes it will
be the largest U.S. consumer of raw cotton as a result of the Graniteville
Acquisition, employs strategic buying practices intended to manage its
cotton costs and ensure a continuous supply. As a result of the volume of
its cotton purchases, Avondale has developed significant experience and
purchasing leverage in the cotton market. Avondale also conducts
comprehensive testing of every bale of cotton it purchases, categorizes
each bale into one of over 150 inventory groupings and, based on a
computer analysis, matches cotton in inventory with customer order
specifications to help ensure cost efficient utilization of raw cotton.
The Company's testing procedures enable the Company to maximize its cotton
mixes to achieve the cost effective utilization.
- Customer Service. Avondale is committed to being an industry leader in
providing superior customer service through innovative product
development, the manufacture of high quality, value-added yarns and
fabrics, just-in-time delivery and quick response manufacturing. Avondale
targets customers who demand a high level of customer service and
structures its operations and product mix to respond to their needs.
Avondale has the manufacturing capacity and flexibility to meet the demand
for yarns and fabrics with varying characteristics and to respond quickly
to changes in customer needs. Avondale also has a dedicated transportation
fleet to ensure rapid delivery of yarn directly to customers, which
reduces their inventory requirements. Avondale also employs "quick
response" manufacturing techniques along with electronic data interchange
to improve overall customer service.
DESCRIPTION OF THE BUSINESS
Products
Yarns. Avondale is one of the largest domestic producers and marketers of
cotton and cotton-blend yarns and believes it is the largest supplier of
open-end yarns to the domestic knitting and weaving industry. The Company's
yarns business has experienced significant growth since the 1986 Acquisition,
more than doubling its production of open-end spun yarn and achieving compound
annual sales growth through fiscal 1995 of approximately 5%. The yarns division
produces a wide range of cotton and cotton-blend carded and combed yarns that
are marketed to the knitting and weaving industry. The Company's yarns are used
in the manufacture of a broad range of items, including apparel (primarily
T-shirts, underwear, hosiery, knitted outerwear, denim, and woven and fleece
sportswear) and home furnishings. The Company's yarns division has
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experienced increased demand for its products as a result of the shift in
consumer preferences in recent years to moderately priced 100% cotton or high
cotton content apparel for both work and leisure. Although the yarns division
may provide a portion of the yarn used by the finished and greige fabrics
divisions, the yarns division markets substantially all of its production to
over 450 unaffiliated customers. Yarn sales accounted for 55.6%, 53.8% and 54.5%
of the Company's net sales in fiscal 1993, 1994 and 1995, respectively.
The Company's principal strategy for its yarns division is to capitalize on
its broad customer base and manufacturing flexibility and capacity while
producing yarns at the lowest cost possible. Management believes that the
Company led the industry in moving to more efficient, cost-effective, open-end
spinning equipment, which has been further modernized since such move. Open-end
spinning eliminates several labor intensive steps from the traditional ring
spinning production process and substantially increases productivity while
reducing defects in finished yarns. Avondale has made additional capital
improvements by aggressively replacing earlier generation open-end spinning
equipment (which generally was less than 10 years old) with the most
technologically advanced equipment available. This modernization program has
enabled the Company to enhance the quality of its yarns, increase its
manufacturing flexibility and cost efficiency and improve its responsiveness to
customers. Avondale competes with other yarn manufacturers by being a low-cost
producer due to its high volume production capability and by using its
manufacturing flexibility to respond quickly and efficiently to shifts in
customer demand. Avondale also has a dedicated transportation fleet to ensure
rapid deliveries of yarn directly to customers.
Finished Fabrics. Avondale is a leading producer of woven cotton finished
fabrics, principally denim, used in the manufacture of jeans, sportswear and
activewear. The Company develops and manufacturers a broad range of high
quality, value-added denim fabrics. The principal product produced by the
finished fabrics division is "range-dyed" denim. Range-dyeing involves dyeing
the yarn in such a way that the dye only coats the outside of the yarn and does
not penetrate it. The result is a fabric that fades and has the variations in
color that give denim its distinctive appearance. The finished fabrics division
also produces twill and canvas fabrics woven from "vat-dyed" yarns, which are
also marketed to apparel manufacturers. "Vat dyeing" involves placing the yarn
in a kier in which dye is forced to penetrate the yarn under heat and pressure.
Avondale dyes and weaves fabrics pursuant to customer orders, not projected
sales, in order to control its inventory of finished fabrics and reduce the risk
of inventory obsolescence. Finished fabric sales accounted for 37.2%, 38.4% and
37.9% of the Company's net sales in fiscal 1993, 1994 and 1995, respectively.
Finished fabric customers include, among others, VF Corporation (the maker of
Lee(R), Rider(R), Wrangler(R), Rustler(R), Girbaud(R) and HealthTex(TM) brands),
OshKosh B'Gosh, Inc., Guess(TM), The Gap Stores, Inc., Liberty Trousers and
Cactus Apparel. Avondale believes that, as a result of its competitive focus, it
has become the leading supplier of denim fabrics to VF Corporation. See "Risk
Factors -- Reliance on Significant Customers".
The finished fabrics division focuses on the development and manufacture of
high quality, value-added fabrics and management believes that the Company is a
leader in the production of enhanced denim fabrics. The Company's modern and
flexible manufacturing process allows it to produce a broad range of denim
styles and finishes. Management believes that styling of denim is a key
competitive factor in the market for denim fabrics. The styling process involves
the creation of a variety of fabric colors, shades and patterns in traditional
and innovative weaves. After weaving, denim fabrics (as well as other finished
fabrics) are processed further in the division's finishing operations to enhance
fabric performance and to produce other desired physical properties. Although
the markets for denim are diverse, Avondale produces primarily heavyweight
denim, which is used primarily in jeans, the largest segment of the denim
market. The Company's denim fabrics are used principally in the manufacture of
medium priced jeans.
To remain one of the leading manufacturers of enhanced denim fabrics, the
Company's principal strategy is to provide its customers with superior product
development and service. The division's product design staff seeks to identify
new product ideas and fashion trends in the domestic apparel market by attending
apparel fashion shows throughout North America and Europe. The product design
staff then works independently and in cooperation with customers to create new,
innovative fabric styles and constructions, which enables customers to respond
to anticipated shifts in domestic consumer demand for apparel products. In these
efforts, the product design staff uses on-line, computer-aided design systems.
Management believes that the
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Company's emphasis on product development and service has resulted in the
development of strong working relationships with key customers.
The finished fabrics division also markets specialty fashion fabrics, which
are cotton and cotton-blend, dyed and printed fabrics used principally in the
manufacture of sportswear. The finished fabric division's product design staff
develops fabric designs that are presented to customers. Once approved, the
division then either uses greige fabric produced by the Company or purchases
such fabric from other manufacturers and contracts to have the fabric dyed or
printed to meet the customer's specifications. These specialty fashion fabrics
expand the finished fabrics line offered by the Company.
Greige Fabrics. Avondale produces undyed, unfinished cotton and
cotton-blend fabrics that are marketed to apparel, home furnishing and
industrial products manufacturers. The Company's modernization efforts in recent
years (which have primarily involved replacing all remaining fly shuttle looms
and early generation shuttleless looms with high speed rapier looms) have
significantly increased the greige fabrics division's manufacturing flexibility
by increasing the range of products that can be manufactured and lowering unit
manufacturing costs. Avondale capitalizes on its manufacturing flexibility
within this division by altering its overall product mix to meet changing
customer needs while maintaining high production efficiencies. The finished
fabric division's product design staff works with greige fabric customers to
create new fabric styles and constructions. Greige fabric sales accounted for
7.2%, 7.7% and 7.6% of the Company's net sales in fiscal 1993, 1994 and 1995,
respectively.
Sales and Marketing
Avondale sold yarns, finished fabrics and greige fabrics to approximately
450, 175 and 50 customers, respectively, in fiscal 1995. None of the Company's
yarn customers accounted for more than 9% of the Company's net sales in fiscal
1995. The Company believes it is the leading supplier of denim to VF Corporation
(the maker of Lee(R), Rider(R), Wrangler(R), Rustler(R), Girbaud(R) and
HealthTex(TM) brand jeans). Avondale believes that it has a strong working
relationship with VF Corporation. See "Risk Factors -- Reliance on Significant
Customers".
Avondale targets customers who demand a high level of customer service. The
Company's three yarn sales offices are located geographically to be close to
customers' manufacturing facilities, and its five fabrics sales offices are
generally located near the headquarters of key customers. Sales associates visit
their customers on a regular basis and are primarily responsible for processing
customer orders and interacting with the Company's production scheduling
personnel. Sales associates assist customers in coordinating their own
production scheduling by monitoring the status of customers' orders through the
production process. Fabric sales associates, and in some cases fabric customers
directly, have access via computer to product information and shipping
schedules. The Company's sales associates are paid a base salary plus sales
incentives to the extent certain performance targets are met. The Company's
independent sales representatives are paid on a commission basis.
Manufacturing
Avondale is a vertically integrated manufacturer of yarns and fabrics.
Through modernizing its manufacturing facilities, the Company has sought to
reduce lead times, minimize inventory levels and maximize flexibility to respond
to changes in customer demand.
Yarn Facilities. Avondale operates 10 yarn manufacturing plants. At these
facilities, raw cotton and synthetic fibers are spun into cotton and
cotton-blend yarns. Avondale has aggressively modernized its yarn manufacturing
facilities, installing advanced carding, drawing, combing and open-end spinning
equipment. The Company has aggressively replaced earlier generation open-end
spinning equipment (which was generally less than 10 years old) with the most
technologically advanced equipment available. Open-end spinning produces high
quality yarns at higher speeds with fewer imperfections and eliminates several
labor-intensive steps in the production process, requiring fewer operators than
ring spinning. The Company nevertheless maintains some ring spinning capability
to offer a full line of yarns and to respond to customer demand for
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both types of yarn. The Company believes that it is a leader in the textile
industry in the use of modern spinning technology.
Fabric Facilities. Avondale operates three fabric manufacturing plants and
one finishing plant. At these facilities raw fibers are spun into yarn, which
may be supplemented with yarn supplied by the Company's yarns division. Yarn to
be used in the manufacture of finished fabrics is then dyed utilizing either
"range" or "vat" dyeing techniques. The finished fabrics and greige fabrics
divisions weave dyed or undyed yarn into fabric according to customer
specifications. Avondale generally employs only modern, high-speed looms for
weaving. These looms enhance the Company's manufacturing flexibility as they can
manufacture fabrics that have a variety of widths and weaves. After weaving,
fabrics produced in the finished fabrics division are transported to the
Company's finishing plant, where they are treated and subjected to several
processes which "set" the fabric to ensure that its characteristics (including
shrinkage, color and shade variation) are consistent within shipments. Within
its greige fabrics division, Avondale has replaced all remaining fly shuttle
looms and earlier generation shuttleless looms with high speed rapier looms and,
in its finished fabrics division, Avondale has installed new projectile looms
with wide-width capability and constructed a large capacity, state-of-the-art
indigo-dyeing facility.
Expansion and Modernization. Over the past 11 years, management has
increased net sales from the $40.5 million achieved by Avondale Incorporated's
predecessor in fiscal 1985 (the last full fiscal year prior to the 1986
Acquisition) to $538.7 million in fiscal 1995. During that period, Avondale has
expanded its operations through acquisitions, an ongoing capital improvements
program and management's ability to optimize the productive output of the
Company's manufacturing facilities. As part of its expansion and modernization
efforts, the Company has also successfully redeployed capital by closing certain
manufacturing facilities and, in other cases, moving manufacturing equipment
among its locations. The Company's expansion and modernization efforts over the
past 11 fiscal years have included, among others, the following principal
initiatives:
- 1986 -- Avondale Incorporated acquired a controlling interest in the
Company, which consisted of 10 yarn manufacturing facilities, two fabric
manufacturing facilities and one finishing plant, expanded its greige
fabrics manufacturing facility and installed more new looms in its greige
fabrics division
- 1987 -- Constructed a new dye range in its finished fabrics division
- 1988, 1989 and 1990 -- Upgraded a portion of its existing open-end
spinning technology and converted a ring-spun yarn manufacturing facility
to open-end spinning technology
- 1989 -- Acquired the property, plant and equipment of three yarn
manufacturing facilities
- 1990 -- Sold an acrylic yarn manufacturing facility (that was not
compatible with the Company's production and manufacturing strategy) and
closed a greige fabrics manufacturing facility
- 1991 -- Sold a ring-spun yarn manufacturing facility as the Company
continued to focus on open-end spinning technology
- 1991, 1992 and 1993 -- Replaced earlier generation open-end spinning
equipment (which generally was less than 10 years old) in the yarns
division with the most technologically advanced equipment available
- 1992 and 1993 -- Replaced all remaining fly shuttle looms in the greige
fabrics division and replaced some earlier generation projectile looms
with technologically advanced, high speed looms and began construction of
a new state-of-the-art indigo-dye range in the finished fabrics division
- 1994 and 1995 -- Completed construction of state-of-the-art indigo-dye
range in the finished fabrics division and replaced open-end spinning
equipment with new generation, advanced spinning technology
- 1996 -- Replaced earlier generation projectile looms and rapier looms
with high speed airjet looms and rapier looms and replaced carding
equipment at two plants with modern carding and drawing systems and
replaced older winders at a third plant with fully automated winders
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Avondale has invested over $100 million over the past five fiscal years in
connection with this capital improvements program. Avondale is currently
implementing a $31 million expansion of its denim manufacturing operations.
Avondale expects this project, which should be completed by the end of fiscal
1997, will expand its denim manufacturing capacity by 25%. This expansion
follows a previous 15% denim expansion completed in fiscal 1995 during which the
Company installed indigo-dyeing capacity in excess of its weaving and finishing
capacity. This current denim expansion program will allow the Company to fully
utilize the previously installed indigo-dyeing capacity, which should enhance
cash flow returns on the current investment.
Customer Service and Quality Assurance. Avondale is committed to being an
industry leader in providing superior customer service. In addition to ensuring
the manufacturing capacity and flexibility to enable the Company to respond
quickly to changes in customer needs, Avondale has structured its manufacturing
processes to meet the increasingly demanding "just-in-time" and "quick response"
delivery requirements of its customers. These techniques reduce in-process
inventories and the time required to process a particular order. In addition,
Avondale has instituted electronic data interchange programs with certain key
customers to facilitate a more efficient, targeted scheduling of their
manufacturing processes. These programs assist the Company in working
effectively with apparel manufacturers to coordinate their operations with the
demands of retailers and, as such, are an important part of the domestic textile
industry's "quick response" program designed to improve its competitive position
compared to imports.
Avondale devotes significant resources to quality assurance, which is
intended to ensure that its yarns and fabrics satisfy fully customer
specifications. The Company's manufacturing plants employ computer-aided control
systems to monitor the manufacturing process and computer-aided product testing
equipment to measure the quality of its yarns and finished fabrics. Avondale
also strives to increase its customers' competitiveness by developing finished
fabrics that reduce the amount of further treatment or finishing required by
such customers. These efforts reduce customers' manufacturing costs and improve
production efficiencies.
Raw Materials
Avondale is one of the largest U.S. consumers of raw cotton, the principle
raw material used in its manufacturing processes. Consequently, the Company's
results of operations may be impacted significantly due to fluctuations in the
supply, quality and price of cotton. Since cotton is an agricultural product,
its supply and quality are subject to forces of nature. Although the Company has
always obtained sufficient supplies of cotton, any material shortage or
interruption in the supply or variations in the quality of cotton by reason of
weather, disease or other factors could have a material adverse effect on the
Company's results of operations. See "Risk Factors -- Raw Materials". Avondale
believes that it will be able to obtain adequate supplies of cotton in the
future.
Because the importation of cotton is generally prohibited, imbalances
between the domestic and world price of cotton can occur. Beginning in 1985,
Congress passed a series of legislative initiatives to ensure that U.S. cotton
was priced competitively with world markets. The Food Security Act of 1985 (the
"1985 Food Act") modified the Commodity Credit Corporation marketing loan
program for cotton producers by linking the amount of non-recourse loans
available under the program and their required repayment levels to world cotton
prices, allowing U.S. cotton producers to meet world cotton prices. The 1985
Food Act also included a one-time payment in kind in August 1986 to domestic
textile mills with respect to certain cotton in inventory to offset in part the
disparity between world and domestic prices. The Food, Agriculture, Conservation
and Trade Act of 1990 (the "1990 Trade Act") and the regulations promulgated
thereunder established a three-step competitiveness plan designed to make
domestic cotton prices approximate world cotton prices through further
modifications to Commodity Credit Corporation loans, payments to users of
domestic cotton and a trigger mechanism to modify the prohibition on cotton
imports if U.S. prices exceed world prices for an extended period of time. The
1985 Food Act and the 1990 Trade Act have resulted in increased domestic cotton
production and a decline in domestic cotton prices, which, together with certain
price equalization payments authorized under both pieces of legislation, have
reduced the Company's effective cotton costs to near world levels. This
legislation and the increased availability of cotton worldwide has improved the
imbalance between world and domestic cotton prices, but there can be no
assurance that this will continue to
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be the case. President Clinton recently signed into law the Farm Agricultural
Improvements and Reform Act of 1996, which establishes certain support programs
that, among other things, continue the three-step competitiveness plan
established under the 1990 Trade Act through 2002. See "Risk
Factors -- Government Policy; Import Regulations".
Avondale closely monitors the cotton market and manages its cotton-buying
practices. The Company's Chief Executive Officer is a member of the board of
directors of the National Cotton Council, a trade organization that spearheads
legislative initiatives to implement U.S. cotton industry policy, which helps
the Company stay abreast of developments in the cotton market. As a result of
the volume of its cotton purchases, Avondale has developed significant
experience and purchasing leverage in the cotton market. Avondale employs
strategic buying practices intended to manage its cotton costs and ensure a
continuous supply. Avondale attempts to purchase cotton as necessary to produce
customer orders, although the Company's purchases may be short of or in excess
of the quantity needed to produce customer orders depending on its market
outlook. Avondale generally enters into cotton purchase contracts several months
in advance of the scheduled date of delivery. Prices for such purchases are
fixed either on the date of the contract or thereafter on a date prior to
delivery and, as a result, Avondale may be favorably or adversely affected if
cotton prices fluctuate during the contract period.
Avondale employs systems and controls designed to ensure cost-efficient
utilization of raw cotton that the Company believes differentiate it from its
competitors. Raw cotton is graded according to U.S. government standards and is
priced based upon its grade. The wide variety of yarns and fabrics produced by
the Company use a broad range of cotton grades, which enhances the Company's
ability to optimize its use of cotton. After purchase by the Company, a sample
from each bale of cotton is sent to the Company's testing facility, which tests
the sample and then categorizes it according to its characteristics into one of
over 150 inventory groupings. Cotton bales are then selected to produce customer
orders based on a computer analysis that matches cotton in inventory with
customer order specifications (e.g., tear strength and dye characteristics) to
ensure the most cost effective raw material mix. The Company's testing
procedures also enable the Company to identify bales that do not meet
contractual quality specifications and thus can be returned to the supplier or
purchased at a lower price.
The principal man-made fiber purchased by the Company is polyester.
Avondale currently purchases man-made fibers for its products from several
suppliers, and such fibers are readily available from other suppliers. Avondale
maintains a limited supply of such fibers in inventory. Avondale has never
experienced difficulty in obtaining sufficient quantities of man-made fibers.
Avondale also purchases dyes and chemicals used in its manufacturing and
finishing processes, and these raw materials have normally been available in
adequate supplies through a number of suppliers. See "The Transactions -- Terms
of the Asset Purchase Agreement -- Supply Agreement".
Competition
The textile industry is highly competitive, and no single company is
dominant. Management believes that the Company is one of the largest domestic
yarns supplier and one of nine principal domestic denim manufacturers. The
Company's competitors include large, vertically integrated textile companies and
numerous smaller companies. In recent years there has been a trend toward
consolidation and deleveraging within certain markets within the textile
industry, and, within the Company's markets, increases in manufacturing
capacity. The primary competitive factors in the textile industry are price,
product styling and differentiation, quality, manufacturing flexibility,
delivery time and customer service. The importance of these factors is
determined by the needs of particular customers and the characteristics of
particular products. The failure of the Company to compete effectively with
respect to any of these key factors or to keep pace with rapidly changing
markets could have a material adverse effect on the Company's results of
operations and financial condition.
Increases in domestic capacity and imports of foreign-made textile and
apparel products are a significant source of competition for many domestic
textile manufacturers. The U.S. government attempts to regulate the growth of
certain textile and apparel imports by establishing quotas on imports from
countries that historically
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<PAGE> 60
account for significant shares of U.S. imports. Despite these efforts, imported
apparel represent a significant portion of the U.S. apparel market, although the
rate of import growth has slowed considerably in recent years.
The extent of import protection afforded by the U.S. government to domestic
textile producers has been, and is likely to remain, subject to considerable
domestic political deliberation and foreign considerations. In January 1995, a
new multilateral trade organization, the WTO, was formed by the members of GATT
to replace GATT. This new body has set forth the mechanisms by which world trade
in textiles and clothing will be progressively liberalized with the elimination
of quotas and the reduction of duties. The implementation began in January 1995
with the phasing-out of quotas and the reduction of duties to take place over a
10-year period. The selection of products at each phase is made by each
importing country and must be drawn from each of the four main textile groups:
yarns, fabrics, made-up textiles and apparel. As it implements the WTO
mechanisms, the U.S. government is negotiating bilateral trade agreements with
developing countries (which generally are exporters of textile products) that
are members of the WTO for purposes of reducing their tariffs on imports of
textiles and apparel. The elimination of quotas and the reduction of tariffs
under the WTO may result in increased imports of certain textile products and
apparel into North America. These factors could make the Company's products less
competitive against low cost imports from third world countries. See "Risk
Factors -- Government Policy; Import Regulations".
The North American Free Trade Agreement among the United States, Canada and
Mexico, which became effective on January 1, 1994, has created the world's
largest free-trade zone. The agreement contains safeguards sought by the U.S.
textile industry, including a rule of origin requirement that products be
processed in one of the three countries in order to benefit from NAFTA. NAFTA
will phase out all trade restrictions and tariffs on textiles and apparel among
the three countries. In addition, NAFTA requires merchandise to be made from
yarns and fabrics originating in North America in order to avoid trade
restrictions. Thus, not only must apparel be made from North American fabric but
the fabric must be woven from North American spun yarn. Although management
believes that the Company may benefit from NAFTA, there can be no assurance that
the removal of these barriers to trade will not have a material adverse effect
on the Company's business. See "Risk Factors -- Government Policy; Import
Regulations".
Avondale has attempted to offset the negative impact of increased imports
by focusing on the manufacture of yarns, finished fabrics and greige fabrics for
use in garments that are less vulnerable to import penetration. The relatively
low labor content of these yarns, fabrics and resulting garments, coupled with
demand for high levels of quality, styling and service, present barriers to
foreign competition. Capital expenditures and systems improvements have centered
on strengthening product and market differentiation and on increasing
productivity, lowering costs and improving quality. In addition, the Company's
U.S. manufacturing presence and its emphasis on shortening production and lead
times allows the Company to respond more quickly than foreign producers to
changing fashion trends and to its domestic customers' requirement that
suppliers meet tight production schedules and provide rapid delivery. In
addition to being affected by the level of imports, the Company's continued
success will be affected by the ability of certain of the Company's customers to
remain competitive, the Company's ability to maintain its manufacturing
flexibility and capacity and, most importantly, the Company's ability to
continue to produce innovative, quality products to satisfy specific customer
needs.
Backlog
The Company's order backlog was approximately $290.5 million at February
23, 1996, as compared to approximately $276.7 million at February 24, 1995, and
the Company's order backlog was approximately $378.6 million at August 25, 1995,
as compared to approximately $194.5 million at August 26, 1994. Orders on hand
are not necessarily indicative of total future sales. Substantially all of the
orders outstanding at February 23, 1996 are expected to have been filled by the
end of fiscal 1996.
Properties
Avondale currently operates 14 modern manufacturing facilities in the
United States, of which eight are located in Alabama, three are located in North
Carolina, two are located in Georgia and one is located in
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South Carolina. Avondale owns 12 of these facilities and leases two facilities
in connection with its prior issuance of industrial revenue bonds. Of the
Company's manufacturing facilities, ten are used for the production of yarns,
three are integrated yarn and fabric manufacturing facilities, and one is a
fabric finishing plant. The Company's plants generally operate 24 hours a day,
seven days a week throughout the year. The Company considers its plants and
equipment to be in good condition and adequate for its current operations. The
Company's principal executive offices are located in Monroe, Georgia, in a
building owned by the Company. The Company also has executive offices in
Sylacauga, Alabama, which are located in a building owned by the Company. All of
the Company's sales offices are leased from unrelated third parties.
The following table sets forth certain information relating to the
Company's manufacturing facilities.
<TABLE>
<CAPTION>
PLANT NAME LOCATION PRODUCTS PRODUCED
-------------------------- ------------------- ---------------------
<S> <C> <C>
Alice Plant Sylacauga, AL Plyed yarn
Bevelle Plant Alexander City, AL Open-end spun yarn;
indigo-dyed fabric
Bon Air Plant Childersburg, AL Open-end spun yarn
Burnsville Plant Burnsville, NC Open-end spun yarn
Catherine Plant Sylacauga, AL Open-end spun yarn
Coosa Plant Rockford, AL Ring spun yarn
Eva Jane Plant Sylacauga, AL Open-end spun yarn;
indigo-dyed fabric
Lee Plant Sanford, NC Open-end spun yarn
Pell City Plant Pell City, AL Ring spun yarn
Sanford Plant Sanford, NC Open-end spun yarn
Sylacauga Finishing Plant Sylacauga, AL Finished denim
Tifton Plant Tifton, GA Open-end spun yarn
Walhalla Plant Walhalla, SC Open-end spun yarn
Walton Plant Monroe, GA Open-end spun yarn;
greige fabric
</TABLE>
Governmental Regulation
Avondale is subject to various federal, state and local environmental laws
and regulations limiting the discharge, storage, handling and disposal of a
variety of substances and wastes used in or resulting from its operations and
potential remediation obligations thereunder, particularly the Federal Water
Pollution Control Act, the Clean Air Act, the Resource Conservation and Recovery
Act (including amendments relating to underground tanks) and the Comprehensive
Environmental Response, Compensation and Liability Act, commonly referred to as
"Superfund" or "CERCLA". Avondale has obtained, and is in compliance in all
material respects with, all material permits required to be issued by federal,
state or local law in connection with the operation of the Company's business as
described herein.
The Company's operations also are governed by laws and regulations relating
to workplace safety and worker health, principally the Occupational Safety and
Health Act and regulations thereunder which, among other things, establish
cotton dust, formaldehyde, asbestos and noise standards, and regulate the use of
hazardous chemicals in the workplace. The Company uses resins containing
formaldehyde in processing some of its products. Although the Company does not
use asbestos in the manufacture of its products, some of its facilities contain
some structural asbestos that management believes is all properly contained.
Many of the Company's manufacturing facilities have been in operation for
several decades. Historical waste disposal and hazardous substance releases and
storage practices may have resulted in on-site and off-site remediation
liability for which the Company would be responsible. In addition, certain
wastewater treatment facilities and air emission sources may have to be upgraded
to meet more stringent environmental requirements in the future. Although the
Company cannot with certainty assess at this time the impact of future emission
standards or enforcement practices under the foregoing environmental laws and
regulations and, in particular, under the 1990 Clean Air Act, upon its
operations or capital expenditure requirements, Avondale believes that it
currently is in compliance in all material respects with the foregoing
environmental or health and safety laws and regulations.
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Associates
At February 23, 1996, Avondale had approximately 3,900 associates. None of
the Company's associates is covered by a collective bargaining agreement, and
management believes that the Company's relations with its associates are good.
Legal Proceedings
On March 3, 1993, a case was filed in the Circuit Court of Jefferson
County, Alabama by Joe and Darnell Sullivan and Tommy and Stella Fay Gould
against the Alabama Power Company, the Company and certain other parties. The
complaint alleges that the Company negligently or willfully discharged
industrial waste water containing hazardous materials, which allegedly damaged
the plaintiffs' riparian rights. The complaint seeks an award of unspecified
damages. The Company is vigorously defending this case and believes that it has
a number of defenses available to it. The Company cannot currently predict
whether the plaintiffs will prevail on their claims or the magnitude of their
potential recovery, if any. Based on currently available information, although
there can be no assurance, the Company does not believe that this case will have
a material adverse effect on its results of operations or financial condition.
Avondale is also a party to litigation incidental to its business from time
to time. Avondale is not currently a party to any litigation that management
believes, if determined adversely to the Company, would have a material adverse
effect on the Company.
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<PAGE> 63
BUSINESS -- GRANITEVILLE
GENERAL
Graniteville, founded over 150 years ago, is a leading manufacturer and
marketer of cotton and cotton-blend finished fabrics. Graniteville markets its
products, which include utility wear fabrics, sportswear fabrics, denim and
specialty fabrics, primarily in the United States to the apparel and industrial
products markets. Graniteville operates 10 manufacturing facilities, including a
modern piece-dyeing and finishing plant believed by the Company to be the
largest in the United States (in terms of pounds processed), all within a
20-mile radius of Graniteville, South Carolina. Graniteville's utility wear
fabrics, sportswear fabrics, denim and specialty fabrics accounted for 47.8%,
16.9%, 27.2% and 8.1%, respectively, of Graniteville's net sales of $505.7 in
fiscal 1995.
DESCRIPTION OF THE BUSINESS
Products
Utility Wear Fabrics. Avondale believes Graniteville is the largest
domestic manufacturer and marketer of fabrics used in the manufacture of utility
wear (principally uniforms and other occupational apparel) for the U.S. rental
and retail markets in which it competes. Graniteville's utility wear fabric
customers require durable fabrics characterized by long wear and easy care.
Graniteville works closely with customers to develop fabrics with these and
other enhanced performance characteristics. Utility wear fabric sales accounted
for 42.3%, 46.9% and 47.8% of Graniteville's net sales in the 1993 Period,
fiscal 1994 and 1995, respectively. Graniteville's utility wear fabric customers
include, among others, Red Kap Industries, Inc., Williamson-Dickie Mfg. Co.,
Inc., Carhartt, Inc., Cintas Corporation and American Uniform Company, Inc.
Sportswear Fabrics. Graniteville is a leading manufacturer and marketer of
woven cotton piece-dyed fabrics that are used primarily in the manufacture of
men's, women's and children's sportswear, casual wear and outerwear. Fabrics are
produced for customers in a wide variety of styles, colors, textures and weights
according to individual customer specifications. Sportswear fabric sales
accounted for 25.3%, 22.8% and 16.9% of Graniteville's net sales in the 1993
Period, fiscal 1994 and 1995, respectively. Graniteville's sportswear fabric
customers include, among others, Liz Claiborne Inc., Farah Incorporated, Disenos
De Alta Moda, S.A. (a Mexican Guess(TM) licensee), Levi Strauss & Co. Inc.
(Dockers(TM)and Brittania(TM)) and Wrangler, Inc.
Denim. Graniteville is a leading manufacturer of indigo-dyed denim fabric
used in the production of branded and private label men's, women's and
children's fashion apparel as well as casual jeans, sportswear and outerwear.
Graniteville develops and manufactures new and innovative colors, textures,
weaves and finishes for its customers, which has helped make Graniteville's
denim fabrics leaders in the branded and private label, fashion-oriented segment
of the apparel market. Denim fabric sales accounted for 23.5%, 20.8% and 27.2%
of Graniteville's net sales in the 1993 Period, fiscal 1994 and 1995,
respectively. Graniteville's denim customers include, among others, Stuffed
Shirt Inc., Michael Caruso & Company Inc. (Bongo(R)), The Gap Stores Inc. and
Levi Strauss & Co. Inc.
Specialty Fabrics. Graniteville produces a variety of fabrics that are
marketed to recreational, industrial and military products manufacturers.
Graniteville's specialty fabrics include coated fabrics for awnings, tents, boat
covers and camper tops. Graniteville also dyes customers' finished apparel
products, which enables customers to meet short delivery schedules while
minimizing inventories. Specialty fabric sales accounted for 9.0%, 9.5% and 8.1%
of Graniteville's net sales in the 1993 Period, fiscal 1994 and 1995,
respectively.
Sales and Marketing
Graniteville sold utility wear fabrics, sportswear fabrics, denim and
specialty fabrics to approximately 275, 250, 300 and 150 customers,
respectively, in fiscal 1995. VF Corporation accounted for approximately 11% of
Graniteville's net sales in fiscal 1995. Other than VF Corporation, none of
Graniteville's customers accounted for more than 10% of Graniteville's net sales
in fiscal 1995.
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Graniteville's fabrics, including utility wear fabrics, sportswear fabrics
and denim, are marketed and sold by its apparel marketing group. The apparel
marketing group recently moved its headquarters from New York City to
Graniteville's headquarters in South Carolina, which has enabled Graniteville to
reduce its marketing expenses. In addition to its South Carolina headquarters,
the apparel marketing group maintains regional offices in New York City, Boston,
Greensboro, NC, Greenville, SC, Dallas, TX, and San Francisco, CA. Independent
sales agents in Los Angeles, California and Canada also market certain of
Graniteville's fabrics. Graniteville's specialty products are sold directly by
its speciality products group located in Graniteville, South Carolina.
Manufacturing
Graniteville is a vertically integrated manufacturer. Graniteville
purchases raw cotton and polyester which it spins into yarn that is either dyed
and then woven into fabrics or woven into fabrics and then dyed according to
customer specifications (as in the case of piece-dyed fabrics). Graniteville
also purchases yarn that it weaves into greige fabrics and that it dyes and
finishes.
Manufacturing Facilities. Graniteville operates four weaving plants, two
indigo-dyeing facilities, one indigo-finishing facility, one piece-dyeing and
finishing facility, one coating facility and one garment-dyeing facility.
Graniteville has recently installed state-of-the-art open-end spinning equipment
and high speed air-jet and rapier looms in its weaving plants, which have
improved quality and increased the capacity and efficiency of Graniteville's
spinning and weaving production processes. Graniteville's dyeing and finishing
facilities use a wide range of technologies, including sophisticated
computer-based monitoring and control systems. These systems allow Graniteville
to continuously monitor and control each phase of the dyeing and finishing
process, which helps to improve productivity, efficiency, consistency and
quality.
Expansion and Modernization. Graniteville has invested over $75 million to
modernize its manufacturing operations during its past five fiscal years.
Graniteville's modernization efforts have focused on updating its yarn spinning
and weaving operations by replacing older generation spinning equipment and
looms with advanced, computer-controlled spinning machinery and high speed
air-jet and rapier looms, which have significantly increased productivity while
allowing Graniteville to maintain its high quality manufacturing standards. In
addition, in fiscal 1994, Graniteville completed construction of a new
indigo-dyeing facility.
Raw Materials
The principal raw materials used by Graniteville in its manufacturing
processes are cotton and man-made fibers (primarily polyester). Graniteville
purchases cotton from a number of domestic suppliers at the time it receives
orders from customers and generally maintains orders for a four to six month
supply of cotton. Polyester is generally purchased from one principal supplier,
although there are numerous alternative domestic sources for polyester.
Polyester is purchased pursuant to periodic negotiations whereby Graniteville
seeks to assure itself of a consistent, cost-effective supply. In addition,
Graniteville purchases yarn and greige fabrics from other manufacturers to
supplement its internal production. These fabrics have normally been available
in adequate supplies from a number of domestic sources. Graniteville also
purchases bulk dyes and specialty chemicals manufactured by various domestic
producers, including C. H. Patrick & Company, Inc. ("Patrick"), which was, prior
to the Graniteville Acquisition, a wholly owned subsidiary of Graniteville that
sells chemicals and dyes to the textile industry. See "The Transactions -- Terms
of the Asset Purchase Agreement -- Supply Agreement".
Competition
Graniteville competes in many of the same markets within the textile
industry as the Company and, as a result, is generally subject to the same
competitive environment. See "Business -- The Company -- Description of the
Business -- Competition".
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Backlog
Graniteville's order backlog was approximately $244.3 million at December
31, 1995, as compared to approximately $276.7 million at January 1, 1995. Orders
on hand are not necessarily indicative of total future sales. Substantially all
of the orders outstanding at December 31, 1995 are expected to have been filled
by the end of fiscal 1996.
Properties
The following table sets forth certain information relating to
Graniteville's manufacturing facilities.
<TABLE>
<CAPTION>
PLANT NAME LOCATION PRODUCTS PRODUCED
----------------------------- ----------------- --------------------------------
<S> <C> <C>
Gregg Dyeing and Finishing Graniteville, SC Piece-dyeing and finishing of
100% cotton and blended
bottom-weight fabrics
Hickman Graniteville, SC Open-end spun yarn; greige
fabrics for piece-dyed
sportswear; Indigo-dyed
fabrics
Kingsmore Indigo Dyeing Graniteville, SC Indigo-dyed yarn
Sibley Augusta, GA Open-end and ring spun yarn;
indigo dyed fabrics
Sibley Dyeing and Finishing Augusta, GA Stock-dyed cotton; finished
denim
Swint Graniteville, SC Open-end and ring spun yarn;
greige fabrics for piece-dyed
sportswear
Townsend Graniteville, SC Open-end and ring spun yarn;
greige fabrics for piece-dyed
sportswear; indigo-dyed
fabrics
Warren Dyeing Graniteville, SC Indigo-dyed yarn
Warren Garment Processing Graniteville, SC Garment dyed apparel
Woodhead Graniteville, SC Finished coated fabrics
</TABLE>
Governmental Regulation
Graniteville is subject to various federal, state and local environmental
laws and regulations limiting the discharge, storage, handling and disposal of a
variety of substances and wastes used in or resulting from its operations and
potential remediation obligations thereunder, particularly the Federal Water
Pollution Control Act, the Clean Air Act, the Resource Conservation and Recovery
Act (including amendments relating to underground tanks) and CERCLA.
Graniteville has obtained and is in compliance in all material respects with all
material permits required to be issued by federal, state or local law in
connection with the operation of the business of Graniteville as described
herein.
Many of Graniteville's manufacturing facilities have been in operation for
several decades. Historical waste disposal and hazardous substance releases and
storage practices may have resulted in on-site and off-site remediation
liability for which Graniteville would be responsible. From time to time, the
Graniteville facilities have been subject to enforcement actions from
governmental authorities regarding alleged noncompliance with environmental
requirements. In the past, such enforcement actions typically have resulted in
the institution of compliance programs and may have resulted in minor penalty
assessments.
In 1987, Graniteville was notified by the South Carolina Department of
Health and Environmental Control (the "DHEC") that it had discovered certain
contamination of a pond near Graniteville, South Carolina and that Graniteville
may be one of the responsible parties. In 1990 and 1991, Graniteville provided
reports to the DHEC summarizing its required study and investigation of the
alleged pollution and its sources which concluded that pond sediments should be
left undisturbed and that other remediation alternatives either provided no
significant benefit or themselves involved adverse effects. In 1995 Graniteville
submitted a proposal regarding periodic monitoring of the site, to which the
DHEC responded with a request for additional
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<PAGE> 66
information. Graniteville provided such information to the DHEC in February
1996. In April 1996, DHEC accepted the proposed protocol for monitoring pond
sediment which is expected to occur over the next two years. The cost of such
monitoring is currently expected to range from $25,000 to $35,000 annually. The
Company is unable to predict at this time whether any further actions will be
required with respect to the site or what the cost thereof may be.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on April 23, 1996 to the Initial
Purchaser in reliance on Section 4(2) of the Securities Act. The Initial
Purchaser offered and sold the Old Notes only to "qualified institutional
buyers" (as defined in Rule 144A) in compliance with Rule 144A and to a limited
number of other institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that, prior to their
purchase of Old Notes, delivered to the Initial Purchaser a letter containing
certain representations and agreements.
In connection with the sale of the Old Notes, the Company, Avondale
Incorporated and the Initial Purchaser entered into a Registration Rights
Agreement dated April 23, 1996 (the "Registration Rights Agreement"), which
generally requires the Company (i) to cause the Old Notes to be registered under
the Securities Act pursuant to the Shelf Registration Statement (as defined) or
(ii) to file with the Commission the Exchange Offer Registration Statement with
respect to the Exchange Offer. The Exchange Offer is being made pursuant to the
Registration Rights Agreement to satisfy the Company's obligations thereunder
with regard to the Notes. The term "holder" with respect to the Exchange Offer
means any person in whose name Old Notes are registered on the registrar's books
or any other person who has obtained a properly completed bond power from the
registered holder, or any person whose Old Notes are held of record by The
Depository Trust Company ("DTC") who desires to deliver such Old Notes, by
book-entry transfer at DTC.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes the New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any holder thereof (other than
broker-dealers, as set forth below, and any such holder that is an "affiliate"
of the Company or Avondale Incorporated within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business and that such holder has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. Any holder who tenders in the Exchange Offer with the
intention to participate, or for the purpose of participating, in a distribution
of the New Notes or who is an affiliate of the Company may not rely upon such
interpretations by the staff of the Commission and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Failure to comply with such requirements in such instance may
result in such holder incurring liabilities under the Securities Act for which
the holder is not indemnified by the Company. Each broker-dealer (other than an
affiliate of the Company) 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. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make the Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution." Any
broker-dealer who is an affiliate of the Company or Avondale Incorporated may
not rely on such no-action letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
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<PAGE> 67
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
this Exchange Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
By tendering in the Exchange Offer, each holder of Old Notes will represent
to the Company that, among other things, (i) the New Notes acquired pursuant to
the Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder, (ii)
neither the holder of Old Notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, (iii) neither the holder nor any such other person is an "affiliate" of
the Company as defined in Rule 405 under the Securities Act or, if such holder
is an "affiliate," that such holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable,
(iv) if the holder is not a broker-dealer, that neither the holder nor any such
other person is engaged in or intends to engage in the distribution of such New
Notes, or (v) if such holder is a broker-dealer, that it will receive New Notes
for its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities and that it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes.
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to participate. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on
whether to participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
General. Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company hereby offers to
exchange any and all Old Notes validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. Subject to the minimum
denomination requirements of the New Notes, the Company will issue $1,000
principal amount of New Notes in exchange for each $1,000 principal amount of
outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or
all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in amounts that are integral multiples of $1,000 principal amount.
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
will be registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof and (ii) holders of the New Notes will
not be entitled to certain rights of holders of Old Notes under the Registration
Rights Agreement, which will terminate upon consummation of the Exchange Offer.
The New Notes will evidence the same debt as the Old Notes, will be entitled to
the benefits of the Indenture and will be treated as a single class thereunder
with any Old Notes that remain outstanding. The Exchange Offer is not
conditioned upon any minimum aggregate principal amount of Old Notes being
tendered for exchange.
As of the date of this Prospectus, $125,000,000 aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1996 to all holders
known to the Company.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Alabama Business Corporation Act or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the provisions of the Registration Rights Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes which are not tendered for exchange in the
Exchange Offer will remain outstanding and interest thereon will continue to
accrue.
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
for the purposes of receiving the New Notes from the Company. If any tendered
Old Notes are not accepted for exchange because of an invalid tender, the
occurrence of certain
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<PAGE> 68
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.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "-- Fees and Expenses".
Expiration Date; Extensions; Amendments. The term "Expiration Date" shall
mean 5:00 p.m., New York City time, on , 1996, unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. Although the Company has no current intention to extend the
Exchange Offer, the Company reserves the right to extend the Exchange Offer at
any time and from time to time by giving oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service. During any extension of the Exchange Offer, all Old Notes previously
tendered pursuant to the Exchange Offer and not withdrawn will remain subject to
the Exchange Offer. The date of the exchange of the New Notes for Old Notes will
be the first New York Stock Exchange trading day following the Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth under "-- Conditions of the
Exchange Offer" below shall not have been satisfied, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent or (ii) to
amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the holders of Old Notes. If
the Exchange Offer is amended in any manner determined by the Company to
constitute a material change, the Company will promptly disclose such amendment
by means of a prospectus supplement that will be distributed to the holders of
Old Notes, and the Company will extend the Exchange Offer for a period of time,
depending upon the significance of the amendment and the manner of disclosure to
such holders, if the Exchange Offer otherwise would expire during such period.
In all cases, issuance of the 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 a properly completed and duly executed Letter of
Transmittal and all other required documents; provided, however, that the
Company reserves the absolute right to waive any conditions of the Exchange
Offer or defects or irregularities in the tender of Old Notes. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer or if Old Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged Old
Notes or substitute Old Notes evidencing the unaccepted portion, as appropriate,
will be returned without expense to the tendering holder (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry procedures described below, such non-exchanged Old
Notes will be credited to an account maintained with DTC), unless otherwise
provided in the Letter of Transmittal, as promptly as practicable after the
expiration or termination of the Exchange Offer.
Interest on the New Notes. Holders of Old Notes that are accepted for
exchange will not receive accrued interest thereon at the time of exchange.
However, each New Note will bear interest from the most recent date to which
interest has been paid on the Old Notes or New Notes, or if no interest has been
paid on the Old Notes or New Notes, from April 29, 1996.
Procedures for Tendering Old Notes. The tender to the Company of Old Notes
by a holder thereof pursuant to one of the procedures set forth below will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal. A holder of the Old Notes may tender such Old Notes by (i) properly
completing and signing a Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to a Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with any
corresponding certificate or certificates representing Old Notes being tendered
(or confirmation of a book-entry-transfer of such Old
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<PAGE> 69
Notes into the Exchange Agent's account at DTC pursuant to the book-entry
procedures described below) and any required signature guarantees, to the
Exchange Agent at its address set forth in the Letter of Transmittal on or prior
to the Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the New Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in DTC (also referred to as a book-entry facility) whose name
appears on a security listing as the owner of Old Notes), the signature of such
signer need not be guaranteed. In any other case, the tendered Old Notes must be
endorsed or accompanied by written instruments of transfer in form satisfactory
to the Company and duly executed by the registered holder and the signature on
the endorsement or instrument of transfer must be guaranteed by a member firm of
a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" as
defined by rule 17Ad-15 under the Exchange Act (any of the foregoing hereinafter
referred to as an "Eligible Institution"). If the New Notes or Old Notes not
exchanged are to be delivered to an address other than that of the registered
holder appearing on the note register for the Old Notes, the signature in the
Letter of Transmittal must be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT 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. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC) is received by the Exchange
Agent or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided below) from an Eligible Institution
is received by the Exchange Agent. Issuances of New Notes in exchange for Old
Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram
or facsimile transmission to similar effect (as provided below) by an Eligible
Institution will be made only against submission of a duly signed Letter of
Transmittal (and any other required documents) and deposit of the tendered Old
Notes (or confirmation of a book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC pursuant to the book-entry procedures described
below).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company, which determination will be final and binding. The Company reserves
the absolute right to reject any and all tenders not in proper form or the
acceptance for exchange of which may, in the opinion of the Company's counsel,
be unlawful. The Company also reserves the absolute right to waive any of the
conditions of the Exchange Offer or any defect or irregularity in the tender of
any Old Notes. None of the Company, the Exchange Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification. Any
Old Notes received by the Exchange Agent that are not validly tendered and as to
which the defects or irregularities have not been cured or waived, or if Old
Notes are submitted in principal amount greater than the principal amount of Old
Notes being tendered by such tendering holder, such unaccepted or non-exchanged
Old Notes will be returned by the Exchange Agent to the tendering holder, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion (i) to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date and (ii) to the extent permitted by
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<PAGE> 70
applicable law, to purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
will differ from the terms of the Exchange Offer.
Book-Entry Transfer. The Company understands that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish an
account with respect to the Old Notes at DTC for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in DTC's system may make book-entry delivery
of Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's
account with respect to the Old Notes in accordance with DTC's procedure for
such transfer. Although delivery of the Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, an appropriate
Letter of Transmittal with any required signature guarantee and all other
required documents must in each case be transmitted to and received or confirmed
by the Exchange Agent at the address set forth in the Letter of Transmittal on
or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures.
Guaranteed Delivery Procedures. If a holder desires to participate in the
Exchange Offer and such holder's Old Notes are not immediately available, or
time will not permit such holder's Old Notes or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if (i) the tender is made through an Eligible Institution, (ii) on or
prior to the Expiration Date, the Exchange Agent has received from an Eligible
Institution a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form
provided by the Company (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth the name and address of the tendering holder, the
name(s) in which the Old Notes are registered, the certificate number(s) of the
Old Notes to be tendered and the amount tendered, and stating that the tender is
being made thereby and guaranteeing that, within three New York Stock Exchange
trading days after the date of execution of the Notice of Guaranteed Delivery,
such Old Notes, in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at DTC), will be
delivered by such Eligible Institution together with any other documents
required by the Letter of Transmittal and (iii) the certificates for all
physically tendered Old Notes, in proper form for transfer, or a confirmation of
book-entry transfer such Old Notes into the Exchange Agent's account at DTC, as
the case may be, and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within three New Stock Exchange Trading Days
after the date of execution of the Notice of Guaranteed Delivery. Unless Old
Notes being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required documents),
the Company may, at its option, reject the tender. Copies of a Notice of
Guaranteed Delivery which may be used by Eligible Institutions for the purposes
described in this paragraph are available from the Exchange Agent.
Terms and Conditions of the Letter of Transmittal. The Letter of
Transmittal contains, among other things, the following terms and conditions,
which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's true and lawful agent and
attorney-in-fact with respect to such tendered Old Notes, with full power of
substitution, among other things, to cause the Old Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Old Notes
and to acquire New Notes issuable upon the exchange of such tendered Old Notes,
and that, when the same are accepted for exchange, the Company will acquire good
and unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges, encumbrances and adverse claims. The Transferor also
warrants that it will, upon request, execute and deliver any additional
documents reasonably requested by the Company or the Exchange Agent as necessary
or desirable to complete and give effect to the transactions contemplated by the
Letter of Transmittal. All authority conferred by the Transferor will survive
the death, bankruptcy or incapacity of the Transferor and every obligation of
the Transferor shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of such Transferor.
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<PAGE> 71
By executing a Letter of Transmittal, each holder will make to the Company
the representations set forth above under the heading "-- Purpose and Effect of
the Exchange Offer".
Withdrawal of Tenders of Old Notes. Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein 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 tendered 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), (iii) contain a statement that
such holder is withdrawing his election to have such Old Notes exchanged, (iv)
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 documents of transfer
sufficient to have the Trustee with respect to the Old Notes register the
transfer of such Old Notes in the name of the person withdrawing the tender and
(v) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. If Old Notes have been tendered pursuant
to the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at DTC. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company, which determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered. Any
Old Notes which have been tendered but which are not accepted for exchange will
be returned to the holder thereof without cost to such holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at DTC pursuant to the book-entry transfer procedures described above, such Old
Notes will be credited to an account maintained with DTC for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described above under "-- Procedures for Tendering Old Notes"
at any time on or prior to the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, or any extension of
the Exchange Offer, the Company shall not be required to accept for exchange, or
exchange New Notes for, any Old Notes, and may terminate the Exchange Offer as
provided herein before the acceptance of such Old Notes, if:
(a) any statute, rule or regulation shall have been enacted, or any
action shall have been taken by any court or governmental authority which,
in the reasonable judgment of the Company, seeks to or would prohibit,
restrict, materially delay or otherwise render illegal consummation of the
Exchange Offer; or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its subsidiaries
has occurred which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company, or
(c) there shall occur a change in the current interpretations by the
staff of the Commission which, in the Company's reasonable judgment, might
materially impair the Company's ability to proceed with the Exchange Offer.
If the Company determines in its sole discretion that any of the above
conditions is not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration Date,
subject, however, to the right of holders to withdraw such Old Notes (see
"-- Terms of the Exchange Offer -- Withdrawal of Tenders of Old Notes") or (iii)
waive such unsatisfied conditions with respect to the Exchange Offer and accept
all validly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change to
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<PAGE> 72
the Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the holders of Old Notes, and
the Company will extend the Exchange Offer for a period of time, depending upon
the significance of the waiver and the manner of disclosure to the such holders,
if the Exchange Offer otherwise would expire during such period.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. All executed Letters of Transmittal should be directed to the Exchange
Agent at one of the addresses set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Hand or Overnight Courier: By Registered or Certified Mail:
The Bank of New York The Bank of New York
Corporate Trust Services 101 Barclay Street-7E
Window, Ground Level New York, New York 10286
101 Barclay Street-7E Attn: Ms. Jodi Smith
New York, New York 10286
Attn: Ms. Jodi Smith
</TABLE>
By Facsimile Transmission (for Eligible Institutions only):
(212) 815-6339
Attn: Ms. Jodi Smith
Confirm by Telephone:
(212) 815-2791
For information with respect to the Exchange Offer, call
Ms. Jodi Smith of the Exchange Agent:
(212) 815-2791
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopy, telephone or in person by officers and regular
employees of the Company and its affiliates. No additional compensation will be
paid to any such officers and employees who engage in soliciting tenders.
The Company has not retained any dealer-manager or other soliciting agent
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 also may pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, the Letter of
Transmittal and related documents to the beneficial owners of the Old Notes and
in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include, among others, fees and expenses of
the Exchange Agent, accounting and legal fees and printing costs.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Old Notes pursuant to the Exchange Offer. If, however, New Notes, or Old
Notes for principal amounts not tendered or accepted for
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exchange, are to be delivered to, or are to be issued in the name of, any person
other than the registered holder of the Old Notes tendered or if a transfer tax
is imposed for any reason other than the exchange of the Old Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities within the meaning of Rule 144 of the
Securities Act. Accordingly, such Old Notes may be resold only (i) to the
Company or any subsidiary thereof, (ii) inside the United States to a qualified
institutional buyer in compliance with Rule 144A, (iii) inside the United States
to an institutional accredited investor that, prior to such transfer, furnishes
to the Trustee a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Old Notes (the form of which
letter can be obtained from the Trustee) and, if such transfer is in respect of
an aggregate principal amount of Old Notes at the time of transfer of less than
$100,000, an opinion of counsel acceptable to the Company that such transfer is
in compliance with the Securities Act, (iv) outside the United States in
compliance with Rule 904 under the Securities Act, (v) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act (if available)
or (vi) pursuant to an effective registration statement under the Securities
Act. The liquidity of the Old Notes could be adversely affected by the Exchange
Offer.
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 for accounting purposes will be recognized by the
Company. The costs of the Exchange Offer and the unamortized expenses related to
the issuance of the Old Notes will be amortized over the term of the New Notes.
THE TRANSACTIONS
TERMS OF THE ASSET PURCHASE AGREEMENT
General. Pursuant to the Asset Purchase Agreement, the Company purchased
substantially all of the assets and certain of the liabilities of the textile
business of Graniteville Company on April 29, 1996.
Purchase Price. Pursuant to the Asset Purchase Agreement, the aggregate
consideration paid by the Company was $255 million in cash less the "deficit
amount". The deficit amount, if any, will be equal to the excess of $242 million
over the net book value, as of April 29, 1996, of assets acquired and
liabilities assumed in connection with the Graniteville Acquisition. The parties
are in the process of determining the deficit amount, if any. If there is a
"deficit amount", Graniteville Company (or Triarc as guarantor) will be required
to repay to the Company an amount equal to the deficit amount, plus interest
thereon from April 29, 1996. On May 21, 1996, Triarc, on behalf of Graniteville
Company, paid to the Company $5.0 million, which amount will be applied to the
deficit amount, if any. Interest will not accrue on such $5.0 million after the
date of such payment. In addition, Avondale paid (or will pay) $5.4 million in
acquisition costs, which include, among other things, $2.6 million in prepayment
penalties that were incurred by Graniteville Company and reimbursed by Avondale
in connection with the repayment by Graniteville Company of certain of its
outstanding indebtedness.
Indemnification. Graniteville Company (and Triarc as guarantor) is
required to indemnify the Company and its subsidiaries and affiliates and each
of their respective officers, directors, employees, agents and representatives
with respect to all claims, liabilities, obligations, losses, costs, expenses,
penalties, fines and other judgements and damages ("Losses") arising out of or
relating to (i) certain liabilities of Graniteville not assumed by the Company;
(ii) certain liabilities of Graniteville assumed by the Company which are not
included as liabilities on the statement of the net book values of the assets
and liabilities of Graniteville
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Company that is agreed upon by the Company and Graniteville Company after the
closing; (iii) all or any portion of any such liability that is in excess of the
amount thereof included as a liability on such statement; (iv) any breach or
inaccuracy of any representation or warranty of Graniteville Company or any of
its affiliates in the Asset Purchase Agreement; (v) any breach of any covenant,
agreement or undertaking made by Graniteville Company or any of its affiliates
in the Asset Purchase Agreement; (vi) any liability or obligation relating to
certain environmental conditions that existed or occurred at or prior to the
closing in connection with the operation of Graniteville's business; (vii) any
fraud by Graniteville Company or any of its affiliates in connection with the
Graniteville Acquisition; or (viii) any knowing and intentional breach of
certain representations and warranties made by Graniteville Company or any of
its affiliates in the Asset Purchase Agreement. The right of the Company to
indemnification with respect to a Loss will be limited to the extent that
reserves have been established by Graniteville Company for such Loss.
The Company (and Avondale Incorporated as guarantor) is required to
indemnify Graniteville Company, Triarc, their respective subsidiaries and
affiliates and each of their respective officers, directors, employees, agents
and representatives with respect to all Losses arising out of or relating to (i)
any liability of Graniteville assumed by the Company, except to the extent the
Company is entitled to be indemnified against such liability; (ii) any breach or
inaccuracy of any representation or warranty of the Company in the Asset
Purchase Agreement or in certain related documents; (iii) any breach of certain
covenants, agreements or undertakings made by the Company in the Asset Purchase
Agreement or in certain related documents; or (iv) subject to certain
exceptions, the conduct of Graniteville's business after the closing date.
Claims for indemnification by the Company with respect to Losses resulting
from the breach or inaccuracy of certain specified representation and warranties
may be made at any time, except as limited by law. Claims for indemnification
with respect to environmental matters must be made on or prior to the third
anniversary of the closing date. All other claims must be made on or prior to
the date which is eighteen months after the closing date.
Under the Asset Purchase Agreement, Graniteville will only be liable for
Losses arising from breaches of representations and warranties and certain other
matters, if and to the extent such Losses (other than those with respect to
claims which may be made at any time after the closing date) exceed $5 million.
In addition, the obligation of Graniteville Company to indemnify the Company is
capped at $100 million, except that Losses with respect to claims which may be
made at any time after the closing date shall not be included in the calculation
of such $100 million cap and there is no limit on the indemnification
obligations of Graniteville with respect to such claims.
Triarc Guarantee. Triarc has guaranteed, among other things, the
obligations of Graniteville Company under the indemnification provisions of the
Asset Purchase Agreement.
Supply Agreement. The Company and Patrick have entered into a 10-year
Supply Agreement (the "Supply Agreement") in connection with the Graniteville
Acquisition. The Supply Agreement generally provides that Patrick will have the
opportunity to provide certain dyes and chemicals utilized by the Company
(including Graniteville) if Patrick meets certain conditions, including the
ability to provide the applicable dyes and chemicals in accordance with the
Company's specifications and delivery requirements. The Supply Agreement is
terminable by the Company prior to the end of the ten-year term in the event of
a pattern of repeated, material failures of Patrick to satisfy its obligations
with respect to Product specifications, delivery schedules or other material
terms.
EQUITY PRIVATE PLACEMENT
General. In connection with the Graniteville Acquisition, Avondale
Incorporated consummated the Equity Private Placement to finance a portion of
the purchase price for the Graniteville Acquisition. In connection with the
Equity Private Placement, Avondale Incorporated issued and sold 2,222,223 shares
of Class A Common Stock to The Clipper Group and certain of its affiliates
(collectively, the "investors") for an aggregate purchase price of $40 million.
In connection with the Equity Private Placement, Avondale Incorporated paid a
closing fee of $600,000 to Clipper.
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Shareholders Agreement. In connection with the Equity Private Placement,
Avondale Incorporated entered into a Shareholders Agreement (the "Shareholders
Agreement") with the investors, G. Stephen Felker ("Felker") and an affiliate of
Felker. The Shareholders Agreement grants the investors the right to appoint a
member of the Board of Directors of Avondale Incorporated so long as the
investors own (in the aggregate) at least one million shares of Class A Common
Stock (as adjusted for stock splits, etc.). The Shareholders Agreement also (i)
grants the investors preemptive rights with respect to future issuances of
Common Stock by Avondale Incorporated (subject to certain exceptions), (ii)
allows the investors to participate in any sale of Common Stock by Felker or his
affiliates and (iii) permits Felker to require the investors to sell their
shares of Class A Common Stock in connection with certain sales by the other
shareholders of Avondale Incorporated. The Shareholders Agreement terminates
upon the earlier of the twentieth anniversary of its execution or the
consummation of a "Qualified Public Offering" (as defined in the Shareholders
Agreement).
Registration Rights Agreement. In connection with the Equity Private
Placement, Avondale Incorporated entered into a Registration Rights Agreement
(the "Registration Agreement") with the investors. Under the Registration
Agreement, after the earlier to occur of three years after the execution thereof
and completion of an initial public offering by Avondale Incorporated, the
investors have the right to require Avondale Incorporated to register their
shares of Class A Common Stock under the Securities Act for sale to the public,
subject to certain limitations. Avondale is required to pay all expenses (other
than discounts and commissions) in connection with two such demand
registrations. In addition, if the Company elects to register securities under
the Securities Act for its own account or the account of other shareholders, the
investors have the right to register their shares of Class A Common Stock under
any such registration statement, subject to certain limitations.
OTHER FINANCINGS
For a description of the New Credit Facility and Receivables Securitization
Facility, see "Description of Certain Indebtedness".
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and Avondale
Incorporated are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD
- ----------------------------- --- -------------------------------------------------
<S> <C> <C>
G. Stephen Felker............ 44 Chairman of the Board, President and Chief
Executive Officer of the Company and Avondale
Incorporated
Jack R. Altherr, Jr. ........ 47 Vice Chairman, Chief Financial Officer, Secretary
and director of the Company and Avondale
Incorporated
T. Wayne Spraggins........... 58 Vice President of the Company and President -
Manufacturing Operations
Keith M. Hull................ 43 Vice President of the Company and
President - Apparel Fabrics*
Robert G. Nelson............. 47 Vice President of the Company and President -
Avondale Yarns*
Craig S. Crockard............ 53 Vice President, Planning and Development of the
Company
Bill W. Henry................ 61 Vice President, Raw Material Purchasing of the
Company
M. Delen Boyd................ 40 Vice President and Controller of the Company and
Assistant Secretary of the Company and Avondale
Incorporated
J. Elliott Woodward.......... 43 Vice President and Treasurer of the Company and
Assistant Secretary of the Company and Avondale
Incorporated
Sharon L. Rodgers............ 39 Vice President, Human Resources of the Company
Kenneth H. Callaway(a)....... 41 Director of the Company and Avondale Incorporated
Robert B. Calhoun(b)......... 53 Director of the Company and Avondale Incorporated
Harry C. Howard(b)........... 67 Director of the Company and Avondale Incorporated
C. Linden Longino, Jr.(b).... 59 Director of the Company and Avondale Incorporated
Dale J. Boden(a)............. 39 Director of the Company and Avondale Incorporated
John P. Stevens(a)........... 67 Director of the Company and Avondale Incorporated
</TABLE>
- ---------------
* Avondale Yarns and Apparel Fabrics refer to the yarns division and finished
fabrics division, respectively.
(a) Member of Compensation Committee.
(b) Member of Audit Committee.
G. Stephen Felker has served as Chairman of the Board of Avondale
Incorporated since 1992 and President and Chief Executive Officer of Avondale
Incorporated since 1980. Mr. Felker also served as Treasurer of Avondale
Incorporated from 1977 until August 1993 and has served Avondale Incorporated in
various capacities since 1974. Mr. Felker has served as Chairman of the Board
and Chief Executive Officer of the Company since 1986, when Avondale
Incorporated acquired the Company, and President of the Company since 1995. Mr.
Felker is a member of the board of directors of Wachovia Bank of Georgia, N.A.
Jack R. Altherr, Jr. has served as Vice Chairman of Avondale Incorporated
and the Company since May 1996, Chief Financial Officer and a director of
Avondale Incorporated since December 1989, Chief Financial Officer and Secretary
of the Company since October 1988 and a director of the Company since 1993. Mr.
Altherr served as Vice President of Avondale Incorporated and the Company from
December 1989 and October 1988, respectively, to May 1996. With the exception of
fiscal 1995, he has served as Secretary of the Company and Avondale Incorporated
since August 1993. Mr. Altherr has served the Company in various other
capacities since July 1982. Mr. Altherr began serving as a director of Oneita in
February 1996 in
72
<PAGE> 77
connection with the Company's subordinated loan to Oneita. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- The
Company -- Liquidity and Capital Resources".
T. Wayne Spraggins has served as Vice President of the Company and
President - Manufacturing Operations since May 1996. Mr. Spraggins served as
Vice President, Manufacturing of the Company from November 1984 until May 1996.
Mr. Spraggins joined the Company as a standards engineer in August 1961 and has
served the Company in various other capacities, including Plant Manager, since
that time.
Keith M. Hull has served as President - Apparel Fabrics, the finished
fabrics division of the Company following the Graniteville Acquisition, since
May 1996. He has served as Vice President of the Company since April 1989. Mr.
Hull served as President of Avondale Fabrics, the finished fabrics division of
the Company prior to the Graniteville Acquisition, from April 1989 until May
1986. Mr. Hull served as Vice President, Merchandising of Avondale Yarns, from
February 1989 to April 1989. Prior to joining the Company, Mr. Hull served as
Vice President, Marketing of Avondale Incorporated from November 1984 to
February 1989 and served Avondale Incorporated in various other capacities since
1977. Mr. Hull has served as a director of Cherokee, Inc. since July 1995.
Robert G. Nelson has served as President - Avondale Yarns since March 1996
and Vice President of the Company since August 1993. He served as
President - Walton Fabrics, the greige fabrics division, from August 1993
through March 1996. Mr. Nelson served as Executive Vice President and Chief
Operating Officer of Avondale Incorporated from December 1988 until August 1993
and as Vice President, Marketing of Avondale Incorporated from November 1988 to
December 1989. Prior to joining Avondale Incorporated, Mr. Nelson had served in
various capacities with Springs Industries, Inc., a textile manufacturer, since
January 1972.
Craig S. Crockard has served as Vice President, Planning and Development of
the Company since September 1983. Mr. Crockard has served the Company in various
other capacities, including Vice President, Corporate Services, since September
1966.
Bill W. Henry has served as Vice President, Raw Material Purchasing of the
Company since July 1987. Mr. Henry has served the Company in various other
capacities, including Manager of the Cotton Department, since January 1969.
M. Delen Boyd has served as Vice President and Controller of the Company
and Assistant Secretary of the Company and Avondale Incorporated since May 1996.
Mr. Boyd has served as controller of the Company since 1987. Mr. Boyd joined the
Company in 1982 and has served in various capacities, including Assistant
Controller and Corporate Director of Accounting and Taxes.
J. Elliott Woodward has served as Vice President and Treasurer of the
Company since May 1996. Mr. Woodward served as Vice President and Controller of
Graniteville Company from 1993 to May 1996. Mr. Woodward joined Graniteville
Company in 1984 and served in various capacities from 1984 to May 1996,
including Manager of General Accounting and Controller.
Sharon L. Rodgers has served as Vice President, Human Resources since May
1996. Ms. Rodgers served as Vice President, legal and Assistant Secretary of
Graniteville Company from 1993 to May 1996. Prior to 1993, Ms. Rodgers served in
various other capacities at Graniteville Company during the fifteen years ending
in 1993.
Kenneth H. Callaway has served as a director of Avondale Incorporated since
November 1987 and of the Company since August 1993. Mr. Callaway has been
President of Calgati Chemical Company, a specialty chemical exporter, since
December 1991. From 1987 through 1991, Mr. Callaway served as president of three
privately-owned retail computer businesses.
Robert B. Calhoun has served as a director of Avondale Incorporated since
August 1993 and of the Company since November 1991. Mr. Calhoun has been
President of Clipper Asset Management Corporation,
73
<PAGE> 78
the sole general partner of The Clipper Group, L.P., a private investment firm,
since 1991, and of Clipper Capital Corporation, the sole general partner of
Clipper, an affiliated private investment firm, since 1993. From 1975 to 1991,
Mr. Calhoun was a Managing Director of CS First Boston Corporation, an
investment banking firm and the Initial Purchaser in the Offering. Mr. Calhoun
is also a director of HighwayMaster Communications, Inc. and Interstate Bakeries
Corporation.
Harry C. Howard has served as a director of Avondale Incorporated since
August 1993 and of the Company since July 1986. Mr. Howard retired from the law
firm of King & Spalding, where he had practiced law since 1956, as of December
31, 1992. Mr. Howard serves as a director of Cresent Banking Company, a bank
holding company.
C. Linden Longino, Jr. has served as a director of Avondale Incorporated
since November 1975 and of the Company since August 1993. Mr. Longino has been
Senior Vice President of SunTrust Bank, Atlanta (formerly, Trust Company Bank)
since December 1978. During his 31-year career with SunTrust Bank, Atlanta, Mr.
Longino has served in various management capacities and is currently on special
assignment as advisor to the Carter Presidential Center in Atlanta, Georgia.
Dale J. Boden has served as a director of Avondale Incorporated and the
Company since November 1994. Mr. Boden has served as President and Chief
Executive Officer of BF Capital, Inc., a private investment company, since
January 1993.
John P. Stevens has served as a director of Avondale Incorporated since
January 1970 and of the Company since July 1986. Mr. Stevens served as Executive
Vice President of Wachovia Bank of Georgia, N.A. from April 1981 until his
retirement in January 1994 and was responsible for managing the Government
Banking and Public Finance department. Mr. Stevens served as a consultant to
Wachovia Bank of Georgia, N.A. from February 1994 to February 1996. In addition,
from February 1994 until the present time, Mr. Stevens has been a partner in The
Stevens Group, a consulting firm specializing in providing assistance in a wide
range of business and governmental affairs.
The Company is a wholly owned subsidiary of Avondale Incorporated, which
therefore controls the election of the Board of Directors of the Company. During
fiscal 1995, the Company paid its non-employee directors an annual fee of
$12,000 plus $1,500 for each board meeting attended (plus out-of-pocket
expenses) and $500 for each committee meeting attended.
All executive officers of the Company are elected annually by and serve at
the discretion of the Board of Directors.
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<PAGE> 79
EXECUTIVE COMPENSATION
Summary Compensation Table. The table below sets forth certain information
concerning the compensation earned during fiscal 1995 by the Company's Chief
Executive Officer and its four other most highly compensated executive officers
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(A)
----------------------------- ALL OTHER
FISCAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(B)
- ------------------------------------------------------- ------ --------- -------- ------------
<S> <C> <C> <C> <C>
G. Stephen Felker...................................... 1995 $ 773,016 $993,182 $ 12,763
Chairman of the Board, President and Chief Executive
Officer
Jack R. Altherr, Jr.................................... 1995 234,508 159,424 7,376
Vice Chairman, Chief Financial Officer and Secretary
Richard H. Monk, Jr.(c)................................ 1995 209,848 132,946 10,978
President and Chief Administrative Officer
T. Wayne Spraggins..................................... 1995 188,840 122,720 10,517
Vice President and President - Manufacturing
Operations
C. Michael Billingsley(d).............................. 1995 187,508 115,041 6,810
Vice President and President - Avondale Yarns
</TABLE>
- ---------------
(a) The aggregate amount of perquisites and other personal benefits, if any, did
not exceed the lesser of $50,000 or 10% of the total annual salary and
bonus reported for each Named Executive Officer and has therefore been
omitted.
(b) Amounts shown reflect (i) matching 401(k) contributions made by the Company
to the Company's Associate Profit Sharing and Savings Plan of $1,125 on
behalf of each Named Executive Officer, (ii) profit sharing contributions
made by the Company to the Company's Associate Profit Sharing and Savings
Plan of $4,776 on behalf of each Named Executive Officer, and (iii) life
insurance premiums of $6,862, $1,475, $5,077, $4,616 and $909 paid by the
Company, on behalf of Messrs. Felker, Altherr, Monk, Spraggins and
Billingsley, respectively.
(c) Mr. Monk resigned as an executive officer of the Company effective as of
November 2, 1995.
(d) Mr. Billingsley resigned as an executive officer of the Company effective
March 1996. Upon his resignation from the Company, Mr. Billingsley became
President of Oneita Industries, Inc., a customer of Avondale's yarns
division. Mr. Billingsley's stock options and phantom unit awards will
continue to vest through November 1999.
Option Grants Table. The table below sets forth certain information
relating to options granted during fiscal 1995 to each Named Executive Officer.
OPTION GRANTS TABLE
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(A)
----------------------------------------------
% OF POTENTIAL REALIZABLE
NUMBER TOTAL VALUE AT ASSUMED
OF OPTIONS ANNUAL RATES OF
SECURITIES GRANTED STOCK PRICE
UNDERLYING TO EXERCISE APPRECIATION
OPTIONS EMPLOYEES PRICE FOR OPTION TERM
GRANTED IN FISCAL PER EXPIRATION -----------------------
(#) YEAR SHARE DATE 5% 10%
---------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
G. Stephen Felker............... 240,000 37.5 $12.50 11/1/04 $1,886,400 $4,780,800
Jack R. Altherr, Jr............. 100,000 15.6 12.50 11/1/04 786,000 1,992,000
Richard H. Monk, Jr.(b)......... -- -- -- -- -- --
T. Wayne Spraggins.............. 50,000 7.8 12.50 11/1/04 393,000 996,000
C. Michael Billingsley.......... 50,000 7.8 12.50 11/1/04 393,000 996,000
</TABLE>
- ---------------
(a) All of the options shown (i) are options to purchase Class A Common Stock of
Avondale Incorporated and (ii) vest in 20% increments commencing one year
after the date of issue.
(b) Excludes 50,000 options granted to Mr. Monk during fiscal 1995, which
terminated in accordance with their terms following his resignation.
75
<PAGE> 80
Aggregated Option Table. The table below sets forth certain information
with respect to options held at the end of fiscal 1995 by each Named Executive
Officer. None of the options held at the end of fiscal 1995 were exercisable and
consequently no options were exercised during fiscal 1995.
AGGREGATED OPTIONS TABLE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SHARES SUBJECT UNEXERCISED
TO UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
AUGUST 25, 1995 AUGUST 25, 1995(A)
--------------- ------------------
<S> <C> <C>
G. Stephen Felker.............................................. 240,000 $331,200
Jack R. Altherr, Jr............................................ 100,000 138,000
Richard H. Monk, Jr............................................ -- --
T. Wayne Spraggins............................................. 50,000 69,000
C. Michael Billingsley......................................... 50,000 69,000
</TABLE>
- ---------------
(a) All options are options to purchase Class A Common Stock of Avondale
Incorporated. There is no existing public market for the Class A Common
Stock. The values shown are based on management's estimate of the fair
market value of the Class A Common Stock at August 25, 1995.
Long-Term Incentive Plans. The table below sets forth certain information
with respect to phantom units held at the end of fiscal 1995 by each Named
Executive Officer. No phantom units were awarded during fiscal 1995.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE PERFORMANCE
AGGREGATE OR OTHER PERIOD ESTIMATED FUTURE
PHANTOM UNTIL MATURATION PAYOUTS FOR ALL
NAME UNITS HELD(A) OR PAYOUT (YEARS) PHANTOM UNITS HELD(B)
- ---------------------------------------------- ------------- ----------------- ---------------------
<S> <C> <C> <C>
G. Stephen Felker............................. 150 20 $ 932,700
Jack R. Altherr, Jr. ......................... 90 18 559,620
Richard H. Monk, Jr. ......................... 110 8 273,729
T. Wayne Spraggins............................ 50 6 310,900
C. Michael Billingsley........................ 90 20 559,620
</TABLE>
- ---------------
(a) Each phantom unit equals 398.606 phantom shares. The value of each phantom
share is equal to the result obtained by dividing (i) five times the
Company's earnings before depreciation, amortization, LIFO inventory
adjustments, interest and income taxes for the 10 fiscal quarters
immediately preceding such date divided by 2.5, plus (ii) certain "balance
sheet adjustments" by the sum of (i) the aggregate number of outstanding
phantom shares plus (ii) the aggregate number of outstanding Class A Common
Stock and Class B Common Stock of Avondale Incorporated. Phantom units vest
at the rate of 5.0% per year for each full and uninterrupted year that the
Named Executive Officer remains employed by the Company after August 31,
1989, and vest fully if the Named Executive Officer dies before his
employment is terminated. The value of vested phantom units is payable
beginning on the later of the date on which the Named Executive Officer
reaches the age of 65 or the date on which the employment of such Named
Executive Officer terminates (the "Normal Payment Date"), in 10 equal
annual installments, with interest equal to the one-year U.S. Treasury Bill
rate in effect on the Normal Payment Date. If the Named Executive Officer
dies before his employment with the Company is terminated, the value of his
phantom units, calculated as of the date of death, is payable to his
beneficiary as described above. If the Named Executive Officer dies after
his Normal Payment Date, the present value of the balance of the annual
installments is payable in a lump sum to his beneficiary. A Named Executive
Officer will forfeit all interest in his Phantom Stock Units (whether or
not vested) if he violates certain non-compete covenants, applicable during
such Named Executive Officer's employment and for a period of five years
after termination of such employment.
76
<PAGE> 81
(b) There are no threshold, target or maximum amounts payable with respect to
phantom unit awards made by the Company. The amounts shown reflect the
future value, excluding interest payable during the installment payment
period, as of September 1, 1995 of vested and non-vested phantom units held
at the end of fiscal 1995 based on the results of the Company for the 10
fiscal quarters ended August 25, 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1995, the Compensation Committee consisted of Messrs.
Stevens, Boden and Callaway. The Compensation Committee is responsible for
recommending to the Board of Directors the compensation for the Company's
executive officers, which compensation is then approved by the full Board of
Directors.
C. Linden Longino, Jr., a director of the Company, is an officer of
SunTrust Bank, Atlanta. Avondale and SunTrust Bank, Atlanta are parties to five
letter of credit agreements relating to industrial revenue bonds issued in
connection with certain of the Company's manufacturing facilities. In addition,
SunTrust Bank, Atlanta has performed other banking services for the Company over
the past three fiscal years. Aggregate payments by the Company to SunTrust Bank,
Atlanta for such services did not exceed 5% of the Company's net sales or
SunTrust Bank, Atlanta's gross revenues in any of such fiscal years.
Harry C. Howard, a director of the Company, is a former partner of the law
firm of King & Spalding. Mr. Howard retired from King & Spalding as of January
1, 1993. King & Spalding has for many years provided legal services to the
Company and is providing certain legal services to the Company in connection
with the Offering. See "Legal Matters".
G. Stephen Felker is a director of Wachovia, a former executive officer of
which, John P. Stevens, is a director of the Company. Avondale maintains the New
Credit Facility, under which it has aggregate borrowing availability of $225
million, with a syndicate of banks, including Wachovia, for which Wachovia
serves as an agent, pursuant to a loan agreement dated April 29, 1996. The
greatest amount owed by the Company under the New Credit Facility (and its
predecessor agreements) during fiscal 1993, 1994 and 1995 was $43.5 million,
$145.1 million and $137.0 million, respectively, and aggregate interest paid by
the Company under such agreements during fiscal 1993, 1994 and 1995 was $1.1
million, $3.0 million and $11.0 million, respectively. In addition, Wachovia has
performed other banking services for the Company over the past three fiscal
years. Aggregate payments by the Company to Wachovia for such services did not
exceed 5% of the Company's net sales or Wachovia's gross revenues in any of such
fiscal years.
Robert B. Calhoun, a director of the Company, is an affiliate of certain of
the investors in the Equity Private Placement. As a result, Mr. Calhoun is
deemed to beneficially own the 2,222,223 shares of Class A Common Stock of
Avondale Incorporated that were purchased by the investors. In addition, Mr.
Calhoun is an affiliate of Clipper, to which the Company paid a $600,000 closing
fee in connection with the Equity Private Placement.
Avondale believes that its bank credit facilities, including the New Credit
Facility, have been on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable facilities with
other borrowers. See "Management's Discussion and Analysis of Financial Position
and Results of Operations -- The Company -- Liquidity and Capital Resources".
77
<PAGE> 82
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
All of the capital stock of the Company is owned by Avondale Incorporated.
The table below sets forth certain information regarding the beneficial
ownership of the Common Stock of Avondale Incorporated as of June 1, 1996 by (i)
each person who is known to the Company to be the beneficial owner of more than
5% of the outstanding Class A Common Stock or Class B Common Stock, (ii) each of
the Named Executive Officers, (iii) each of the directors of the Company and
(iv) all directors and executive officers of the Company as a group. Except as
set forth below, the shareholders named below have sole voting and investment
power with respect to all shares of Common Stock shown as being beneficially
owned by them.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
OF CLASS A OF CLASS B
COMMON STOCK COMMON STOCK
---------------------- --------------------- PERCENTAGE OF
NUMBER PERCENT NUMBER PERCENT COMBINED
NAME OF BENEFICIAL OWNER(A) OF SHARES OF CLASS OF SHARES OF CLASS VOTING POWER
- ------------------------------------------------ --------- -------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
G. Stephen Felker............................... 4,120,689(b) 30.9% 978,939 100% 71.1%
Jack R. Altherr, Jr............................. 127,199(c) 1.0% -- -- *
Richard H. Monk, Jr............................. 20,750(d) * -- -- *
T. Wayne Spraggins.............................. 92,628(e) * -- -- *
C. Michael Billingsley.......................... 11,750(f) * -- -- *
Dale J. Boden................................... 113,500(g) * -- -- *
Kenneth H. Callaway............................. 37,500 * -- -- *
Robert B. Calhoun(h)(i)(j)...................... 2,227,773 18.1% -- -- 7.0%
Harry C. Howard................................. 45,000 * -- -- *
C. Linden Longino, Jr........................... 50,000(k) * -- -- *
John P. Stevens................................. 98,500(l) * -- -- *
The Clipper Group(i)(j)(m)...................... 2,222,223 18.1% -- -- 7.0%
Grayward Company(n)............................. 3,754,500 30.5% -- -- 11.8%
Felker Investments, Ltd.(o)..................... 2,093,750 17.0% -- -- 6.6%
Avondale Mills, Inc.
Associate Profit Sharing and Savings
Plan(p)....................................... 600,000 4.9% -- -- 1.9%
All directors and executive officers as a group
(16 persons).................................. 7,062,973 52.7% 978,939 100% 80.2%
</TABLE>
- ---------------
* Less than 1%
(a) Except as otherwise noted, the address of each person who is an officer or
a director of the Company is c/o Avondale Mills, Inc., 506 South Broad
Street, Monroe, Georgia 30655.
(b) Reflects (i) 2,093,750 shares of Class A Common Stock held of record by
Felker Investments, Ltd., a partnership of which Mr. Felker is the general
partner (as the general partner, Mr. Felker is deemed to beneficially own
such shares under Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act")), (ii) 978,939 shares of Class A Common Stock issuable upon
conversion of the 978,939 shares of Class B Common Stock beneficially owned
by Mr. Felker and (iii) 48,000 shares of Class A Common Stock issuable upon
exercise of stock options beneficially owned by Mr. Felker, which shares
are deemed beneficially owned by Mr. Felker under Rule 13d-3 under the
Exchange Act.
(c) Reflects 20,000 shares of Class A Common Stock issuable upon exercise of
stock options beneficially owned by Mr. Altherr, which shares are deemed
beneficially owned by Mr. Altherr under Rule 13d-3 under the Exchange Act.
(d) Reflects 2,000 shares of Class A Common Stock beneficially owned by Mr.
Monk's spouse.
(e) Reflects 10,000 shares of Class A Common Stock issuable upon exercise of
stock options beneficially owned by Mr. Spraggins, which shares are deemed
beneficially owned by Mr. Spraggins under Rule 13d-3 under the Exchange
Act.
(f) Reflects 10,000 shares of Class A Common Stock issuable upon exercise of
stock options beneficially owned by Mr. Billingsley, which shares are
deemed beneficially owned by Mr. Billingsley under Rule 13d-3 under the
Exchange Act.
(g) Includes (i) 2,500 shares beneficially owned by BF Capital, Inc. and (ii)
111,000 shares beneficially owned by Hilliard Lyons Trust Co. Trustee Dale
Boden and Charles Boden Irrevocable T/U/A dated July 21, 1993, with respect
to which Mr. Boden is a beneficiary. Mr. Boden is the majority shareholder
of BF Capital, Inc. and, consequently, is deemed to beneficially own under
Rule 13d-3 under the Exchange Act all of the shares beneficially owned by
the Trust.
(h) The address of Mr. Calhoun is c/o Clipper Capital Partners, L.P., 12 East
49th Street, New York, New York 10017.
(i) Reflects shares beneficially owned by Clipper Capital Associates, L.P.
("CCA"), Clipper/Merchant Partners, L.P. and Clipper Equity Partners I,
L.P. (whose address is 12 East 49th Street, New York, New York 10017),
Clipper/Merban, L.P. ("Merban") and Clipper/European Re, L.P. (whose
address is c/o CITCO, De Ruyterkade,
78
<PAGE> 83
62, P.O. Box 812, Curacao, Netherlands Antilles) and CS First Boston
Merchant Investments 1995/96, L.P. ("Merchant") (whose address is 55 East
52nd Street, New York, New York 10055).
(j) CCA is the general partner of all of the Clipper Group partnerships other
than Merchant. The general partner of CCA is Clipper Capital Associates,
Inc. ("CCI"), and Mr. Calhoun is the sole stockholder and a director of
CCI. Clipper, an affiliate of Mr. Calhoun, has sole voting and investment
power with respect to the shares of Class A Common Stock beneficially owned
by Merchant. As a result, each of Mr. Calhoun, CCA and CCI is deemed to
beneficially own all shares of Class A Common Stock beneficially owned by
the Clipper Group (other than Merchant), and Mr. Calhoun is deemed to
beneficially own the shares of Class A Common Stock beneficially owned by
Merchant. It is anticipated that Merban will beneficially own shares of
Class A Common Stock representing approximately 5.5% of the outstanding
Class A Common Stock and that none of the other members of the Clipper
Group will beneficially own more than 5% of the outstanding Class A Common
Stock.
(k) Reflects 14,500 shares beneficially owned by Mr. Longino's spouse.
(l) Reflects 9,500 shares beneficially owned by Mr. Steven's spouse.
(m) Merchant Capital, Inc. ("Merchant Capital"), an affiliate of CS First
Boston Corporation, is the general partner of Merchant and the 99% limited
partner of Clipper/Merchant Partners, L.P. CS Holding, an affiliate of CS
First Boston Corporation, is the indirect 99% limited partner of Merban. CS
First Boston Corporation acted as the Initial Purchaser in the Offering.
None of Merchant, Merchant Capital, CS First Boston Corporation and CS
Holding is an affiliate of Clipper or CCA.
(n) Grayward Company's address is c/o Third National Bank, P.O. Box 305110,
Nashville, Tennessee 37230. Grayward Company is a trust of which Third
National Bank serves as trustee. As trustee, Third National Bank is deemed
to beneficially own under Rule 13d-3 under the Exchange Act all of the
shares beneficially owned by Grayward Company.
(o) The address of Felker Investments, Ltd. is c/o G. Stephen Felker, 506 South
Broad Street, Monroe, Georgia 30655.
(p) The address of the Avondale Mills, Inc. Associate Profit Sharing and
Savings Plan (the "Plan") is c/o Wachovia Bank of North Carolina, N.A.,
P.O. Box 3099, Winston-Salem, N.C. 27150. Wachovia Bank of North Carolina,
N.A., serves as trustee for the Plan and, as such, is deemed to
beneficially own under Rule 13d-3 under the Exchange Act all of the shares
beneficially owned by the Plan.
CERTAIN TRANSACTIONS
C. Linden Longino, Jr., a director of the Company, is an officer of
SunTrust Bank, Atlanta. The Company and SunTrust Bank, Atlanta are parties to
five letter of credit agreements relating to industrial revenue bonds issued in
connection with certain of the Company's facilities. See
"Management -- Compensation Committee Interlocks and Insider Participation".
Harry C. Howard, a director of the Company, is a former partner of the law
firm of King & Spalding. Mr. Howard retired from King & Spalding as of January
1, 1993. King & Spalding has for many years provided legal services to the
Company and is providing certain legal services to the Company in connection
with the Offering. See "Legal Matters".
John P. Stevens, a director of the Company, is a former executive officer
of Wachovia. The Company maintains the New Credit Facility, under which the
Company has aggregate borrowing availability of $225 million with a syndicate of
banks, including Wachovia, for which Wachovia served as an agent, pursuant to a
loan agreement dated April 29, 1996. See "Management -- Compensation Committee
Interlocks and Insider Participation". The Company believes that its bank credit
facilities, including the New Credit Facility, have been on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable facilities with other borrowers. See "Management's
Discussion and Analysis of Financial Position and Results of Operations -- The
Company -- Liquidity and Capital Resources".
Robert B. Calhoun, a director of the Company, is an affiliate of certain of
the investors in the Equity Private Placement. As a result, Mr. Calhoun is
deemed to beneficially own the 2,222,223 shares of Class A Common Stock of
Avondale Incorporated that were purchased by the investors. In addition, Mr.
Calhoun is an affiliate of Clipper, to which the Company paid a $600,000 closing
fee in connection with the Equity Private Placement.
79
<PAGE> 84
DESCRIPTION OF CERTAIN INDEBTEDNESS
THE NEW CREDIT FACILITY
The following is a summary of the material terms and conditions of the New
Credit Facility. This summary does not purport to be a complete description of
the New Credit Facility and is subject to its detailed provisions and various
documents entered into in connection with the New Credit Facility.
The New Credit Facility consists of a five-year revolving credit facility
of up to $225 million. Borrowings under the New Credit Facility consist of
revolving loans to be provided by the Lenders ("Revolver Loans") and up to $5
million of revolving swing loans to be provided by Wachovia ("Swing Revolver
Loans").
Interest accrues on Revolver Loans (i) at the Company's option at either
LIBOR (adjusted for any reserves) plus a specified margin ranging from 0.75% to
1.75% or the base rate, which is the higher of Wachovia's prime rate and the
overnight federal funds rate plus 0.50% (the "Base Rate"), or (ii) if the
Company and the Lenders agree, at the "set" rate, which shall be an interest
rate agreed to by the Company and the Lenders at the time such Revolver Loan is
made. Swing Revolver Loans bear interest at the Base Rate.
The aggregate commitment under the New Credit Facility will be reduced by
an amount equal to the net proceeds from certain specified asset sales
(including accounts receivable sold pursuant to the Receivables Securitization
Facility). The Company may terminate or reduce the amount available under the
New Credit Facility to the extent such amounts are unused in certain minimum
amounts.
Under the New Credit Facility, the Company paid certain structuring fees to
Wachovia and First Chicago upon the closing. In addition, the Company paid
certain arrangement and funding fees on the closing date and will pay certain
annual administration fees.
The New Credit Facility is secured by a security interest in substantially
all of the Company's assets (including the assets acquired pursuant to the
Graniteville Acquisition) and is guaranteed by Avondale Incorporated.
The New Credit Facility contains a number of significant covenants that,
among other things, will restrict the ability of the Company to dispose of
assets, incur additional indebtedness, repay other indebtedness, pay dividends,
enter into certain investments or acquisitions, repurchase or redeem capital
stock, engage in mergers or consolidations, create liens, or engage in certain
transactions with subsidiaries and affiliates and otherwise restrict corporate
activities. In addition, under the New Credit Facility, the Company is required
to comply with specified financial ratios and tests, including a fixed charge
coverage ratio, a leverage ratio and ratios relating to cash flow.
THE RECEIVABLES SECURITIZATION FACILITY
The following is a summary of certain terms and conditions of the
Receivables Securitization Facility. This summary does not purport to be a
complete description of the Receivables Securitization Facility and is subject
to its detailed provisions and various documents entered into in connection with
the Receivables Securitization Facility, which have been filed as exhibits to
the Registration Statement of which this Prospectus forms a part.
The Company and First Chicago have entered into an agreement whereby First
Chicago has provided to the Company, through a special purpose vehicle
administered by it, the Receivables Securitization Facility of up to $120
million for the securitization of certain trade receivables (the "Receivables")
originated by the Company. The Company acts as the initial servicer for the
Receivables. The Company received $104.0 million in proceeds under the
Receivables Securitization Facility concurrently with the consummation of the
Offering.
The Company transferred the Receivables to a newly-established,
wholly-owned, limited-purpose subsidiary of the Company (the "Receivables
Company"), which sold the Receivables to a trust (the "Trust"). The Trust issued
variable funding certificates to lending or financial institutions or other
investors evidencing undivided interests in the assets of the Trust (the
"Certificates") in an aggregate principal amount
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of $104.0 million. The Receivables Securitization Facility permits draws and
repayments on a revolving basis prior to May 1, 2001 or such earlier time as
certain events occur (the "Amortization Commencement Date"). The Certificates,
which represent beneficial interests in the Trust, entitle the holders thereof
to (i) receipt of collections from the Receivables, (ii) all rights of the
Company or the Receivables Company in goods the sale of which gave rise to the
Receivables, (iii) all collateral and other arrangements supporting the
Receivables, (iv) all rights to proceeds of any of the foregoing held in
lock-boxes and bank accounts of the Company or the Receivables Company, (v)
rights and interests of the Receivables Company under the documents for the
Receivables Securitization Facility and (vi) all collections and other proceeds
of the assets described above. The Certificates represent beneficial interests
in the Trust only, and do not represent obligations or interests in, and are not
guaranteed or insured by, the Receivables Company, the Company or Avondale
Incorporated.
The rate of interest on the Receivables Securitization Facility is the
Eurodollar rate (adjusted for any reserves) plus 0.625% or First Chicago's
alternate base rate. A commitment fee calculated on the unused portion of the
Receivables Securitization Facility is payable quarterly by the Company,
accruing from the closing date. The final maturity of the Certificates is
expected to occur six months after the Amortization Commencement Date. All
collections attributable to the Certificates will be set aside commencing on the
Amortization Commencement Date to repay the Certificates in full. Amounts set
aside will be applied on a monthly basis to repay the Certificates in full.
In connection with the Receivables Securitization Facility, the Company
paid (or will pay, as the case may be) to First Chicago Capital Markets, Inc.
("FCCM"), an affiliate of First Chicago, certain commitment fees relating to the
Receivables Securitization Facility on the closing date and, subject to certain
conditions, on the sixth month anniversary of the closing date.
The Receivables Securitization Facility contains covenants, representations
and warranties customary for such facilities and consistent with those that
First Chicago reasonably believes are required to obtain an "A" rating from the
rating agencies. Financial covenants are not included in the documentation
relating to the Receivables Securitization Facility nor are any provisions
relating to cross defaults to any other obligations of the Company.
The Company has engaged FCCM as its exclusive financial advisor to assist
in structuring and documenting a receivables securitization facility (the
"Replacement Receivables Facility") which will, if entered into, replace the
Receivables Securitization Facility. It is contemplated that the financing
and/or sale of receivables for the Replacement Receivables Facility would be
obtained through (i) the issuance of rated medium-term certificates of
beneficial interest or rated medium-term notes backed by the Receivables (the
"Replacement Certificates"), (ii) the sale of rated participation interests in
the Receivables (the "Participations"), and/or (iii) any other form of
securitization backed by the Receivables (the "Alternative Receivables Backed
Instruments" and, together with the Replacement Certificates and the
Participations, the "Receivables Backed Instruments"). The Receivables Backed
Instruments may be issued either by the Receivables Company, the Trust or by
another newly-formed, special purpose entity or entities (a "Special Purpose
Entity") established for the sole purpose of issuing the Receivables Backed
Instruments and purchasing or being made a transferee of the Receivables, or
interests in the Receivables, from the Receivables Company and/or making loans
to the Receivables Company secured by the Receivables.
The size of the Replacement Receivables Facility will be up to
approximately $125 million, or such other amount as FCCM and the Company deem to
be reasonably practicable (the "Program Amount").
FCCM has been engaged, subject to certain conditions, to serve as the
exclusive placement agent or sole manager to place any securities and/or
Alternative Receivables Backed Instruments issued in connection with the
Replacement Receivables Facility. FCCM is not committed to act as an underwriter
or placement agent in connection with any offering or sale of securities of the
Company. The Company will pay to FCCM certain fees, upon the execution of
definitive documentation in connection with the Replacement Receivables
Facility.
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DESCRIPTION OF THE NOTES
GENERAL
The New Notes are to be issued under the Indenture, dated as of April 23,
1996 (the "Indenture"), among the Company, Avondale Incorporated and The Bank of
New York, as Trustee (the "Trustee"). The form and terms of the New Notes are
identical in all material respects to the form and terms of the Old Notes,
except that the New Notes will be registered under the Securities Act and,
therefore, will not bear legends restricting transfer thereof. The New Notes
will evidence the same debt as the Old Notes and will be treated as a single
class under the Indenture with any Old Notes that remain outstanding. The Old
Notes and New Notes are herein collectively referred to as the "Notes".
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of which Indenture and the form of Notes have been filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
The following summary of certain provisions of the Indenture does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee, at The Bank of New York, 101
Barclay Street, Floor 21W, New York, New York 10286), except that, at the option
of the Company, payment of interest may be made by check mailed to the address
of the Holders as such address appears in the Note register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
shall be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes will be unsecured senior subordinated obligations of the Company,
limited to $125 million aggregate principal amount, and will mature on May 1,
2006. The Notes will bear interest at the rate per annum shown on the cover page
hereof from the Issue Date, or from the most recent date to which interest has
been paid or provided for, payable semiannually to Holders of record at the
close of business on the April 15 or October 15 immediately preceding the
interest payment date on May 1 and November 1 of each year, commencing November
1, 1996. The Company will pay interest on overdue principal at 1% per annum in
excess of such rate, and it will pay interest on overdue installments of
interest at such higher rate to the extent lawful. Interest on the Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
The interest rate on the Notes is subject to increase in certain
circumstances if the Company does not file a registration statement relating to
the Registered Exchange Offer or if the registration statement is not declared
effective on a timely basis or if certain other conditions are not satisfied,
all as further described under "-- Registered Exchange Offer; Registration
Rights".
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Company prior to May 1, 2001. Thereafter, the
Notes will be redeemable, at the Company's option, in whole or in part, at any
time or from time to time, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's registered address, at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the redemption date (subject to the right of Holders
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of record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on May
1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------------------------------------------------------------------ ----------
<S> <C>
2001.............................................................. 105.125%
2002.............................................................. 103.417
2003.............................................................. 101.709
2004 and thereafter............................................... 100.000
</TABLE>
In addition, at any time and from time to time prior to May 1, 1999, the
Company may redeem in the aggregate up to $25 million principal amount of the
Notes with the proceeds of one or more Public Equity Offerings following which
there is a Public Market (provided that if the Public Equity Offering is a
public offering of any class of common stock of Parent, a portion of the net
cash proceeds thereof equal to the amount required to redeem any such Notes is
contributed to the equity capital of the Company), at a redemption price
(expressed as a percentage of principal amount) of 110% plus accrued interest to
the redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least $100 million aggregate principal amount of the
Notes must remain outstanding after each such redemption.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating 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.
RANKING
The indebtedness evidenced by the Notes will be senior subordinated,
unsecured obligations of the Company. The payment of the principal of, premium
(if any) and interest on the Notes is subordinate in right of payment, as set
forth in the Indenture, to the prior payment in full of all Senior Indebtedness,
whether outstanding on the Issue Date or thereafter incurred, including the
Company's obligations under the New Credit Facility.
As of May 24, 1996, the Company's Senior Indebtedness was approximately
$193.4. In addition, the Notes will be effectively subordinated to all
obligations of any subsidiaries of the Company as may exist from time to time,
including any obligation of a Receivables Subsidiary under the Receivables
Securitization Facility. Although the Indenture contains limitations on the
amount of additional Indebtedness that the Company may incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in any
case, such Indebtedness may be Senior Indebtedness. See "-- Certain
Covenants -- Limitation on Indebtedness".
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not Incur, directly or indirectly, any Indebtedness that is subordinate or
junior in ranking in right of payment to its Senior Indebtedness unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in
right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is
not deemed to be subordinated or junior to Secured Indebtedness merely because
it is unsecured.
Notwithstanding anything herein to the contrary, the Company may not pay
principal of, premium (if any) or interest on the Notes or make any deposit
pursuant to the provisions described under "-- Defeasance" below and may not
repurchase, redeem or otherwise retire any Notes (collectively, "pay the Notes")
if (i) any Designated Senior Indebtedness is not paid when due or (ii) any other
default on Designated Senior Indebtedness occurs and the maturity of such
Designated Senior Indebtedness is accelerated in accordance
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with its terms unless, in either case, the default has been cured or waived and
any such acceleration has been rescinded or such Designated Senior Indebtedness
has been paid in full. However, the Company may pay the Notes without regard to
the foregoing if the Company and the Trustee receive written notice approving
such payment from the Representative of the Designated Senior Indebtedness with
respect to which either of the events set forth in clause (i) or (ii) of the
immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the second preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because a Representative of the holders of such Designated Senior Indebtedness
has notified the Trustee that the default giving rise to such Blockage Notice is
no longer continuing or (iii) because such Designated Senior Indebtedness has
been repaid in full). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the first sentence of this
paragraph), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, the Company may resume payments on the Notes after the end
of such Payment Blockage Period. The Notes shall not be subject to more than one
Payment Blockage Period in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness will
be entitled to receive payment in full of such Senior Indebtedness before the
Noteholders are entitled to receive any payment, and until the Senior
Indebtedness is paid in full, any payment or distribution to which Noteholders
would be entitled but for the subordination provisions of the Indenture will be
made to holders of such Senior Indebtedness as their interests may appear. If a
distribution is made to Noteholders that, due to the subordination provisions,
should not have been made to them, such Noteholders are required to hold it in
trust for the holders of Senior Indebtedness and pay it over to them as their
interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of Designated Senior
Indebtedness or the Representative of such holders of the acceleration.
By reason of the subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness may recover less,
ratably, than holders of Senior Indebtedness and may recover more, ratably, than
the Noteholders.
The terms of the subordination provisions described above will not apply to
payment from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described under "-- Defeasance".
GUARANTY
Parent, as primary obligor and not merely as surety, will irrevocably and
unconditionally guarantee (the "Guaranty") on a senior subordinated basis the
performance and punctual payment when due, whether at Stated Maturity, by
acceleration or otherwise, of all obligations of the Company under the Indenture
and the Notes, whether for principal of or interest on the Notes, expenses,
indemnification or otherwise (all such obligations guaranteed by Parent being
herein called the "Guaranteed Obligations"). Parent will agree to pay, on a
senior subordinated basis and in addition to the amount stated above, any and
all expenses (including
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reasonable counsel fees and expenses) incurred by the Trustee or the Holders in
enforcing any rights under the Guaranty with respect to Parent. Parent has no
material assets other than the common stock of the Company.
The obligations of Parent under the Guaranty are senior subordinated
obligations. As such, the rights of Holders to receive payment by Parent
pursuant to the Guaranty will be subordinate in right of payment to the rights
of holders of Senior Indebtedness of Parent. As of May 24, 1996, Parent had
outstanding $193.4 million of Senior Indebtedness, including its obligations
under the New Credit Facility. The Indenture does not limit the incurrence of
Indebtedness by Parent.
The Guaranty is a continuing guarantee and shall (a) remain in full force
and effect until payment in full of all the Guaranteed Obligations, (b) be
binding upon Parent and (c) enure to the benefit of and be enforceable by the
Trustee, the Holders and their successors, transferees and assigns.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the New Notes sold will be issued in the form of
a Global Note. The Global Note will be deposited with, or on behalf of, the
Depository and registered in the name of the Depository or its nominee. Except
as set forth below, the Global Note may be transferred, in whole and not in
part, only to the Depository or another nominee of the Depository. Investors may
hold their beneficial interests in the Global Note directly through the
Depository if they have an account with the Depository or indirectly through
organizations which have accounts with the Depository.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934 (the "Exchange Act"). The Depository was created to hold securities
of institutions that have accounts with the Depository ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depository's participants include securities
brokers and dealers (which may include the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Upon the issuance of the Global Note, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Note to the accounts of participants. Ownership of
beneficial interests in the Global Note will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests in the Global Note will be shown on, and the transfer of those
ownership interests will be effected only through, records maintained by the
Depository (with respect to participants' interest) and such participants (with
respect to the owners of beneficial interests in the Global Note other than
participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to transfer or pledge
beneficial interests in the Global Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related New Notes for
all purposes of such New Notes and the Indenture. Except as set forth below,
owners of beneficial interests in the Global Note will not be entitled to have
the New Notes represented by the Global Note registered in their names, will not
receive or be entitled to receive physical delivery of certificated Notes in
definitive form and will not be considered to be the owners or holders of any
New Notes under the Global Note. The Company understands that under existing
industry practice, in the event an owner of a beneficial interest in the Global
Note desires to take any action that the Depository, as the holder of the Global
Note, is entitled to take, the Depository would authorize the participants to
take such action, and that the participants would authorize beneficial owners
owning through such participants to take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
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<PAGE> 90
Payment of principal of and interest on New Notes represented by the Global
Note registered in the name of and held by the Depository or its nominee will be
made to the Depository or its nominee, as the case may be, as the registered
owner and holder of the Global Note.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depository or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Note held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Note for any Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Note owning through such participants.
Unless and until it is exchanged in whole or in part for certificated New
Notes in definitive form, the Global Note may not be transferred except as a
whole by the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
The New Notes represented by the Global Note are exchangeable for
certificated New Notes in definitive form of like tenor as such Notes in
denominations of U.S. $1,000 and integral multiples thereof if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for the Global Note or if at any time the Depository ceases to be a
clearing agency registered under the Exchange Act, (ii) the Company in its
discretion at any time determines not to have all of the Notes represented by
the Global Note or (iii) a default entitling the holders of the Notes to
accelerate the maturity thereof has occurred and is continuing. Any New Note
that is exchangeable pursuant to the preceding sentence is exchangeable for
certificated New Notes issuable in authorized denominations and registered in
such names as the Depository shall direct. Subject to the foregoing, the Global
Note is not exchangeable, except for a Global Note of the same aggregate
denomination to be registered in the name of the Depository or its nominee.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS
In connection with the original issuance and sale of the Old Notes, the
Initial Purchaser and its assignees became entitled to the benefits of the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
the Company agreed that it would at its cost, (i) within 45 days after the date
of original issue of the Notes (or, if such 45th day is not a Business Day, the
first business day thereafter), file the Registration Statement of which this
Prospectus forms a part (the "Exchange Offer Registration Statement") with the
SEC with respect to a registered offer to exchange the Old Notes for the New
Notes and (ii) use its reasonable efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act within
150 days after the date of original issue of the Old Notes (or, if such 150th
day is not a Business Day, the first business day thereafter). Upon the
effectiveness of the Exchange Offer Registration Statement, the Company will
offer the New Notes in exchange for surrender of the Old Notes. The Company will
keep the Exchange Offer open for not less than 20 business days (or longer if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the holders of the Notes. For each Old Note surrendered to the Company
pursuant to the Exchange Offer, the holder of such Old Note will receive a New
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Note having a principal amount equal to that of the surrendered Note. Interest
on each New Note will accrue from the last interest payment date on which
interest was paid on the Old Note surrendered in exchange thereof or, if no
interest has been paid on such Old Note, from the date of its original issue.
Under existing SEC interpretations, the New Notes would be freely transferable
by holders other than affiliates of the Company after the Exchange Offer without
further registration under the Securities Act if the holder of the New Notes
represents that it is acquiring the New Notes in the ordinary course of its
business, that it has no arrangement or understanding with any person to
participate in the distribution of the New Notes and that it is not an affiliate
of the Company, as such terms are interpreted by the SEC; provided, however,
that broker-dealers ("Participating Broker-Dealers") receiving New Notes in the
Exchange Offer will have a prospectus delivery requirement with respect to
resales of such New Notes. The SEC has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to New Notes (other than a resale of an unsold allotment from the original sale
of the Notes) with the prospectus contained in the Exchange Offer Registration
Statement. Under the Registration Rights Agreement, the Company is required to
allow Participating Broker-Dealers and other persons, if any, with similar
prospectus delivery requirements to use the prospectus contained in the Exchange
Offer Registration Statement in connection with the resale of such Exchange
Notes.
A Holder of Old Notes (other than certain specified holders) who wishes to
exchange such Old Notes for New Notes in the Registered Exchange Offer will be
required to represent that any New Notes to be received by it will be acquired
in the ordinary course of its business and that at the time of the commencement
of the Registered Exchange Offer it has no arrangement or understanding with any
person to participate in the distribution (within the meaning of the Securities
Act) of the Exchange Notes and that it is not an "affiliate" of the Company, as
defined in Rule 405 of the Securities Act, or if it is an affiliate, that it
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
In the event that applicable interpretations of the staff of the SEC do not
permit the Company to effect the Exchange Offer, or if for any other reason the
Exchange Offer is not consummated within 180 days of the date of the
Registration Rights Agreement, or if the Initial Purchaser so requests with
respect to Notes not eligible to be exchanged for New Notes in the Exchange
Offer, or if any holder of Old Notes is not eligible to participate in the
Exchange Offer or does not receive freely tradeable New Notes in the Exchange
Offer, the Company will, at its cost, (a) as promptly as practicable, file a
registration statement (a "Shelf Registration Statement") covering resales of
the Old Notes or the New Notes, as the case may be, (b) use its reasonable
efforts to cause the Shelf Registration Statement to be declared effective under
the Securities Act and (c) keep the Shelf Registration Statement effective until
the earlier of (i) the time when the Notes covered by the Shelf Registration
Statement can be sold pursuant to Rule 144 without any limitations under clauses
(c), (e), (f) and (h) of Rule 144 and (ii) three years from the Issue Date. The
Company will, in the event a Shelf Registration Statement is filed, among other
things, provide to each holder for whom such Shelf Registration Statement was
filed copies of the prospectus which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement has
become effective and take certain other actions as are required to permit
unrestricted resales of the Notes or the Exchange Notes, as the case may be. A
holder selling such Old Notes or New Notes pursuant to the Shelf Registration
Statement generally would be required to be named as a selling security holder
in the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such holder (including
certain indemnification obligations).
If (i) by June 13, 1996, neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement has been filed with the SEC; (ii) by
October 28, 1996, neither the Registered Exchange Offer is consummated nor the
Shelf Registration Statement is declared effective; or (iii) after either the
Exchange Offer Registration Statement or the Shelf Registration Statement is
declared effective, such Registration Statement thereafter ceases to be
effective or usable (subject to certain exceptions) in connection with resales
of Notes or Exchange Notes in accordance with and during the periods specified
in the Registration Rights Agreement (each such event referred to in clauses (i)
through (iii) a "Registration Default"), additional interest will accrue on the
Notes and the Exchange Notes at the rate of 0.50% per annum from and including
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the date on which any such Registration Default shall occur to but excluding the
date on which all Registration Defaults have been cured. Such interest is
payable in addition to any other interest payable from time to time with respect
to the Notes and the Exchange Notes. At all other times, the Notes will bear
interest at the rate set forth on the cover page hereof.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date):
(i) prior to the earlier to occur of (A) the first public offering of
any class of common stock of Parent or (B) the first public offering of any
class of common stock of the Company, the Permitted Holders cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of a majority of the total voting power of
the Voting Stock of the Company (for purposes of this clause (i) and clause
(ii) below, the Permitted Holders shall be deemed to beneficially own any
Voting Stock of the Company or any other corporation (in any such case, the
"specified corporation") held by Parent or any other corporation (in any
such case, the "parent corporation") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, in the aggregate
a majority of the total voting power of the Voting Stock of the parent
corporation);
(ii) on or after any such first public offering of common stock
referred to in clause (i) above, any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in clause
(i) above, except that for purposes of this clause (ii) such person shall
be deemed to have "beneficial ownership" of all shares that any such person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 40%
of the total voting power of the Voting Stock of the Company; provided,
however, that the Permitted Holders beneficially own (as defined in clause
(i) above), directly or indirectly, in the aggregate a lesser percentage of
the total voting power of the Voting Stock of the Company than such other
person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors (for the purposes of this clause (ii), such other person shall be
deemed to beneficially own any Voting Stock of a specified corporation held
by a parent corporation, if such other person is the beneficial owner (as
defined in this clause (ii)), directly or indirectly, of more than 40% of
the total voting power of the Voting Stock of such parent corporation and
the Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
corporation); or
(iii) (A) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of the Company was
approved by a vote of 66 2/3% of the directors of the Company then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors then in
office and (B) the Permitted Holders cease to be the beneficial owners (as
defined in clause (ii) above), directly or indirectly, of a majority of the
total outstanding Voting Stock of Parent or the Company or cease to have
the ability, by voting power, contract or otherwise, to elect or designate
for election a majority of the Board of Directors of Parent or the Company.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Company
to purchase such Holder's Notes at a purchase price in cash equal to 101% of the
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principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest on the relevant interest payment date); (2) the
circumstances and relevant facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control); (3) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (4) the instructions determined by the
Company, consistent with the covenant described hereunder, that a Holder must
follow in order to have its Notes purchased.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company to incur additional Indebtedness are contained in the
covenant described under "-- Certain Covenants -- Limitation on Indebtedness".
Such restrictions can only be waived with the consent of the holders of a
majority in principal amount of the Notes then outstanding. Except for the
limitations contained in such covenants, however, the Indenture will not contain
any covenants or provisions that may afford holders of the Notes protection in
the event of a highly leveraged transaction.
The New Credit Facility will prohibit (unless permitted by the requisite
percentage of lenders thereunder) the Company from purchasing any Notes, or
making any deposit with the Trustee pursuant to the provisions described under
"-- Defeasance", so long as any obligations of the Company remain outstanding
under the New Credit Facility and the commitments under the New Credit Facility
have not been terminated. The New Credit Facility will also provide that the
occurrence of certain change of control events with respect to the Company will
constitute a default thereunder. 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 the lenders under the New Credit Facility 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 a default under
the Credit Agreement. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes.
Future Senior Indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
holders of Notes following the occurrence of a Change of Control may be limited
by the Company's then existing financial resources. There can be no assurance
that sufficient funds will be available when necessary to make any required
repurchases. The provisions under the Indenture relative to the Company's
obligation to make an offer to repurchase the Notes as a result of a Change of
Control may be waived or modified with the written consent of the holders of a
majority in principal amount of the Notes then outstanding.
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CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company shall not, and shall not
permit any Restricted Subsidiary to, Incur, directly or indirectly, any
Indebtedness unless, on the date of such Incurrence, the Consolidated Coverage
Ratio exceeds 2.0 to 1.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness: (1)
Indebtedness Incurred by the Company pursuant to the New Credit Facility or any
other revolving credit arrangement; provided, however, that, after giving effect
to any such Incurrence, the aggregate principal amount of such Indebtedness then
outstanding does not exceed the greater of $325 million (less the then
outstanding principal amount of Indebtedness arising under any Receivables
Program of the Company or any Restricted Subsidiary, other than Indebtedness
described in clause (2) below) and the sum of (i) 50% of the book value of the
inventory of the Company and its Restricted Subsidiaries and (ii) 85% of the
book value of the accounts receivable of the Company and its Restricted
Subsidiaries (other than accounts receivable subject to any Receivables Program
of the Company or any Restricted Subsidiary), in each case determined in
accordance with GAAP; (2) Indebtedness of the Company owed to and held by a
Wholly Owned Subsidiary and Indebtedness of a Wholly Owned Subsidiary owed to
and held by the Company or a Wholly Owned Subsidiary; provided, however, that
any subsequent issuance or transfer of any Capital Stock which results in any
such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of such Indebtedness (other than to the Company or a Wholly
Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of
such Indebtedness by the issuer thereof; (3) the Notes; (4) Indebtedness
outstanding on the Issue Date (other than Indebtedness described in clause (1),
(2) or (3) of this paragraph (b)); (5) Refinancing Indebtedness in respect of
Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (3) or (4)
or this clause (5); (6) Hedging Obligations consisting of Interest Rate or
Currency Protection Agreements directly related to Indebtedness permitted to be
Incurred by the Company pursuant to the Indenture; (7) Indebtedness Incurred by
a Receivables Subsidiary, other than Indebtedness described in clause (2) above,
in an amount not exceeding 95% of the aggregate unpaid balance of the
Receivables and Related Assets of such Receivables Subsidiary at the time of
such Incurrence pursuant to a Receivables Program; and (8) Indebtedness Incurred
by the Company in an aggregate principal amount which, together with all other
Indebtedness of the Company outstanding on the date of such Incurrence (other
than Indebtedness permitted by clauses (1) through (7) above or paragraph (a))
does not exceed $70 million.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are
used, directly or indirectly, to Refinance any Subordinated Obligations unless
such Indebtedness shall be subordinated to the Notes to at least the same extent
as such Subordinated Obligations.
(d) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (1) Indebtedness Incurred under the
New Credit Facility on or prior to the date of the Indenture shall be treated as
Incurred pursuant to clause (1) of paragraph (b) above and (2) Guarantees, Liens
or obligations with respect to letters of credit supporting Indebtedness
otherwise included in the determination of such particular amount shall not be
included. For purposes of determining compliance with the foregoing covenant,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above.
(e) Notwithstanding paragraphs (a) and (b) above, the Company shall not
Incur (i) any Indebtedness if such Indebtedness is subordinate or junior in
ranking in any respect to any Senior Indebtedness, unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior
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Subordinated Indebtedness or (ii) any Secured Indebtedness that is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with such Secured Indebtedness for so long
as such Secured Indebtedness is secured by a Lien.
Limitation on Restricted Payments. (a) The Company shall not, and shall
not permit any Restricted Subsidiary, directly or indirectly, to make a
Restricted Payment if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment: (1) a Default shall have occurred and be
continuing (or would result therefrom); (2) the Company or such Restricted
Subsidiary is not able to Incur an additional $1.00 of Indebtedness pursuant to
paragraph (a) of the covenant described under " -- Limitation on Indebtedness";
or (3) the aggregate amount of such Restricted Payment and all other Restricted
Payments since the Issue Date would exceed the sum of: (A) 50% of the
Consolidated Net Income accrued on a cumulative basis during the period (treated
as one accounting period) beginning on the first day of the fiscal quarter
beginning immediately following the Issue Date to the end of the most recent
fiscal quarter ending at least 45 days prior to the date of such Restricted
Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100%
of such deficit); (B) the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of, or as a capital contribution in respect of, its
Capital Stock (other than Disqualified Stock) subsequent to the Issue Date
(other than an issuance or sale to a Subsidiary of the Company and other than an
issuance or sale to an employee stock ownership plan or to a trust established
by the Company or any of its Subsidiaries for the benefit of their employees);
(C) the aggregate Net Cash Proceeds received by the Company from the issuance or
sale of its Capital Stock (other than Disqualified Stock) subsequent to the
Issue Date to any employee stock ownership plan or to a trust established by the
Company or any of its Restricted Subsidiaries for the benefit of their employees
to the extent that any such Net Cash Proceeds are equal to an increase in the
Consolidated Net Worth of the Company resulting from principal repayments made
by such employee stock ownership plan or trust with respect to Indebtedness
Incurred by it to finance the purchase of such Capital Stock; (D) the amount by
which Indebtedness of the Company is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash, or the fair value of any other property,
distributed by the Company upon such conversion or exchange); (E) an amount
equal to the sum of (i) the net reduction in Investments in any Person resulting
from dividends, repayments of loans or advances or other transfers of assets, in
each case to the Company or any Restricted Subsidiary from such Person, and (ii)
the portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of an Unrestricted Subsidiary at the
time such Unrestricted Subsidiary is designated a Restricted Subsidiary;
provided, however, that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made (and treated
as a Restricted Payment) by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary; and (F) $10 million.
(b) The provisions of the foregoing paragraph (a) shall not prohibit: (i)
any purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, or capital contribution in respect of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital Stock issued or
sold to a Subsidiary of the Company or an employee stock ownership plan or to a
trust established by the Company or any of its Subsidiaries for the benefit of
their employees); provided, however, that (A) such purchase or redemption shall
be excluded in the calculation of the amount of Restricted Payments and (B) the
Net Cash Proceeds from such sale or capital contribution shall be excluded from
the calculation of amounts under clause (3)(B) of paragraph (a) above; (ii) any
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value of Subordinated Obligations made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Indebtedness of the Company
which is permitted to be Incurred pursuant to the covenant described under
"--Limitation on Indebtedness"; provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value
shall be excluded in the calculation of the amount of Restricted Payments; (iii)
dividends paid within 60 days after the date of declaration thereof if at such
date of declaration such dividend would have complied with this covenant;
provided, however, that at the time of payment of such dividend, no other
Default shall have occurred and be continuing (or result therefrom); provided
further, however, that such dividend shall be included in the calculation of the
amount of Restricted Payments;
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(iv) the repurchase of shares of, or options to purchase shares of, Capital
Stock (other than Preferred Stock) of Parent, the Company or any of its
Subsidiaries from employees, former employees, directors or former directors of
Parent, the Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors or their respective
estates), pursuant to the terms of the agreements (including employment
agreements) or plans (or amendments thereto) approved by the Board of Directors
of Parent or the Company, as the case may be, under which such individuals
purchase or sell or are granted the option or right to purchase or sell such
Capital Stock (other than Preferred Stock); provided, however, that the
aggregate amount of such repurchases shall not exceed $2 million in any calendar
year (excluding any such repurchases funded with the proceeds of any life
insurance policy or policies maintained by the Company or under which the
Company is the beneficiary); provided further, however, that such repurchases
shall be excluded in the calculation of the amount of Restricted Payments; (v)
dividends paid by the Company to Parent to be used by Parent to pay Federal,
state and local taxes payable by Parent and directly attributable to (or arise
as a result of) the operations of the Company and its Restricted Subsidiaries;
provided, however, that (A) the amount of such dividends shall not exceed the
amount that the Company and its Restricted Subsidiaries would be required to pay
in respect of such Federal, state and local taxes were the Company to pay such
taxes as a stand-alone taxpayer and (B) such dividends pursuant to this clause
(v) are used by Parent for such purposes within 20 days of the receipt of such
dividends by Parent; provided further, however, that such dividends shall be
excluded in the calculation of the amount of Restricted Payments; (vi) payments
or distributions to shareholders pursuant to appraisal rights in respect of up
to 10% of the Capital Stock of Parent or the Company required by law in
connection with a consolidation, merger or transfer of assets that complies with
the covenant described under "-- Merger and Consolidation" below; provided,
however, that any such payments or distributions shall be included in the
calculation of the amount of Restricted Payments; (vii) so long as no Default
has occurred and is continuing or would result therefrom, any purchase of any
fractional share of Capital Stock of Parent or the Company resulting from (A)
any dividend or other distribution on outstanding shares of Capital Stock that
is payable in shares of such Capital Stock (including any stock split or
subdivision of the outstanding Capital Stock of Parent or the Company), (B) any
combination of all of the outstanding shares of Capital Stock of Parent or the
Company, (C) any reorganization or consolidation of Parent or the Company in any
merger of Parent or the Company with or into any other Person or (D) the
conversion of any securities of Parent or the Company into shares of Capital
Stock of Parent or the Company; provided, however, that such purchases shall be
included in the calculation of the amount of Restricted Payments; and (viii)
Investments in an aggregate amount not to exceed $15 million in any Person
engaged primarily in a Related Business on the date of any such Investment;
provided, however, that such Investments shall be included in the calculation of
the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary (a) to pay dividends or make any other distributions on its Capital
Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to
the Company, (b) to make any loans or advances to the Company or (c) to transfer
any of its property or assets to the Company, except: (i) any encumbrance or
restriction pursuant to an agreement in effect at or entered into on the Issue
Date, including without limitation, under the New Credit Facility; (ii) any
encumbrance or restriction with respect to a Receivables Subsidiary pursuant to
a Receivables Program of such Receivables Subsidiary; provided that such
encumbrances and restrictions are customarily required by the institutional
sponsor or arranger at the time of entering into such Receivables Program in
similar types of documents relating to the purchase of similar receivables in
connection with the financing thereof; (iii) any encumbrance or restriction with
respect to a Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on
which such Restricted Subsidiary was acquired by the Company (other than
Indebtedness Incurred as consideration in, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on such
date; (iv) any encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred pursuant to an agreement referred to in
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clause (i), (ii) or (iii) of this covenant or this clause (iv) or contained in
any amendment to an agreement referred to in clause (i), (ii) or (iii) of this
covenant or this clause (iv); provided, however, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are no less favorable to the Noteholders than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in such agreements; (iv) any such encumbrance or restriction
consisting of customary nonassignment provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the lease or
the property leased thereunder; (v) in the case of clause (c) above,
restrictions contained in security agreements or mortgages securing Indebtedness
of a Restricted Subsidiary to the extent such restrictions restrict the transfer
of the property subject to such security agreements or mortgages; and (vi) any
restriction with respect to a Restricted Subsidiary imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
the Capital Stock or assets of such Restricted Subsidiary pending the closing of
such sale or disposition.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) the Company or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at least
equal to the fair market value (including as to the value of all non-cash
consideration) of the shares and assets subject to such Asset Disposition (which
fair market value shall be determined in good faith by the Board of Directors
for any transaction (or series of transactions) involving in excess of $500,000
and not involving solely a sale of equipment or other assets specifically
contemplated by the Company's capital expenditure budget previously approved by
the Board of Directors) and at least 75% of the consideration thereof received
by the Company or such Restricted Subsidiary is in the form of cash or cash
equivalents and (ii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such Restricted Subsidiary, as
the case may be) (A) first, to the extent the Company elects (or is required by
the terms of any Senior Indebtedness), to prepay, repay, redeem or purchase
Senior Indebtedness or Indebtedness (other than any Disqualified Stock) of a
Wholly Owned Subsidiary (in each case other than Indebtedness owed to the
Company or an Affiliate of the Company) within one year from the later of the
date of such Asset Disposition or the receipt of such Net Available Cash; (B)
second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), to the extent the Company elects, to
acquire Additional Assets within one year from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (C) third, subject
to paragraph (b) below, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to make an offer to
the holders of the Notes (and to holders of other Senior Subordinated
Indebtedness designated by the Company) to purchase Notes (and such other Senior
Subordinated Indebtedness) pursuant to and subject to the conditions contained
in the Indenture; and (D) fourth, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A), (B) and (C) to
(x) the acquisition by the Company or any Wholly Owned Subsidiary of Additional
Assets or (y) the prepayment, repayment or purchase of Indebtedness (other than
any Disqualified Stock) of the Company (other than Indebtedness owed to an
Affiliate of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or an Affiliate of the Company), in each case
within one year from the later of the receipt of such Net Available Cash and the
date the offer described in clause (b) below is consummated; provided, however,
that in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A), (C) or (D) above (other than such repayment or
prepayment of Indebtedness Incurred pursuant to clause (1) of paragraph (b) of
the covenant described under "-- Limitation on Indebtedness"), the Company or
such Restricted Subsidiary shall retire such Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased. Notwithstanding the
foregoing provisions of this paragraph, the Company and the Restricted
Subsidiaries shall not be required to apply any Net Available Cash in accordance
with this paragraph except to the extent that the aggregate Net Available Cash
from all Asset Dispositions in any period of twelve consecutive months which is
not applied in accordance with this paragraph exceeds $10 million. Pending
application of Net Available Cash pursuant to this covenant, such Net Available
Cash shall be invested in Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the assumption of Indebtedness of the Company or any
Restricted Subsidiary and the release of the Company or
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such Restricted Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of the
Notes (and other Senior Subordinated Indebtedness) pursuant to clause (a)(ii)(C)
above, the Company will be required to purchase Notes tendered pursuant to an
offer by the Company for the Notes (and other Senior Subordinated Indebtedness)
at a purchase price of 100% of their principal amount (without premium) plus
accrued but unpaid interest (or, in respect of such other Senior Subordinated
Indebtedness, such lesser price, if any, as may be provided for by the terms of
such Senior Subordinated Indebtedness) in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of Notes (and any other Senior
Subordinated Indebtedness) tendered pursuant to such offer is less than the Net
Available Cash allotted to the purchase thereof, the Company will be required to
apply the remaining Net Available Cash in accordance with clause (a)(ii)(D)
above. Notwithstanding anything to the contrary contained herein, the Company
shall not be required to make such an offer to purchase Notes (and other Senior
Subordinated Indebtedness) pursuant to this covenant if the Net Available Cash
available therefor is less than $15 million (which lesser amount shall be
carried forward for purposes of determining whether such an offer is required
with respect to any subsequent Asset Disposition).
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof
(1) are no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate, (2) if such Affiliate
Transaction involves an amount in excess of $500,000, (i) are set forth in
writing and (ii) have been approved by a majority of the disinterested members
of the Board of Directors and (3) if such Affiliate Transaction involves an
amount in excess of $10 million, have been determined by nationally recognized
investment banking or accounting firm having experience in such matters to be
fair, from a financial point of view, to the Company and its Restricted
Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under "-- Limitation on Restricted Payments"; (ii) 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 or similar employee benefit plans or arrangements approved by
the Board of Directors; (iii) the grant of stock options or similar rights to
employees and directors of the Parent or the Company pursuant to plans approved
by the Board of Directors, (iv) loans or advances to employees in the ordinary
course of business in accordance with the past practices of the Company or its
Restricted Subsidiaries, but in any event not to exceed $2.0 million in the
aggregate outstanding at any one time; (v) the payment of reasonable fees to
directors of the Parent or the Company and its Restricted Subsidiaries who are
not employees of the Company or its Restricted Subsidiaries; (vi) any Affiliate
Transaction between the Company and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries; and (vii) any Receivables Program of the Company or a
Restricted Subsidiary.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company shall not sell or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock except (i) to the Company or a Wholly Owned
Subsidiary or (ii) if, immediately after giving effect to
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such issuance, sale or other disposition, the Company and its Restricted
Subsidiaries would own less than 20% of the Voting Stock of such Restricted
Subsidiary and have no greater economic interest in such Restricted Subsidiary.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any Person, unless: (i)
the Company shall be the resulting, surviving or transferee Person or the
resulting, surviving or transferee Person (in either case, the "Successor
Company") shall be a Person organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and the
Successor Company (if not the Company) shall expressly assume, by an indenture
supplemental thereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Company
or any Restricted Subsidiary as a result of such transaction as having been
Incurred by such Successor Company or such Restricted Subsidiary at the time of
such transaction), no Default shall have occurred and be continuing, (iii)
immediately after giving effect to such transaction, the Successor Company would
be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a)
of the covenant described under "-- Limitation on Indebtedness"; (iv)
immediately after giving effect to such transaction, the Successor Company shall
have Consolidated Net Worth in an amount that is not less than the Consolidated
Net Worth of the Company prior to such transaction; and (v) the Company shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with the Indenture; provided, however,
that notwithstanding clauses (iii) and (iv) above, a Wholly Owned Subsidiary may
merge with or into the Company.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
SEC Reports. Notwithstanding that the Company may not be required to
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the SEC and provide the Trustee and
Noteholders with such annual reports and such information, documents and other
reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections;
provided, however, that so long as Parent is the Guarantor of the Notes (or the
Exchange Notes), the reports, information and other documents required to be
filed and provided as described hereunder may, at the Company's option, be filed
by and be those of Parent rather than the Company; provided further, however,
that in the event Parent conducts any business or holds any significant assets
other than the capital stock of the Company at the time of filing and providing
any such report, information or other document containing financial statements
of Parent, Parent shall include in such report, information or other document
summarized financial information (as defined in Rule 1-02(bb) of Regulation S-X
promulgated by the SEC) with respect to the Company.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Company to comply with its obligations under
" -- Certain Covenants -- Merger and Consolidation" above, (iv) the failure by
the Company to comply for 30 days after notice with any of its obligations in
the covenants described above under "Change of Control" (other than a failure to
purchase the Notes) or under "-- Certain Covenants" under "-- Limitation on
Indebtedness", "-- Limitation on Restricted Payments", "-- Limitation on
Restrictions on Distributions from Restricted Subsidiaries", "-- Limitation on
Sales of Assets and Subsidiary Stock" (other than a failure to purchase Notes),
"-- Limitation on Affiliate
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Transactions", "-- Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries" or "-- SEC Reports", (v) the failure by Parent or the
Company to comply for 60 days after notice with its other agreements contained
in the Indenture, (vi) Indebtedness of Parent, the Company or any Significant
Subsidiary is not paid within any applicable grace period after final maturity
or is accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $10 million (the
"cross acceleration provision"), (vii) certain events of bankruptcy, insolvency
or reorganization of Parent, the Company or a Significant Subsidiary (the
"bankruptcy provisions"), (viii) any judgment or decree for the payment of money
in excess of $10 million is rendered against Parent, the Company or a
Significant Subsidiary, remains outstanding for a period of 60 days following
such judgment and is not discharged, waived or stayed within 10 days after
notice (the "judgment default provision") or (ix) the Guaranty ceases to be in
full force and effect (other than in accordance with the terms of such Guaranty)
or Parent denies or disaffirms its obligations under the Guaranty. However, a
default under clauses (iv), (v) and (viii) will not constitute an Event of
Default until the Trustee or the holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing (other than an Event of
Default described in clause (vii) of the preceding paragraph with respect to the
Company), the Trustee or the holders of at least 25% in principal amount of the
outstanding Notes may declare the principal of and accrued but unpaid interest
on all the Notes to be due and payable. Upon such a declaration, such principal
and interest shall be due and payable immediately. If an Event of Default
described in clause (vii) of the preceding paragraph occurs and is continuing
with respect to the Company, the principal of and interest on all the Notes will
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder of a Note
may pursue any remedy with respect to the Indenture or the Notes unless (i) such
holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy, (iii) such holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder of a Note or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its trust officers determines that
withholding notice is not opposed to the interest of the holders of the Notes.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
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AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
holder of an outstanding Note affected thereby, no amendment may, among other
things, (i) reduce the amount of Notes whose holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or extend the Stated Maturity of any
Note, (iv) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "-- Optional
Redemption", (v) make any Note payable in money other than that stated in the
Note, (vi) impair the right of any holder of the Notes to receive payment of
principal of and interest on such holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's Notes, (vii) make any change in the amendment
provisions which require each holder's consent or in the waiver provisions,
(viii) make any change to the subordination provisions of the Indenture that
would adversely affect the Noteholders or (ix) make any change in the Guaranty
that would adversely affect the Noteholders.
Without the consent of any holder of the Notes, Parent, the Company and the
Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
Notes in addition to or in place of certificated Notes (provided that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code), to add guarantees with respect
to the Notes, to secure the Notes, to add to the covenants of the Company for
the benefit of the holders of the Notes or to surrender any right or power
conferred upon the Company, to make any change that does not adversely affect
the rights of any holder of the Notes or to comply with any requirement of the
SEC in connection with the qualification of the Indenture under the Trust
Indenture Act. However, no amendment may be made to the subordination provisions
of the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
their Representative) consents to such change.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under "Change of
Control" and under the covenants described under "-- Certain Covenants" (other
than the covenant described under "-- Merger and Consolidation"), the operation
of the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"-- Defaults" above and the limitations contained in clauses (iii) and (iv)
under "-- Certain Covenants -- Merger and Consolidation" (and clause (iii) of
the first paragraph under "-- Defaults" as it relates to clauses (iii) and (iv)
under "-- Certain Covenants -- Merger and Consolidation") above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
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defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "-- Defaults" above or because of the
failure of the Company to comply with clause (iii) or (iv) under "-- Certain
Covenants -- Merger and Consolidation" above. If the Company exercises its legal
defeasance option or its covenant defeasance option, Parent will be released
from all its obligations with respect to the Guaranty.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
CONCERNING THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
The Holders of a majority in principal amount of the 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 if an Event of Default occurs (and is
not 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 and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock), including, without limitation, land, machinery,
equipment, leasehold interests and improvements, in a Related Business; (ii) the
Capital Stock of a Person that becomes a Restricted Subsidiary as a result of
the acquisition of such Capital Stock by the Company or another Restricted
Subsidiary or (iii) Capital Stock constituting a minority interest in any Person
that at such time is a Restricted Subsidiary; provided, however, that any such
Restricted Subsidiary described in clauses (ii) or (iii) above is primarily
engaged in a Related Business.
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "-- Certain Covenants -- Limitation
on Restricted Payments", "-- Certain Covenants -- Limitation on Affiliate
Transactions" and "-- Certain Covenants -- Limitations on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
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"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of the Company or any Restricted Subsidiary or (iii) any
other assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary. Notwithstanding
the foregoing, the following shall not be deemed an "Asset Disposition" for
purposes of the Indenture: (a) the sale or other transfer or disposition of
Receivables and Related Assets pursuant to a Receivables Program, (b) a
disposition by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Wholly Owned Subsidiary and (c) for purposes of the
covenant described under "-- Certain Covenants -- Limitation on Sales of Assets
and Subsidiary Stock" only, a disposition that constitutes a Restricted Payment
permitted by the covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments").
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of (x) the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
(y) the amount of such payment by (ii) the sum of all such principal or
redemption payments.
"Banks" has the meaning specified in the New Credit Facility.
"Board of Directors" means, as the context requires, the Board of Directors
of Parent or the Company or any committee thereof duly authorized to act on
behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Expenditure Indebtedness" means Indebtedness Incurred to finance
the purchase or construction of any property acquired or constructed by such
Person so long as (i) the purchase or construction price for such property is or
should be capitalized in accordance with GAAP, (ii) the acquisition or
construction of such property is not part of an acquisition of a Person or
business unit and (iii) such Indebtedness is Incurred within 360 days of the
acquisition or completion of construction of such property.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any Restricted
Subsidiary has Incurred any Indebtedness since the beginning of such period that
remains outstanding or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period (other than
Indebtedness Incurred or repaid under a revolving credit or similar arrangement
to the extent of the commitment thereunder (or under the predecessor revolving
credit or similar arrangement) in effect on the
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last day of such period unless any portion of such Indebtedness is projected, in
the reasonable judgment of the senior management of the Company, to remain
outstanding for a period in excess of twelve months from the date of Incurrence
thereof) and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, (2) if since the
beginning of such period the Company or any Restricted Subsidiary shall have
made any Asset Disposition, the EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive) directly attributable to the assets
which are the subject of such Asset Disposition for such period, or increased by
an amount equal to the EBITDA (if negative), directly attributable thereto for
such period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction requiring a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first day of
such period and (4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (2) or (3) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
of assets occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (i) interest expense
attributable to capital leases, (ii) amortization of debt discount and debt
issuance cost, (iii) capitalized interest, (iv) non-cash interest expenses, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) net costs associated with
Hedging Obligations (including amortization of fees), (vii) Preferred Stock
dividends in respect of all Preferred Stock held by Persons other than the
Company or a Wholly Owned Subsidiary, (viii) interest incurred in connection
with Investments in discontinued operations, (ix) interest accruing on any
Indebtedness of any other Person to the extent such Indebtedness is Guaranteed
by the Company or any Restricted Subsidiary, (x) the cash contributions to any
employee stock ownership plan or similar trust to the extent such contributions
are used by such plan or trust to pay interest or fees to any Person (other than
the Company) in connection with Indebtedness Incurred by such plan or trust and
(xi) any premiums, fees, discounts, expenses and losses on the sale of
Receivables and Related Assets (and any amortization thereof) payable in
connection with the New Credit Facility, the Receivables Program or the offering
of the Notes, all as determined on a consolidated basis in conformity with GAAP.
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"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
be excluded from such Consolidated Net Income, without duplication: (i) any net
income of any Person if such Person is not a Restricted Subsidiary, except that
(A) subject to the exclusion contained in clause (iv) below, the Company's
equity in the net income of any such Person for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution paid to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of any such Person for such period shall be included in determining
such Consolidated Net Income; (ii) any net income (or loss) of any Person
acquired by the Company or a Subsidiary in a pooling of interests transaction
for any period prior to the date of such acquisition; (iii) any net income of
any Restricted Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to the
Company, except that (A) subject to the exclusion contained in clause (iv)
below, the Company's equity in the net income of any such Restricted Subsidiary
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Restricted Subsidiary
during such period to the Company or another Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other distribution
paid to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such Consolidated
Net Income; (iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of the Company or its consolidated Subsidiaries
(including pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (but not
loss) realized upon the sale or other disposition of any Capital Stock of any
Person; (v) extraordinary gains or losses; and (vi) the cumulative effect of a
change in accounting principles. Notwithstanding the foregoing, for the purposes
of the covenant described under "Certain Covenants -- Limitation on Restricted
Payments" only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (a)(3)(E) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Indebtedness and all other
monetary obligations (including Post-Petition Interest, expenses and fees) under
the New Credit Facility and any other obligation, including hedging obligations,
secured by the security agreements referred to in the New Credit Facility and
(ii) any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend up to,
at least $25 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, 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 (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof, in whole or in part, in
each case on or prior to the first anniversary of the Stated Maturity of the
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Notes; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions described under "Change of Control" and under
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock".
"EBITDA" for any period means the sum of Consolidated Net Income plus
Consolidated Interest Expense plus, without duplication, the following to the
extent deducted in calculating such Consolidated Net Income: (a) all income tax
expense of the Company, (b) depreciation expense, (c) amortization expense, (d)
non-cash inventory charges recorded as a result of the utilization of the
last-in, first-out (LIFO) inventory valuation method and (e) all other non-cash
items reducing Consolidated Net Income (other than items that will require cash
payments and for which an accrual or reserve is, or is required by GAAP to be,
made), less all non-cash items increasing Consolidated Net Income, in each case
for such period. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization of, a Subsidiary
of the Company shall be added to Consolidated Net Income to compute EBITDA only
to the extent (and in the same proportion) that the net income of such
Subsidiary was included in calculating Consolidated Net Income 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 approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth (i) in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants (ii) in statements and
pronouncements of the Financial Accounting Standards Board (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) in the published rules and regulations of the
SEC governing the inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and pronouncements in staff
accounting bulletins and similar written statements from the accounting staff of
the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing
any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate or Currency Protection Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Subsidiary at the time it becomes a Restricted Subsidiary. The term
"Incurrence" when used as a noun
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shall have a correlative meaning. The accretion of principal of a non-interest
bearing or other discount security shall be deemed the Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable (other than, in
the case of the Company and its Restricted Subsidiaries, any non-negotiable
notes of the Company or its Subsidiaries issued to its insurance carriers in
lieu of maintenance of policy reserves in connection with its workers
compensation and liability insurance programs); (ii) all Capital Lease
Obligations of such Person; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit and time drafts relating to any such letters of credit
payable within 180 days after the date of Issuance to the extent such time
drafts are issued in the ordinary course of business for the payment of goods or
services); (v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in
each case, any accrued dividends); (vi) all obligations of the type referred to
in clauses (i) through (v) of other Persons and all dividends of other Persons
for the payment of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise, including by means
of any Guarantee; (vii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the fair market value
of such property or assets at such date of determination or the amount of the
obligation so secured and (viii) to the extent not otherwise included in this
definition, Hedging Obligations of such Person. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the amount of liability required by GAAP to be accrued or reflected
on the most recently published balance sheet of such Person; provided, however,
that (A) the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (B)
Indebtedness shall not include any liability for federal, state, local or other
taxes.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Company or its assets, or (ii) any liquidation, dissolution or other winding up
of the Company, whether voluntary or involuntary or whether or not involving
insolvency or bankruptcy, or (iii) any assignment for the benefit of creditors
or any other marshalling of assets or liabilities of the Company.
"Interest Rate or Currency Protection Agreement" of any Person means any
interest rate protection agreement (including, without limitation, interest rate
swaps, caps, floors, collars, derivative instruments and similar agreements),
and/or other types of interest hedging agreements and any currency protection
agreement (including foreign exchange contracts, currency swap agreements or
other currency hedging arrangements) in support of the Company's business and
not of a speculative nature.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are,
in conformity with GAAP, recorded as accounts receivable on the balance sheet of
such Person) or other extensions of credit (including by way of Guarantee or
similar arrangement) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of
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Capital Stock, Indebtedness or other similar instruments issued by such Person.
For purposes of the definition of "Unrestricted Subsidiary", the definition of
"Restricted Payment" and the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments", (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of the Company at
the time that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary equal to an amount (if positive)
equal to (x) the Company's "Investment" in such Unrestricted Subsidiary at the
time of such redesignation as a Restricted Subsidiary less (y) the portion
(proportionate to the Company's equity interest in such Unrestricted Subsidiary)
of the fair market value of the net assets of such Unrestricted Subsidiary at
the time of such redesignation as a Restricted Subsidiary; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means payments in cash or
cash equivalents received therefrom (including any cash payments received by way
of deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, but excluding any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to such properties or assets or received in any other
noncash form) in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred (including fees and
expenses of investment bankers), and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP, incurred in
connection with such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by a Lien on any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be, repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or other assets disposed in such Asset Disposition, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Dispositions, all as determined in
conformity with GAAP, and retained by the Company or any Restricted Subsidiary
after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the proceeds of such issuance or sale in the form of cash or cash
equivalents net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"New Credit Facility" means credit facilities provided to the Company
pursuant to the Amended and Restated Credit Agreement dated April 29, 1996,
among the Company, the lenders thereunder and Wachovia Bank of Georgia, N.A. and
The First National Bank of Chicago, as agents, as the same may from time to time
be amended, renewed, supplemented or otherwise modified.
"Parent" means Avondale Incorporated, a Georgia corporation, or any
successor corporation.
"Permitted Holders" means G. Stephen Felker and/or any "Permitted
Transferee" (as defined in the Restated and Amended Articles of Incorporation of
Parent as of the Issue Date) of G. Stephen Felker.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) a Receivables Subsidiary or a Restricted Subsidiary or a
Person that will, upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary business of such Restricted
Subsidiary is
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a Related Business; (ii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (viii) any Person to the extent such
Investment represents the non-cash portion of the consideration received for an
Asset Disposition as permitted pursuant to the covenant described under
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock";
and (ix) a trust, limited liability company, special purpose entity or other
similar entity in connection with a Receivables Program; provided, however, that
(A) such Investment is made by a Receivables Subsidiary and (B) the only assets
transferred to such trust, limited liability company, special purpose or other
similar entity consist of Receivables and Related Assets of such Receivables
Subsidiary.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Post-Petition Interest" means all interest accrued or accruing after the
commencement of any Insolvency or Liquidation Proceeding (and interest that
would accrue but for the commencement of any Insolvency or Liquidation
Proceeding) in accordance with and at the contract rate (including, without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing any Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is allowed
as a claim in such Insolvency or Liquidation Proceeding.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
any class of common stock of the Company or Parent pursuant to an effective
registration statement under the Securities Act.
"Public Market" means any time after (x) an underwritten public equity
offering of Parent or the Company has been consummated and (y) at least 10% of
the total issued and outstanding common stock of Parent or the Company has been
distributed by means of an effective registration statement under the Securities
Act or sales pursuant to Rule 144 under the Securities Act.
"Receivables and Related Assets" means accounts receivable, instruments,
chattel paper, obligations, general intangibles and other similar assets,
including interest in merchandise or goods, the sale or lease of which give rise
to the foregoing, related contractual rights, guarantees, insurance proceeds,
collections, other related assets and proceeds of all the foregoing.
"Receivables Program" means, with respect to any Person, any accounts
receivable securitization program pursuant to which such Person pledges, sells
or otherwise transfers or encumbers its accounts receivable, including to a
trust, limited liability company, special purpose entity or other similar
entity.
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"Receivables Subsidiary" means a Wholly Owned Subsidiary (i) created for
the purpose of financing receivables created in the ordinary course of business
of the Company and its Subsidiaries and (ii) the sole assets of which consist of
Receivables and Related Assets of the Company and its Subsidiaries and related
Permitted Investments.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company, (y) Indebtedness of the
Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary or (z) Indebtedness that Refinances Indebtedness of a
Subsidiary that was Incurred and outstanding on or prior to the date such
Subsidiary was acquired by the Company unless such proposed Refinancing
Indebtedness is Incurred by such Subsidiary.
"Related Business" means the businesses of the Company and the Restricted
Subsidiaries on the Issue Date and any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions in respect of its Capital
Stock (including any payment in connection with any merger or consolidation
involving such Person) or similar payment to the direct or indirect holders of
its Capital Stock (other than dividends or distributions payable solely in its
Capital Stock (other than Disqualified Stock)) and dividends or distributions
payable solely to the Company or a Restricted Subsidiary, and other than pro
rata dividends or other distributions made by a Restricted Subsidiary that is
not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company
(other than a Restricted Subsidiary), including the exercise of any option to
exchange any Capital Stock (other than into Capital Stock of the Company that is
not Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance
or other acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) or (iv) the making of any Investment in any
Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means with respect to any Person, (i) Indebtedness
referred to in clause (i) of the definition of "Designated Senior Indebtedness",
(ii) Indebtedness of such Person, whether outstanding on the Issue Date or
thereafter Incurred and (iii) accrued and unpaid interest (including
Post-Petition Interest) in
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respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinate in right of
payment to the Notes; provided, however, that Senior Indebtedness shall not
include (1) any obligation of such Person to any Subsidiary, (2) any liability
for Federal, state, local or other taxes owed or owing by such Person, (3) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of such Person (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect to
any other Indebtedness or other obligation of such Person or (5) that portion of
any Indebtedness which at the time of Incurrence is Incurred in violation of the
Indenture.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of outstanding shares of Capital Stock or other interests (including
partnership interests) 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 (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by an registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Ratings Group, and (v) investments in securities with maturities of
six months or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
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"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments". The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
"-- Certain Covenants -- Limitation on Indebtedness" and (y) no Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced by the Company to the Trustee by promptly filing with the
Trustee a copy of the board resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law to be held by a
Person other than the Company or a Restricted Subsidiary) is owned by the
Company or one or more Wholly Owned Subsidiaries.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, proposed
Treasury regulations, judicial authority and administrative rulings and
practice. There can be no assurance that the Internal Revenue Service (the
"Service") will not take a contrary view, and no ruling from the Service has
been or will be sought. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements and
conditions set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules not
discussed below. The Company recommends that each holder consult such holder's
own tax advisor as to the particular tax consequences of exchanging such
holder's Old Notes for New Notes, including the applicability and effect of any
state, local or foreign tax laws.
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not be treated as an "exchange" for federal income tax purposes because the
Exchange Notes should not be considered to differ materially in kind or extent
from the Old Notes. Rather, the New Notes received by a holder will be treated
as a continuation of the Old Notes in the hands of such holder. As a result,
there will be no federal income tax consequences to holders exchanging Old Notes
for New Notes pursuant to the Exchange Offer.
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
108
<PAGE> 113
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer (other than an "affiliate" of the Company or Avondale
Incorporated) in connection with resales of such New Notes. The Company has
agreed that for a period of 180 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any such broker-dealer
for use in connection with any such resale. In addition, until ,
1996, all dealers effecting transactions in the Exchange Notes may be required
to deliver a prospectus.
Neither the Company nor Avondale Incorporated will receive any proceeds
from any sale 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 may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
the New Notes and any commissions or concessions received by any 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 180 days after the Expiration Date, the Company promptly
will send additional copies of this Prospectus and any amendment or supplement
to this Prospectus to any broker-dealer that requests such documents in a Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for all of the holders of
Old Notes) other than commissions or concessions of any brokers or dealers and
transfer taxes and will indemnify the Holders of the Old Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The legality of the New Notes offered hereby will be passed upon for the
Company by King & Spalding, Atlanta, Georgia.
EXPERTS
The Consolidated Financial Statements of the Company at August 26, 1994 and
August 25, 1995 and for each of the three years in the period ended August 25,
1995 appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, and the information under the
caption "Selected Historical Consolidated Financial Data" pertaining to Avondale
Incorporated for each of the five years in the period ended August 25, 1995,
appearing in this Prospectus and Registration Statement have been derived from
consolidated financial statements audited by Ernst & Young LLP, as set forth in
their report thereon appearing elsewhere herein. Such consolidated financial
statements have been included herein in reliance upon such report, given upon
the authority of such firm as experts in auditing and accounting.
With respect to the unaudited condensed consolidated interim financial
information of the Company as of and for the twenty-six week periods ended
February 24, 1995 and February 23, 1996, included in this Prospectus and
Registration Statement, Ernst & Young LLP reported that they have applied
limited procedures in accordance with professional standards for review of such
information. However, their separate report dated March 28, 1996, included
herein, states that they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on their
report on such financial information should be restricted considering the
limited nature of the review procedures applied. The independent auditors are
not subject to the liability provisions of Section 11 of the Securities Act for
their report on the unaudited interim financial information because that report
is not a "report" or a "part" of the
109
<PAGE> 114
Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Act.
The Financial Statements of Graniteville at January 2, 1994, January 1,
1995 and December 31, 1995 and for the ten months ended January 2, 1994 and for
each of the two years in the period ended December 31, 1995 included elsewhere
in this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing elsewhere herein, and have been
included in reliance upon the report of such firm, given upon their authority as
experts in auditing and accounting.
110
<PAGE> 115
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVONDALE INCORPORATED
UNAUDITED FINANCIAL STATEMENTS:
Independent Accountants' Review Report................................................ F-2
Condensed Consolidated Balance Sheets (Unaudited) as of February 24, 1995 and February
23, 1996............................................................................ F-3
Condensed Consolidated Statements of Income (Unaudited) -- Twenty-Six Weeks Ended
February 24, 1995 and February 23, 1996............................................. F-4
Condensed Consolidated Statements of Cash Flows (Unaudited) -- Twenty-Six Weeks Ended
February 24, 1995 and February 23, 1996............................................. F-5
Notes to Condensed Consolidated Financial Statements (Unaudited)...................... F-6
AUDITED FINANCIAL STATEMENTS:
Report of Independent Auditors........................................................ F-8
Consolidated Balance Sheets as of August 26, 1994 and August 25, 1995................. F-9
Consolidated Statements of Income -- Fiscal Years Ended August 27, 1993, August 26,
1994 and August 25, 1995............................................................ F-10
Consolidated Statements of Shareholders' Equity -- Years Ended August 27, 1993, August
26, 1994 and August 25, 1995........................................................ F-11
Consolidated Statements of Cash Flows -- Fiscal Years Ended August 27, 1993, August
26, 1994 and August 25, 1995........................................................ F-12
Notes to Consolidated Financial Statements............................................ F-13
GRANITEVILLE
UNAUDITED FINANCIAL STATEMENTS:
Condensed Statements of Assets and Liabilities as of April 2, 1995 and March 31,
1996................................................................................ F-19
Condensed Statements of Operations for the Thirteen Weeks ended April 2, 1995 and
March 31, 1996...................................................................... F-20
Condensed Statements of Equity for the Thirteen Weeks ended April 2, 1995 and
March 31, 1996...................................................................... F-21
Condensed Statements of Cash Flows for the Thirteen Weeks ended April 2, 1995 and
March 31, 1996...................................................................... F-22
Notes to Condensed Financial Statements............................................... F-23
AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report.......................................................... F-25
Statements of Assets and Liabilities as of January 2, 1994, January 1, 1995 and
December 31, 1995................................................................... F-26
Statements of Operations -- Ten Months Ended January 2, 1994, Years Ended January 1,
1995 and December 31, 1995.......................................................... F-27
Statements of Equity -- Ten Months Ended January 2, 1994, Years Ended January 1, 1995
and December 31, 1995............................................................... F-28
Statements of Cash Flows -- Ten Months Ended January 2, 1994, Years Ended January 1,
1995 and December 31, 1995.......................................................... F-29
Notes to Financial Statements......................................................... F-30
</TABLE>
F-1
<PAGE> 116
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Shareholders
Avondale Incorporated
We have reviewed the accompanying condensed consolidated balance sheets of
Avondale Incorporated as of February 23, 1996 and February 24, 1995, and the
related condensed consolidated statements of income and cash flows for the
twenty-six week periods then ended. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Birmingham, Alabama
March 28, 1996
F-2
<PAGE> 117
AVONDALE INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FEBRUARY FEBRUARY
24, 23,
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash................................................................. $ 1,550 $ 2,885
Accounts receivable, less allowance for doubtful accounts of $2,711
in 1995 and $3,052 in 1996........................................ 86,344 80,810
Inventories.......................................................... 43,792 45,714
Prepaid expenses..................................................... 900 833
----------- -----------
Total current assets......................................... 132,586 130,242
Real estate held for sale.............................................. 11,487 11,483
Investment in debt securities.......................................... -- 7,500
Property, plant and equipment
Land................................................................. 970 970
Buildings............................................................ 36,736 38,182
Machinery and equipment.............................................. 236,049 255,287
----------- -----------
273,755 294,439
Less accumulated depreciation........................................ (150,016) (173,236)
----------- -----------
123,739 121,203
Other assets........................................................... 4,723 5,080
----------- -----------
$ 272,535 $ 275,508
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable..................................................... $ 20,161 $ 19,068
Accrued compensation, benefits and related expenses.................. 7,061 7,291
Other accrued expenses............................................... 8,298 7,682
Long-term debt due in one year....................................... 3,000 4,000
Income taxes payable................................................. 972 950
Deferred income taxes................................................ 3,031 1,823
----------- -----------
Total current liabilities.................................... 42,523 40,814
Long-term debt......................................................... 191,567 183,972
Deferred income taxes and other long-term liabilities.................. 29,312 30,301
Shareholders' equity
Preferred Stock
$.01 par value; 10,000 shares authorized.......................... -- --
Common Stock
Class A, $.01 par value; 100,000 shares authorized, 10,090 issued
and outstanding.................................................. 101 101
Class B, $.01 par value; 5,000 shares authorized, 979 issued and
outstanding..................................................... 10 10
Capital in excess of par value....................................... 2,566 2,566
Retained earnings.................................................... 6,456 17,744
----------- -----------
Total shareholders' equity................................... 9,133 20,421
----------- -----------
$ 272,535 $ 275,508
========= =========
</TABLE>
See independent accountants' review report and notes to condensed consolidated
financial statements.
F-3
<PAGE> 118
AVONDALE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
26 WEEKS ENDED
---------------------------
FEBRUARY 24, FEBRUARY 23,
1995 1996
------------ ------------
<S> <C> <C>
Net sales............................................................. $265,595 $243,496
Operating costs and expenses
Cost of goods sold.................................................. 217,525 205,565
Depreciation........................................................ 11,703 12,607
Selling and administrative expenses................................. 12,134 13,292
------------ ------------
Operating income................................................. 24,233 12,032
Interest expense...................................................... 7,334 6,036
Other income, net..................................................... (335) (540)
------------ ------------
Income before income taxes.......................................... 17,234 6,536
Provision for income taxes............................................ 6,685 2,540
------------ ------------
Net income....................................................... $ 10,549 $ 3,996
========= =========
Per share data:
Net income.......................................................... $ 0.95 $ 0.36
========= =========
Dividends declared.................................................. $ 0.14 $ 0.14
========= =========
Weighted average shares outstanding................................... 11,133 11,133
========= =========
</TABLE>
See independent accountants' review report and notes to condensed consolidated
financial statements.
F-4
<PAGE> 119
AVONDALE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FEBRUARY 24, FEBRUARY 23,
1995 1996
------------ ------------
<S> <C> <C>
Operating activities
Net income.......................................................... $ 10,549 $ 3,996
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 11,710 12,629
Provision for (benefit of) deferred income taxes................. 976 (522)
Interest expense on payment-in-kind notes........................ 1,161 1,229
Gain on sale of equipment........................................ (388) (638)
Changes in operating assets and liabilities...................... (8,628) (11,301)
------------ ------------
Net cash provided by operating activities................... 15,380 5,393
Investing activities
Debt securities available for sale.................................. -- (7,500)
Purchase of property, plant and equipment........................... (7,018) (13,275)
Payments received on real estate purchase option.................... -- 1,017
Proceeds from sale of property, plant and equipment................. 402 640
------------ ------------
Net cash used in investing activities....................... (6,616) (19,118)
Financing activities
Principal payments on long-term debt................................ (6,550) --
Issuance of long-term debt.......................................... -- 16,825
Dividends paid...................................................... (1,550) (1,550)
------------ ------------
Net cash (used) provided by financing activities............ (8,100) 15,275
Increase in cash and cash equivalents................................. 664 1,550
Cash and cash equivalents at beginning of period...................... 886 1,335
------------ ------------
Cash and cash equivalents at end of period.................. $ 1,550 $ 2,885
========= =========
</TABLE>
See independent accountants' review report and notes to condensed consolidated
financial statements.
F-5
<PAGE> 120
AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FEBRUARY 23, 1996
1. Basis of Presentation: The accompanying unaudited condensed
consolidated financial statements include the accounts of Avondale Incorporated
and its wholly owned subsidiary, Avondale Mills, Inc. (collectively, the
"Company"). These statements have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The accounting
policies and basis of presentation followed by the Company are presented in Note
1 to the August 25, 1995 Audited Consolidated Financial Statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Demand for the Company's yarn products is broadly distributed over markets
with staggered seasonality and therefore generally does not exhibit significant
seasonal trends. Demand for the Company's fabric products and the level of the
Company's fabric sales fluctuate moderately during the year, based upon
historical buying trends. Generally there is increased retail demand for denim
garments during the fall (back-to-school) and Christmas holiday selling seasons.
As a result, demand for the Company's fabrics is generally higher during the
Company's second and third fiscal quarters when fabrics are produced for these
selling seasons.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation. Operating results for the
twenty-six weeks ended February 23, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ending August 30, 1996.
2. Inventories: Components of inventories are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
FEBRUARY 24, FEBRUARY 23,
1995 1996
------------ ------------
<S> <C> <C>
Finished goods................................................ $ 8,111 $ 9,205
Work in process............................................... 10,276 11,581
Raw materials................................................. 26,519 28,113
Dyes and chemicals............................................ 1,084 1,172
------------ ------------
Inventories at FIFO........................................... 45,990 50,071
Less allowance to reduce carrying value to LIFO basis......... (7,740) (9,693)
------------ ------------
38,250 40,378
Supplies at average cost...................................... 5,542 5,336
------------ ------------
$ 43,792 $ 45,714
========= =========
</TABLE>
Valuation of the Company's inventories under the last-in, first-out (LIFO)
method, at February 24, 1995 and February 23, 1996, and the related impact on
the statements of income for the twenty-six weeks then ended, has been
determined using estimated quantities and costs as of the respective fiscal
year-ends. Because these estimates are subject to many forces beyond
management's control, including the cost of cotton, interim results are subject
to the final year-end LIFO valuation.
See independent accountants' review report.
F-6
<PAGE> 121
AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. Commitments: At February 23, 1996 the Company had contractual
commitments of approximately $22 million relating to the acquisition of
machinery and equipment. The Company anticipates that these capital expenditures
will be funded primarily from cash generated by operations and borrowings under
bank credit facilities.
4. Investment in Debt Securities: In February 1996, the Company made a
$7.5 million subordinated loan to Oneita that bears interest at the rate of 10%
per annum and is due and payable on February 26, 1999 (the "Oneita Note").
Although Oneita intended to repay the Oneita Note with a portion of the proceeds
from an offering (the "Oneita Rights Offering") of its common stock (the "Oneita
Common Stock") to its existing shareholders and the Company had agreed, along
with a shareholder of Oneita, to purchase at $7.00 per share any such shares of
Oneita Common Stock not so purchased, the Company does not believe that Oneita
will effect the Oneita Rights Offering. The Company believes that it will have
the right under certain circumstances to convert and exchange the Oneita Note
for shares of Oneita common stock at a purchase price to be agreed upon by the
Company and Oneita. Oneita announced in March 1996 that it expects to incur a
pretax loss in its second fiscal quarter ending March 31, 1996 in the range of
$15 to $17 million and that it does not expect to be profitable for its current
fiscal year ending September 30, 1996. Although Oneita's financial condition
could prevent it from being able to repay the Oneita Note, which is unsecured
and subordinated in right of payment to Oneita's other outstanding indebtedness,
the Company believes that Oneita will be able to satisfy its obligations under
the Oneita Note.
5. Contingencies: On March 3, 1993, a case was filed in the Circuit Court
of Jefferson County, Alabama by Joe and Darnell Sullivan and Tommy and Stella
Fay Gould against the Company and certain other parties. The complaint alleges
that the Company negligently or willfully discharged industrial waste water
containing hazardous materials, which allegedly damaged the plaintiffs' riparian
rights. The complaint seeks an award of unspecified damages. The Company is
vigorously defending this case and believes that it has a number of defenses
available to it. The Company cannot currently predict whether the plaintiffs
will prevail on their claims or estimate the magnitude of potential loss, if
any. Based on currently available information, although there can be no
assurance, the Company does not believe that this case will have a material
adverse effect on its results of operations or financial condition. Accordingly,
no accrual for potential loss has been made for this case in the accompanying
condensed consolidated financial statements.
The Company is also a party to litigation incidental to its business from
time to time. The Company is not currently a party to any litigation that
management believes, if determined adversely to the Company, would have a
material adverse effect on the Company.
6. Purchase of Graniteville Company: On January 25, 1996, the Company
entered into a letter of intent with Triarc to purchase substantially all of the
textile assets of Graniteville for cash consideration of $255,000,000 plus
assumption of certain liabilities other than long-term debt. (See THE
TRANSACTIONS -- Terms of the Asset Purchase Agreement in the accompanying
Prospectus.)
See independent accountants' review report.
F-7
<PAGE> 122
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Avondale Incorporated
We have audited the accompanying consolidated balance sheets of Avondale
Incorporated as of August 26, 1994 and August 25, 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three fiscal years in the period ended August 25, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Avondale
Incorporated at August 26, 1994 and August 25, 1995, and the consolidated
results of its operations and its cash flows for each of the three fiscal years
in the period ended August 25, 1995 in conformity with generally accepted
accounting principles.
We also previously have audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets of Avondale Incorporated as
of August 30, 1991, August 28, 1992 and August 27, 1993, and the related
consolidated statements of income, shareholders' equity, and cash flows for the
fiscal years ended August 30, 1991 and August 28, 1992 (none of which are
presented separately herein); and we expressed unqualified opinions on those
consolidated financial statements. The information set forth as Statement of
Income Data and Balance Sheet Data in the Selected Consolidated Financial Data
for each of the five fiscal years in the period ended August 25, 1995, appearing
on page 31 was derived from the consolidated financial statements which we
audited. In our opinion, the aforementioned information derived from the
consolidated financial statements is fairly stated in all material respects in
relation to those consolidated financial statements.
Ernst & Young LLP
Birmingham, Alabama
September 22, 1995
F-8
<PAGE> 123
AVONDALE INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 26, AUGUST 25,
1994 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash................................................................ $ 886 $ 1,335
Accounts receivable, less allowance for doubtful accounts of $2,153
in 1994 and $2,239 in 1995....................................... 88,271 82,129
Inventories......................................................... 31,467 36,391
Prepaid expenses.................................................... 2,444 412
---------- ----------
Total current assets........................................ 123,068 120,267
Real estate held for sale............................................. 11,490 11,485
Property, plant and equipment
Land................................................................ 971 971
Buildings........................................................... 36,608 36,827
Machinery and equipment............................................. 229,390 244,287
---------- ----------
266,969 282,085
Less accumulated depreciation....................................... (138,547) (161,592)
---------- ----------
128,422 120,493
Other assets.......................................................... 4,669 5,177
---------- ----------
$ 267,649 $ 257,422
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.................................................... $ 20,530 $ 19,352
Accrued compensation, benefits and related expenses................. 7,507 11,274
Other accrued expenses.............................................. 9,183 6,570
Long-term debt due in one year...................................... 3,000 4,000
Income taxes payable................................................ -- 352
Deferred income taxes............................................... 3,007 2,352
---------- ----------
Total current liabilities................................... 43,227 43,900
Long-term debt........................................................ 196,956 165,918
Deferred income taxes and other long-term liabilities................. 27,332 29,630
Shareholders' equity
Preferred Stock
$.01 par value; 10,000 shares authorized......................... -- --
Common Stock
Class A, $.01 par value; 100,000 shares authorized, 10,090 issued
and outstanding................................................. 101 101
Class B, $.01 par value; 5,000 shares authorized, 979 issued and
outstanding.................................................... 10 10
Capital in excess of par value...................................... 2,566 2,566
Retained earnings................................................... (2,543) 15,297
---------- ----------
Total shareholders' equity.................................. 134 17,974
---------- ----------
$ 267,649 $ 257,422
========= =========
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE> 124
AVONDALE INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
AUGUST 27, AUGUST 26, AUGUST 25,
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales...................................................... $ 495,542 $ 481,580 $ 538,652
Operating costs and expenses
Cost of goods sold........................................... 373,708 407,352 443,726
Depreciation................................................. 22,375 23,269 23,709
Selling and administrative expenses.......................... 22,693 22,069 23,606
---------- ---------- ----------
Operating income.......................................... 76,766 28,890 47,611
Interest expense............................................... 2,051 6,541 14,333
Other, net..................................................... 529 (227) (761)
---------- ---------- ----------
Income before income taxes and extraordinary item.............. 74,186 22,576 34,039
Provision for income taxes..................................... 29,011 8,535 13,100
---------- ---------- ----------
Income before extraordinary item............................... 45,175 14,041 20,939
Loss on retirement of debt, net of income taxes of $1,570...... (2,766) -- --
---------- ---------- ----------
Net income..................................................... $ 42,409 $ 14,041 $ 20,939
======== ======== ========
Earnings per common share:
Income before extraordinary item............................. $ 2.20 $ 0.85 $ 1.88
Extraordinary item........................................... (0.14) -- --
---------- ---------- ----------
Net income................................................... $ 2.06 $ 0.85 $ 1.88
======== ======== ========
Weighted average shares outstanding............................ 20,561 16,609 11,133
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE> 125
AVONDALE INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
ISSUED EXCESS OF
--------------- PAR RETAINED
SHARES AMOUNT VALUE EARNINGS
------ ------ ---------- ---------
<S> <C> <C> <C> <C>
Balance at August 28, 1992............................... 20,811 $208 $ 4,812 $ 127,416
Net income............................................... -- -- -- 42,409
Cash dividends ($0.96 per share)......................... -- -- -- (19,372)
Purchase and retirement of treasury stock................ (267) (3) (42) (1,365)
------ ------ ---------- ---------
Balance at August 27, 1993............................... 20,544 205 4,770 149,088
Net income............................................... -- -- -- 14,041
Cash dividends ($0.28 per share)......................... -- -- -- (3,758)
Purchase and retirement of treasury stock................ (9,475) (94) (2,204) (161,914)
------ ------ ---------- ---------
Balance at August 26, 1994............................... 11,069 111 2,566 (2,543)
Net income............................................... -- -- -- 20,939
Cash dividends ($0.28 per share)......................... -- -- -- (3,099)
------ ------ ---------- ---------
Balance at August 25, 1995............................... 11,069 $111 $ 2,566 $ 15,297
====== ====== ======= =========
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 126
AVONDALE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
AUGUST 27, AUGUST 26, AUGUST 25,
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities
Net income.................................................. $ 42,409 $ 14,041 $ 20,939
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of goodwill................ 22,435 23,318 23,849
Provision for (benefit of) deferred income taxes......... 1,471 1,639 (85)
Interest expense on payment-in-kind notes................ -- -- 2,337
Gain on sale of equipment................................ (407) (207) (738)
Loss on retirement of debt, net of income taxes.......... 2,766 -- --
Changes in operating assets and liabilities:
Accounts receivable.................................... 9,325 (18,107) 6,142
Inventories............................................ (927) 3,531 (4,924)
Prepaid expenses....................................... (222) (1,716) 2,032
Other assets........................................... (1,172) (1,342) (643)
Accounts payable and accrued expenses.................. (11,228) 1,635 (24)
Income taxes payable................................... (4,306) (334) 352
Other liabilities...................................... 1,286 447 1,211
---------- ---------- ----------
Net cash provided by operating activities........... 61,430 22,905 50,448
Investing activities
Purchase of property, plant and equipment................... (36,434) (17,605) (15,823)
Restricted funds held for the purchase of property, plant
and equipment............................................ 3,807 -- --
Payments received on real estate purchase option............ -- -- 517
Proceeds from sale of property, plant and equipment......... 479 433 781
---------- ---------- ----------
Net cash used in investing activities............... (32,148) (17,172) (14,525)
Financing activities
Principal payments on long-term debt........................ (33,778) (2,000) (32,375)
Issuance of long-term debt.................................. 11,075 124,875 --
Purchase and retirement of treasury stock................... (1,599) (124,656) --
Dividends paid.............................................. (19,372) (3,758) (3,099)
---------- ---------- ----------
Net cash used in financing activities............... (43,674) (5,539) (35,474)
---------- ---------- ----------
Increase (decrease) in cash and cash equivalents.............. (14,392) 194 449
Cash and cash equivalents at beginning of year................ 15,084 692 886
---------- ---------- ----------
Cash and cash equivalents at end of year............ $ 692 $ 886 $ 1,335
======== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-12
<PAGE> 127
AVONDALE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 25, 1995
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The Consolidated Financial Statements include the
accounts of Avondale Incorporated and its wholly owned subsidiary, Avondale
Mills, Inc. and its subsidiaries (collectively, the "Company"). All significant
intercompany accounts and transactions have been eliminated. Unless otherwise
stated, all references to years relate to the Company's fiscal year, which ends
on the last Friday in August, rather than calendar years.
Avondale Incorporated is a holding company and has no operations or assets
other than its investment in Avondale Mills, Inc. and has no obligations after
making adjustments for inter-company loans. Summarized financial information for
Avondale Mills, Inc. and its subsidiaries is as follows (in thousands):
<TABLE>
<CAPTION>
AUGUST 26, AUGUST 26,
1994 1995
---------- ----------
<S> <C> <C>
Current assets..................................................... $ 123,068 $ 120,267
Noncurrent assets.................................................. 144,581 137,155
---------- ----------
$ 267,649 $ 257,422
======== ========
Current liabilities................................................ $ 43,227 $ 43,900
Noncurrent liabilities............................................. 215,979 187,135
Shareholder's equity............................................... 8,443 26,387
---------- ----------
$ 267,649 $ 257,422
======== ========
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
AUGUST 27, AUGUST 26, AUGUST 26,
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.............................................. $ 459,702 $ 481,580 $ 538,652
Gross profit........................................... 91,520 50,994 71,242
Income before extraordinary item....................... 42,941 13,937 20,830
Net income............................................. 40,175 13,937 20,830
</TABLE>
The Company operates in a single business segment, manufacturing cotton and
cotton-blend yarns and fabrics, which are marketed primarily to the apparel
market and, to a lesser extent, the home furnishings and industrial products
markets. Sales generally are recorded by the Company when products are shipped
to customers. The credit status of each customer is approved and monitored by
the Company. Sales to V.F. Corporation and its affiliates represented 28% of net
sales for fiscal 1993, 1994 and 1995. Accounts receivable from this customer
represented 34% and 38% of the Company's net accounts receivable at August 26,
1994 and August 25, 1995, respectively.
Cash and Cash Equivalents: The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.
Inventories: Inventories are stated at the lower of cost or market value.
Except for certain supply inventories valued on an average cost basis, cost is
determined on a last-in, first-out (LIFO) basis.
Periodically, the Company purchases cotton futures and options contracts to
hedge exposure to price fluctuations in the cotton acquired from various
suppliers. Gains and losses on these hedging contracts are deferred as an
adjustment to the carrying value of inventories and recognized when these
inventories are sold. At August 25, 1995, the Company had no such contracts
outstanding.
Property, Plant and Equipment: Property, plant and equipment is stated at
cost and depreciated over the estimated useful lives of the related assets.
Depreciation is calculated primarily using the straight-line method.
F-13
<PAGE> 128
AVONDALE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Associate Benefit Plans: The Company has a discretionary non-contributory
profit sharing plan covering substantially all associates. Annual contributions
by the Company are made to the plan in amounts determined by the board of
directors. In addition, the plan has 401(k) savings options that are available
to all associates. The Company matches 25% of the first 3% of compensation
contributed by each associate. The Company also has a deferred compensation plan
for certain key personnel. The related expense for these plans is charged to
operations currently and totaled $6,205,000, $2,840,000 and $4,310,000 for 1993,
1994 and 1995, respectively.
Other Assets and Other Long-Term Liabilities: Other assets consist
primarily of unamortized loan fees, cash surrender value of life insurance and
deposits on machinery and equipment purchases. Other long-term liabilities
consist of accrued postretirement and workers' compensation benefits, deferred
compensation for certain key management personnel and payments received on an
option to purchase real estate held for sale.
Earnings Per Share: Earnings per share are based on the weighted average
shares of common stock and dilutive common stock equivalents (for stock options
using the treasury stock method) outstanding during each year.
Recent Accounting Pronouncements: In March 1995, the Financial Accounting
Standards Board issued Statement No. 121, Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to Be disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations when
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company will adopt Statement 121 in the first fiscal quarter of
1997 and, based on current circumstances, does not believe the effect of
adoption will be material.
The Company accounts for its stock compensation arrangements described in
Note 6 under the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and intends to continue to do so.
Revenue Recognition
The Company records revenues principally when products are shipped to
customers. Consistent with recognized practice in the textile industry, the
Company also records revenues to a lesser extent (10%, 13% and 8% of total
revenues in 1993, 1994 and 1995, respectively), on a bill and hold basis under
which the goods are complete, packaged and ready for shipment. These goods are
effectively segregated from inventory which is available for sale, the risks of
ownership of the goods have passed to the customer, and the underlying customer
orders are supported by contracts or written confirmations.
NOTE 2 -- INVENTORIES
Components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Finished goods................................................. $ 6,604 $ 7,101
Work in process................................................ 9,966 9,769
Raw materials.................................................. 15,877 22,949
Dyes and chemicals............................................. 1,544 1,905
------- -------
Inventories at FIFO............................................ 33,991 41,724
Less allowance to reduce carrying value to LIFO basis.......... (6,790) (9,693)
------- -------
27,201 32,031
Supplies at average cost....................................... 4,266 4,360
------- -------
$31,467 $36,391
======= =======
</TABLE>
F-14
<PAGE> 129
AVONDALE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- INCOME TAXES
Provision for income taxes is composed of the following (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------ -------
<S> <C> <C> <C>
Current:
Federal.............................................. $24,139 $5,924 $11,376
State................................................ 3,401 972 1,809
------- ------ -------
27,540 6,896 13,185
Deferred:
Federal.............................................. 1,285 1,565 (86)
State................................................ 186 74 1
------- ------ -------
1,471 1,639 (85)
------- ------ -------
$29,011 $8,535 $13,100
======= ====== =======
</TABLE>
The following table shows the reconciliation of federal income tax expense
at the statutory rate on income before income taxes to reported income tax
expense (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------ -------
<S> <C> <C> <C>
Taxes on earnings at 34.7% in 1993, 35% in 1994 and
1995................................................. $25,743 $7,901 $11,914
State income taxes, net of federal tax benefit......... 2,342 680 1,177
Other.................................................. 926 (46) 9
------- ------ -------
$29,011 $8,535 $13,100
======= ====== =======
</TABLE>
The Company made income tax payments of $24,974,000, $6,923,000 and
$12,620,000 during fiscal 1993, 1994 and 1995, respectively.
Deferred income taxes are provided for temporary differences in financial
and income tax reporting. Significant components of the Company's year-end
deferred tax liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Deferred tax liabilities:
Depreciation..................................................... $18,826 $19,499
Inventory valuation.............................................. 6,428 6,295
Other............................................................ 3,142 3,030
------- -------
Deferred tax liabilities...................................... 28,396 28,824
Deferred tax assets:
Employee benefit programs........................................ 4,392 4,859
Bad debt expense................................................. 800 832
Other............................................................ 602 616
------- -------
Deferred tax assets........................................... 5,794 6,307
------- -------
Net deferred tax liabilities.................................. $22,602 $22,517
======= =======
</TABLE>
F-15
<PAGE> 130
AVONDALE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Revolving credit facility, interest tied to banks' base rate or
at alternative rates, 6.5%-9.2% in 1995, due September 1997.... $135,950 106,575
Industrial Revenue Bonds, floating rate, 2.7%-5.8% in 1995, due
in various installments through 2002........................... 24,000 21,000
Subordinated payment-in-kind notes, 5.65%, due March 1998........ 40,006 42,343
-------- --------
199,956 169,918
Less current portion............................................. (3,000) (4,000)
-------- --------
$196,956 $165,918
======== ========
</TABLE>
The Company maintains a secured revolving credit facility with a group of
banks which provides aggregate borrowing availability of a maximum of $164
million through September 1997. Under the terms of this agreement, the Company
can designate an interest rate tied to the banks' base rate or alternative rates
negotiated with the banks, for specified time periods. A commitment fee of 3/8
of 1% per annum is payable quarterly on the average daily unused portion of the
revolving credit commitment. The revolving credit facility is secured by
accounts receivable and inventories. Covenants of the credit agreement require
the Company to maintain certain cash flow ratios and debt to equity ratios, and
contain restrictions on capital spending and payment of dividends.
The Company uses interest rate swap agreements to effectively convert a
portion of its outstanding revolving credit facility to a fixed rate basis, thus
reducing the impact of interest rate changes on future income. These agreements
involve the receipt of floating rate amounts in exchange for fixed rate interest
payments over the lives of the agreements without an exchange of the underlying
principal amounts. The differential to be paid or received is accrued as
interest rates change and recognized as an adjustment to interest expense
related to the debt. The related amount payable to or received from
counterparties is included in other liabilities or assets. At August 25, 1995,
the Company had interest rate swap agreements with notional amounts aggregating
$40 million covered by interest rate swap agreements providing an effective
interest rate of 7.3% on that equivalent portion of the revolving credit
facility. The fair value of these swap agreements at August 25, 1995 is
estimated to represent a net liability of approximately $600,000 based on
current market rates.
Concurrent with the repurchase of Common Stock of the Company discussed in
Note 6, the Company issued $40 million of unsecured 5.65% payment-in-kind notes,
subordinate to the revolving credit facility. Under the terms of these notes,
additional 5.65% payment-in-kind notes ($2,337,000 in 1995) are issued
semiannually in an amount equal to, and in payment of, interest accrued on notes
outstanding. The notes substantially adopt the restrictive covenant provisions
of the revolving credit facility.
Two of the industrial revenue bonds which were issued to acquire property,
plant and equipment represent capital lease obligations. These lease obligations
plus the other industrial revenue bonds are secured by letter of credit
agreements with a bank. The letter of credit agreements are, in turn, secured by
the property, plant and equipment at three plant locations, which had a carrying
value of approximately $36 million at August 25, 1995. Covenants of the letter
of credit agreements substantially adopt the restrictive covenant provisions of
the revolving credit facility.
At August 25, 1995, the Company was in compliance with the debt and letter
of credit covenants.
As a result of the favorable rate and terms of the Company's subordinated
payment-in-kind notes, the fair value of these notes, estimated using discounted
cash flow analysis and current market rates for similar
F-16
<PAGE> 131
AVONDALE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
borrowing arrangements, is approximately $3.5 million less than their carrying
value. The carrying value of the Company's remaining long-term debt approximates
fair value.
Aggregate maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
1996...................................................................... $ 4,000
1997...................................................................... 3,250
1998...................................................................... 152,168
1999...................................................................... 2,250
2000...................................................................... 3,250
Thereafter through 2002................................................... 5,000
--------
$169,918
========
</TABLE>
In connection with the Company's borrowings, no interest has been
capitalized. The Company paid interest on revolving credit and long-term debt of
approximately $4,140,000, $4,005,000 and $12,235,000 in 1993, 1994 and 1995,
respectively.
Commitments for future additions to plant and equipment were approximately
$19 million at August 25, 1995.
NOTE 5 -- POSTRETIREMENT BENEFITS
The Company accrues postretirement benefits over the service lives of the
associates expected to receive such benefits. These benefits, provided by the
Company from its general assets, include life and medical insurance coverage
after retirement to associates who were in designated positions of management
with Avondale Mills, Inc. on August 12, 1964, and life insurance coverage for
all associates of Avondale Mills, Inc. who attained age 55 on or before
September 1, 1981, at which time the program was terminated. At August 25, 1995,
the accumulated postretirement benefit obligation was $5,458,000, calculated
using an assumed discount rate of 8%. Pretax postretirement benefits expense,
including interest costs, was $422,000, $541,000 and $941,000 for 1993, 1994 and
1995, respectively.
The rate of increase in the per capita costs of covered health care
benefits is assumed to be 11% in 1996, decreasing gradually to 6% by the year
2011. Increasing the assumed health care cost trend rate by 1% would not have a
significant impact on the accumulated postretirement benefit obligation or the
net periodic postretirement benefit cost.
NOTE 6 -- CAPITAL STOCK
Each share of Class A Common Stock is entitled to one vote and each share
of Class B Common Stock is entitled to 20 votes with respect to matters
submitted to a vote of shareholders. Each share of the Class B Common Stock is
convertible at any time, at the option of its holder, into one share of Class A
Common Stock. The Class B Common Stock will convert automatically into Class A
Common Stock, and thereby lose its special voting rights, if such Class B Common
Stock is sold or otherwise transferred to any person or entity other than
certain designated transferees.
In September 1993, the Company purchased and retired 62,000 shares of Class
A Common Stock of the Company from an officer of the Company. This transaction
was recorded net of related income tax benefits.
In March 1994, the Company purchased and retired a total of 9,413,000
shares of Class A Common Stock of the Company from five former shareholders for
an aggregate purchase price of $163,317,000. Payment of the purchase price
consisted of cash in an amount equal to $13.10 per share, with the balance paid
through the issuance of subordinated payment-in-kind notes (see Note 4).
F-17
<PAGE> 132
AVONDALE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under an agreement with an officer, the Company may be required to purchase
a portion of the shares of Common Stock of the Company held by that officer
(representing approximately 9% of the Company's outstanding Common Stock) upon
the death of the officer. The purchase price, as defined, will approximate
market value. The Company has purchased term life insurance on the officer to
assist in funding the acquisition of such Common Stock.
During August 1993, the Company adopted a Stock Option Plan that allows for
the grant of non-qualified and incentive stock options. Under the Stock Option
Plan, options to purchase up to 1,081,250 shares of Class A common stock may be
granted to full-time associates, including executive officers of the Company.
During 1995, 640,000 shares of nonqualified options were granted at an option
price per share of $12.50, the approximate fair market value on the date of
grant. All options granted vest ratably over 5 years and may be exercised for a
period of 10 years. At August 25, 1995, no stock options were exercisable.
NOTE 7 -- CONTINGENCIES
In the normal course of business, the Company is involved in various
lawsuits. Management, in consultation with legal counsel, does not believe the
outcome of these lawsuits will have a materially adverse impact on the financial
position of the Company or the results of its operations.
NOTE 8 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for 1994 is summarized below (amounts in
thousands, except per share data):
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------
NOVEMBER 26, FEBRUARY 25, MAY 27, AUGUST 26,
------------ ------------ -------- ----------
<S> <C> <C> <C> <C>
Net sales................................ $116,030 $109,000 $122,722 $ 133,828
========== ========= ======== ========
Gross profit............................. $ 16,581 $ 12,460 $ 10,858 $ 11,060
========== ========= ======== ========
Net income............................... $ 6,197 $ 4,054 $ 2,134 $ 1,656
========== ========= ======== ========
Earnings per common share................ $ 0.30 $ 0.20 $ 0.15 $ 0.15
========== ========= ======== ========
Weighted average shares outstanding...... 20,506 20,482 14,379 11,069
========== ========= ======== ========
</TABLE>
Quarterly financial information for 1995 is summarized below (amounts in
thousands, except per share data):
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------
NOVEMBER 25 FEBRUARY 24 MAY 26 AUGUST 25
----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Net sales................................. $ 132,637 $ 132,958 $145,021 $ 128,036
========= ========= ======== ========
Gross profit.............................. $ 17,123 $ 19,244 $ 21,746 $ 13,104
========= ========= ======== ========
Net income................................ $ 4,644 $ 5,905 $ 7,358 $ 3,032
========= ========= ======== ========
Earnings per common share................. $ 0.42 $ 0.53 $ 0.66 $ 0.27
========= ========= ======== ========
Weighted average shares outstanding....... 11,133 11,133 11,133 11,133
========= ========= ======== ========
</TABLE>
F-18
<PAGE> 133
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
CONDENSED STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
APRIL 2, MARCH 31,
1995 1996
-------- ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................... $ 3,618 $ 1,628
Receivables, net....................................................... 104,087 99,834
Inventories............................................................ 71,385 72,496
Other current assets................................................... 589 3,015
-------- ---------
Total current assets........................................... 179,679 176,973
-------- ---------
Properties, at cost...................................................... 186,621 187,787
Less accumulated depreciation and amortization........................... 70,797 76,084
-------- ---------
115,824 111,703
-------- ---------
Cost in excess of net assets acquired.................................... 7,743 8,190
Other assets............................................................. 4,484 4,780
-------- ---------
$307,730 $ 301,646
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt...................................... $ 13,339 $ 14,473
Accounts payable....................................................... 33,547 23,298
Accrued salaries and wages............................................. 3,957 3,114
Deferred income taxes.................................................. 8,288 7,747
Other current liabilities.............................................. 7,191 8,981
-------- ---------
Total current liabilities...................................... 66,322 57,613
Long-term debt........................................................... 155,528 192,637
Deferred income taxes.................................................... 22,756 24,130
Payable to C.H. Patrick & Company, Inc................................... 6,308 7,226
Other liabilities........................................................ 1,113 1,020
-------- ---------
252,027 282,626
-------- ---------
Commitments and contingencies
Equity................................................................... 55,703 19,020
-------- ---------
$307,730 $ 301,646
======== ========
</TABLE>
See notes to condensed financial statements.
F-19
<PAGE> 134
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
APRIL 2, MARCH 31,
1995 1996
-------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Net sales.............................................................. $134,377 $ 121,018
-------- ---------
Operating costs and expenses:
Cost of goods sold................................................... 116,495 105,498
Depreciation and amortization........................................ 3,753 3,793
Selling and administrative expenses.................................. 6,855 7,377
Management fees and other administrative expenses allocated from
parent............................................................ 1,140 1,168
-------- ---------
128,243 117,836
-------- ---------
Operating profit.................................................. 6,134 3,182
-------- ---------
Other expenses (income):
Interest expense..................................................... 4,913 5,276
Interest expense with affiliate...................................... 151 168
Interest income...................................................... (209) (167)
Gain on insurance recovery........................................... (1,875) --
Other, net........................................................... (24) 103
-------- ---------
2,956 5,380
-------- ---------
Income (loss) before income taxes................................. 3,178 (2,198)
Provision for (benefit from) income taxes.............................. 1,745 (781)
-------- ---------
Net income (loss)................................................. $ 1,433 $ (1,417)
======== ========
</TABLE>
See notes to condensed financial statements.
F-20
<PAGE> 135
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
CONDENSED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------
APRIL 2, MARCH 31,
1995 1996
-------- ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Balance at beginning of period........................................ $ 54,844 $21,434
Net income (loss)..................................................... 1,433 (1,417)
Effect of carve-out accounting........................................ (574) (997)
-------- ---------
Balance at end of period.............................................. $ 55,703 $19,020
======= =======
</TABLE>
See notes to condensed financial statements.
F-21
<PAGE> 136
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
APRIL 2, MARCH 31,
1995 1996
-------- ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................... $ 1,433 $(1,417)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities
Depreciation and amortization of properties....................... 3,753 3,793
Amortization of deferred financing costs.......................... 346 443
Provision for deferred income taxes............................... 2,956 85
Provision for doubtful accounts................................... 349 1,027
Other, net........................................................ (2) 33
Decrease (increase) in:
Receivables..................................................... (13,754) 3,514
Inventories..................................................... (1,406) (7,456)
Other current assets............................................ 618 778
Increase (decrease) in:
Accounts payable................................................ 9,388 1,268
Other current liabilities....................................... 535 929
Other liabilities............................................... -- (1)
-------- ---------
Net cash provided by operating activities.................... 4,216 2,996
-------- ---------
Cash flows from investing activities:
Capital expenditures................................................. (1,665) (749)
Proceeds from sale of properties..................................... 2 64
Other, net........................................................... 4 28
-------- ---------
Net cash used in investing activities........................ (1,659) (657)
-------- ---------
Cash flows from financing activities:
Increase in payable to C.H. Patrick & Company, Inc................... 150 514
Repayment of long-term debt.......................................... (2,305) (3,261)
Effect of carve-out accounting....................................... (574) (997)
Increase in deferred financing costs................................. (151) (368)
-------- ---------
Net cash used in financing activities........................ (2,880) (4,112)
-------- ---------
Net decrease in cash................................................... (323) (1,773)
Cash at beginning of period............................................ 3,941 3,401
-------- ---------
Cash at end of period.................................................. $ 3,618 $ 1,628
======== =======
</TABLE>
See notes to condensed financial statements.
F-22
<PAGE> 137
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
(1) BASIS OF PRESENTATION
Graniteville Company ("the Company"), is an indirect wholly-owned
subsidiary of Triarc Companies, Inc. (referred to herein as "Triarc" and,
collectively with its subsidiaries, "Triarc Companies"). On January 25, 1996,
Triarc signed a letter of intent to sell substantially all of the textile assets
of the Company (the "Textile Business") to Avondale Incorporated ("Avondale")
for cash consideration of $225,000,000 plus the assumption of certain
liabilities other than long-term debt. The sale closed on April 29, 1996.
The Textile Business has no separate legal status and is a part of the
operations of the Company. The accompanying financial statements have been
prepared from the books and records of the Company and present the assets,
liabilities, equity and operations of the Textile Business and exclude the
assets of the Company's wholly-owned subsidiary, C. H. Patrick & Company, Inc.
("C. H. Patrick"), and certain other assets, principally real estate and notes
receivable from Triarc, not directly related to the Textile Business.
Accordingly, these financial statements do not purport to represent the
financial position or results of operations of the Company.
The accompanying unaudited interim financial statements contain all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Textile Business as of April 2,
1995 and March 31, 1996 and its results of operations and cash flows for the
thirteen-week periods then ended. Results of operations for interim periods
should not be regarded as necessarily indicative of the results to be expected
for the full year.
These unaudited interim financial statements should be read in conjunction
with the financial statements of the Textile Business and related notes for the
ten months ended January 2, 1994 and the years ended January 1, 1995 and
December 31, 1995.
The effect of carving out the balances and transactions not related to the
Textile Business is reflected as "Effect of carve-out accounting" in the
accompanying statements of equity and cash flows.
(2) INVENTORIES
The following is a summary of the major classification of inventories:
<TABLE>
<CAPTION>
APRIL 2, MARCH 31,
1995 1996
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials................................................. $ 13,218 $12,184
Work in process............................................... 6,675 6,543
Finished goods................................................ 48,789 51,157
Supplies...................................................... 2,703 2,612
-------- ---------
$ 71,385 $72,496
======= =======
</TABLE>
Had the first-in, first-out method been used, inventories would have been
$4,580,000 and $9,042,000 higher at April 2, 1995 and March 31, 1996,
respectively.
(3) LEGAL MATTERS
The Textile Business participates in regional wastewater treatment
facilities and considers that it is in substantial compliance with water
pollution regulations. In 1987, the Textile Business was, however, notified by
the South Carolina Department of Health and Environmental Control ("DHEC") that
DHEC discovered certain contamination of Langley Pond near Graniteville, South
Carolina and asserted that the Textile
F-23
<PAGE> 138
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Business may be one of the parties responsible for such contamination. In 1990
and 1991, the Textile Business provided reports to DHEC summarizing its required
study and investigation of the alleged pollution and its sources which concluded
that pond sediments should be left undisturbed and in place and that other less
passive remediation alternatives either provided no significant additional
benefits or themselves involved adverse effects (i) on human health, (ii) to
existing recreational uses or (iii) to the existing biological communities. In
March 1994, DHEC appeared to conclude that while environmental monitoring at
Langley Pond should be continued, based on currently available information, the
most reasonable alternative is to leave the pond sediments undisturbed and in
place. DHEC requested the Textile Business to submit a proposal by mid-April
1995 concerning periodic monitoring of sediment deposition in the pond. The
Textile Business submitted a proposed protocol for monitoring sediment
deposition in Langley Pond on April 26, 1995. DHEC responded to the proposal on
October 30, 1995 requesting some additional information. This information was
provided to DHEC in February 1996. In April 1996, DHEC accepted the proposed
protocol for monitoring pond sediment which is expected to occur over the next
two years. The cost of monitoring pond sediment is currently expected to range
from $25,000 to $35,000 annually. Management is unable to predict at this time
what further actions, if any, may be required in connection with Langley Pond or
what the cost thereof may be. However, given DHEC's apparent conclusion in March
1994 and the absence of reasonable remediation alternatives, the Textile
Business believes the ultimate outcome of this matter will not have a material
adverse effect on its future results of operations or financial position.
The Textile Business owns a nine acre property in Aiken County, South
Carolina (the "Vaucluse Landfill"), which was used as a landfill from
approximately 1950 to 1973. The Vaucluse Landfill was operated jointly by the
Textile Business and Aiken County and may have received municipal waste and
possibly industrial waste from the Textile Business and sources other than the
Textile Business. In March 1990, a "Site Screening Investigation" was conducted
by DHEC. The Textile Business conducted an initial investigation in June 1992
which included the installation and testing of two ground water monitoring
wells. The United States Environmental Protection Agency conducted an Expanded
Site Inspection (an "ESI") in January 1994 and the Textile Business conducted a
supplemental investigation in February 1994. In response to the ESI, DHEC has
indicated its desire to have an investigation of the Vaucluse Landfill. On April
7, 1995, the Textile Business submitted a conceptual investigation approach to
DHEC. On August 22, 1995 DHEC requested that the Textile Business enter into a
consent agreement to conduct an investigation. The Textile Business has
responded to DHEC that a consent agreement is inappropriate considering the
Textile Business' demonstrated willingness to cooperate with DHEC's requests and
asked DHEC to approve the Textile Business' April 7, 1995 conceptual
investigation approach. The cost of the study proposed by the Textile Business
is estimated to be between $125,000 and $150,000. Since an investigation has not
yet commenced, the Textile Business is currently unable to estimate the cost, if
any, to remediate the landfill. Such cost could vary based on the actual
parameters of the study. Based on currently available information, the Textile
Business does not believe that the outcome of this matter will have a material
adverse effect on its future results of operations or financial position.
The Textile Business is a defendant in certain other legal proceedings
arising out of the ordinary conduct of its business. In the opinion of
management, the ultimate outcome of these legal proceedings will not have a
material adverse effect on the Textile Business' future results of operations or
financial position.
F-24
<PAGE> 139
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Graniteville Company
Graniteville, South Carolina:
We have audited the accompanying statements of assets and liabilities of
the Textile Business of Graniteville Company (a South Carolina corporation and
an indirect wholly-owned subsidiary of Triarc Companies, Inc.) as of January 2,
1994, January 1, 1995 and December 31, 1995, and the related statements of
operations, equity, and cash flows for the ten months ended January 2, 1994 and
the years ended January 1, 1995 and December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Textile Business of
Graniteville Company as of January 2, 1994, January 1, 1995 and December 31,
1995, and the results of its operations, and its cash flows for the ten months
ended January 2, 1994 and the years ended January 1, 1995 and December 31, 1995
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, Triarc Companies, Inc.
has entered into a letter of intent with Avondale Incorporated to sell
substantially all of the textile assets of the Textile Business of Graniteville
Company.
Deloitte & Touche LLP
Greenville, South Carolina
March 22, 1996
F-25
<PAGE> 140
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash....................................................... $ 2,163 $ 3,941 $ 3,401
Receivables, net (Notes 1, 4 and 8)........................ 81,955 90,682 104,374
Inventories (Notes 1, 5 and 8)............................. 78,484 69,979 65,040
Other current assets....................................... 736 1,207 3,783
---------- ---------- ------------
Total current assets............................... 163,338 165,809 176,598
---------- ---------- ------------
Properties, at cost (Notes 3, 6 and 8)....................... 163,178 184,931 188,256
Less accumulated depreciation and amortization............... 56,179 67,135 73,480
---------- ---------- ------------
106,999 117,796 114,776
---------- ---------- ------------
Cost in excess of net assets acquired (Notes 1 and 3)........ -- 7,835 8,309
Other assets................................................. 6,115 4,707 4,885
---------- ---------- ------------
$ 276,452 $ 296,147 $304,568
======== ======== ==========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt (Note 8)................. $ 12,174 $ 16,541 $ 13,701
Accounts payable........................................... 22,601 24,159 22,031
Accrued salaries and wages (Note 13)....................... 5,008 3,052 1,404
Deferred income taxes (Notes 1 and 7)...................... 6,563 7,359 7,746
Other current liabilities.................................. 7,334 7,561 9,698
---------- ---------- ------------
Total current liabilities.......................... 53,680 58,672 54,580
Long-term debt (Note 8)...................................... 150,949 154,632 196,670
Deferred income taxes (Notes 1, 3 and 7)..................... 19,760 20,728 24,061
Payable to C. H. Patrick & Company, Inc. (Note 11)........... 8,301 6,158 6,801
Other liabilities (Note 10).................................. 1,231 1,113 1,022
---------- ---------- ------------
233,921 241,303 283,134
---------- ---------- ------------
Commitments and contingencies (Notes 2, 7, 8, 9 and 12)
Equity....................................................... 42,531 54,844 21,434
---------- ---------- ------------
$ 276,452 $ 296,147 $304,568
======== ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE> 141
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED
ENDED -------------------------
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
<S> <C> <C> <C>
Net sales (Note 1).......................................... $416,418 $ 497,068 $505,687
---------- ---------- ------------
Operating costs and expenses:
Cost of goods sold (Notes 5 and 11)....................... 352,308 430,840 446,921
Depreciation and amortization............................. 10,362 13,204 14,430
Selling and administrative expenses (Note 13)............. 22,659 27,233 25,623
Management fees and other administrative expenses
allocated from parent (Notes 11 and 14)................ 7,696 4,721 4,556
Facilities relocation and corporate restructuring charges
(Note 14).............................................. 1,843 -- --
---------- ---------- ------------
394,868 475,998 491,530
---------- ---------- ------------
Operating profit.................................. 21,550 21,070 14,157
---------- ---------- ------------
Other expenses (income):
Interest expense.......................................... 11,998 15,974 21,152
Interest expense with affiliate (Note 11)................. 492 607 643
Interest income........................................... (385) (582) (738)
Loss on investment in Chesapeake Insurance Company Limited
(Note 11).............................................. 2,500 -- --
Gain on insurance recovery (Note 16)...................... -- -- (1,875)
Other, net................................................ (554) (97) 465
---------- ---------- ------------
14,051 15,902 19,647
---------- ---------- ------------
Income (loss) before income taxes................. 7,499 5,168 (5,490)
Provision for income taxes (Note 7)......................... 4,826 2,105 859
---------- ---------- ------------
Net income (loss)................................. $ 2,673 $ 3,063 $ (6,349)
========= ========== ============
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE> 142
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
STATEMENTS OF EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED
ENDED -------------------------
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
<S> <C> <C> <C>
Balance at beginning of period............................... $100,050 $ 42,531 $ 54,844
Net income (loss)............................................ 2,673 3,063 (6,349)
Additional paid-in capital resulting from SEPSCO merger (Note
3)......................................................... -- 9,700 845
Effect of carve-out accounting (Note 1)...................... (60,192) (450) (27,906)
---------- ---------- ------------
Balance at end of period..................................... $ 42,531 $ 54,844 $ 21,434
========= ======= ==========
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE> 143
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED
ENDED -------------------------
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
------------ ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................. $ 2,673 $ 3,063 $ (6,349)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities
Depreciation and amortization of properties...................... 10,362 13,204 14,430
Amortization of deferred financing costs......................... 893 1,465 1,579
Provision for deferred income taxes.............................. 1,338 737 3,720
Provision for doubtful accounts.................................. 838 (175) 971
Loss on investment in Chesapeake Insurance Company Limited....... 2,500 -- --
Other, net....................................................... (466) 24 135
Decrease (increase) in:
Receivables.................................................... (20,541) (8,551) (14,664)
Inventories.................................................... (7,338) 8,505 4,939
Other current assets........................................... (97) (471) (549)
Increase (decrease) in:
Accounts payable............................................... (3,265) 1,558 (2,128)
Other current liabilities...................................... (1,126) (1,729) (1,535)
Other liabilities.............................................. 80 (118) (93)
------------ ---------- ------------
Net cash provided by (used in) operating activities......... (14,149) 17,512 456
------------ ---------- ------------
Cash flows from investing activities:
Capital expenditures............................................... (21,923) (21,385) (11,699)
Proceeds from sale of properties................................... 534 613 549
Other, net......................................................... 112 84 86
------------ ---------- ------------
Net cash used in investing activities....................... (21,277) (20,688) (11,064)
------------ ---------- ------------
Cash flows from financing activities:
Increase (decrease) in payable to C. H. Patrick & Company, Inc..... 2,972 (2,143) 643
Repayment of long-term debt........................................ (69,810) (12,740) (8,822)
Additions to long-term debt........................................ 169,384 20,470 48,020
Effect of carve-out accounting..................................... (60,192) (450) (27,906)
Increase in deferred financing costs............................... (6,000) (183) (1,867)
------------ ---------- ------------
Net cash provided by financing activities................... 36,354 4,954 10,068
------------ ---------- ------------
Net increase (decrease) in cash...................................... 928 1,778 (540)
Cash at beginning of period.......................................... 1,235 2,163 3,941
------------ ---------- ------------
Cash at end of period................................................ $ 2,163 $ 3,941 $ 3,401
============ ========= ===========
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest......................................................... $ 10,796 $ 13,980 $ 18,937
============ ========= ===========
Income taxes..................................................... $ 4,278 $ (2,019) $ (1,061)
============
--------- ---------
--------- -----------
Supplemental schedule of non-cash investing and financing activities:
Total capital expenditures......................................... $ 22,767 $ 21,705 $ 11,699
Capital expenditures financed by capital leases.................... (844) (320) --
------------ ---------- ------------
$ 21,923 $ 21,385 $ 11,699
============ ========= ===========
</TABLE>
In April 1994 the Company's ultimate parent, Triarc Companies, Inc.
("Triarc"), acquired the 28.9% minority interest in its subsidiary and the 50%
owner of the Company, Southeastern Public Service Company ("SEPSCO"), that it
did not already own through the issuance of its common stock. As discussed
further in Note 3 to the accompanying financial statements, $13,768,000 of
Triarc's excess of cost over the carrying value of the minority interest
acquired was pushed down to the Company in the year ended January 1, 1995 and an
additional sum of $1,159,000 was pushed down in the year ended December 31,
1995. Due to its noncash nature, such pushdown has not been reflected in the
statement of cash flows for the years ended January 1, 1995 or December 31,
1995.
See accompanying notes to financial statements.
F-29
<PAGE> 144
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Graniteville Company ("the Company"), is a 50% owned subsidiary of
Southeastern Public Service Company ("SEPSCO") and an indirect wholly-owned
subsidiary of Triarc Companies, Inc. (referred to herein as "Triarc" and,
collectively with its subsidiaries, "Triarc Companies"). On January 25, 1996,
Triarc signed a letter of intent to sell substantially all of the textile assets
of the Company (the "Textile Business") to Avondale Incorporated ("Avondale")
for cash consideration of $255,000,000 plus the assumption of certain
liabilities other than long-term debt. The letter of intent specifies that
Avondale and the Company's wholly-owned subsidiary, C. H. Patrick & Company,
Inc. ("C. H. Patrick")will enter into a ten year supply agreement at the closing
of the sale. The sale is expected to close in the second quarter of calendar
year 1996.
The Textile Business has no separate legal status and is a part of the
operations of the Company. The accompanying financial statements have been
prepared from the books and records of the Company and present the assets,
liabilities, equity and operations of the Textile Business and exclude the
assets of C. H. Patrick and certain other assets, principally real estate and
notes receivable from Triarc, not directly related to the Textile Business.
Accordingly, these financial statements do not purport to represent the
financial position or results of operations of the Company.
The effect of carving out the balances and transactions not related to the
Textile Business is reflected as "Effect of carve-out accounting" in the
accompanying statements of equity and cash flows.
The Textile Business manufactures, dyes and finishes cotton, synthetic and
blended (cotton and polyester) apparel fabrics for utility wear including
uniforms and other occupational apparel, piece-dyed fabrics for sportswear,
casual wear and outerwear, indigo-dyed fabrics for jeans, sportswear and
outerwear and specialty fabrics for recreational, industrial and military
end-uses.
Fiscal Year/Change in Fiscal Year
On October 27, 1993, the Board of Directors of Triarc approved a change in
Triarc's fiscal year from a fiscal year ending April 30 to a calendar year
ending December 31 effective for the transition period ended December 31, 1993.
The fiscal years of all of Triarc's subsidiaries which did not end on December
31 were also changed. Accordingly, the Company has adopted a 52-53 week period
ending on the Sunday nearest the last day of December. As used herein,
"Transition 1993" refers to the ten month period (44 weeks) ended January 2,
1994, "Calendar 1994" refers to the year (52 weeks) ended January 1, 1995 and
"Calendar 1995" refers to the year (52 weeks) ended December 31, 1995.
Inventories
The Textile Business' inventories, consisting of materials, labor and
overhead, are valued at the lower of cost or market. Cost for approximately 92%,
89% and 89% of all inventories is determined on the last-in, first-out ("LIFO")
basis as of January 2, 1994, January 1, 1995 and December 31, 1995,
respectively. Cost for the remaining portion of the inventories is determined
using the first-in, first-out ("FIFO") method.
Depreciation
Depreciation is computed principally on the straight-line basis using the
estimated useful lives of the related major classes of properties: 3 to 6 years
for automotive and transportation equipment; 12 to 14 years for machinery and
equipment; and 15 to 60 years for buildings and improvements. Gains and losses
arising from disposals are included in current operations.
F-30
<PAGE> 145
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Amortization of Deferred Financing Costs
Deferred financing costs are being amortized as interest expense over the
life of the respective debt using the interest method. Unamortized deferred
financing costs are included in "Other assets" in the accompanying statements of
assets and liabilities.
Amortization of Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired ("Goodwill") is being amortized on
the straight-line basis over 30 years. Amortization expense was $208,000 and
$371,000 in Calendar 1994 and Calendar 1995, respectively (none in Transition
1993). Accumulated amortization was $208,000 at January 1, 1995 and $579,000 at
December 31, 1995.
The Company periodically evaluates the value of the carrying amount of
Goodwill using estimates of future cash flows and operating earnings of the
business. Adjustments to the carrying amount or amortization period of Goodwill
will be made if the earnings and cash flow outlook do not support the current
carrying value.
Impairment of Long-Lived Assets
In Calendar 1995 the Textile Business adopted Statement of Financial
Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." This standard requires that
long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of this standard had no effect on the results of operations or
financial position of the Textile Business.
Derivative Financial Instruments
The Textile Business is a party to an interest rate swap agreement under
which it receives or pays an amount each month which effectively fixes the
interest rate of certain of its floating rate debt (See Note 8). The Textile
Business recognizes such amount currently as a component of interest expense.
The recognition of gain or loss from the interest rate swap agreement is
effectively correlated with the stated interest on the underlying debt.
Research and Development
Research and development costs are expensed during the period in which the
costs are incurred and amounted to $640,000 in Transition 1993, $866,000 in
Calendar 1994 and $811,000 in Calendar 1995.
Income Taxes
The Company files a consolidated Federal income tax return with Triarc
effective April 14, 1994.
Deferred tax liabilities and assets are recognized for the expected future
tax consequences of temporary differences between the carrying amounts and the
tax basis of assets and liabilities.
Revenue Recognition
The Textile Business records revenues principally when inventory is
shipped. The Textile Business also records revenues to a lesser extent (18%, 16%
and 15% of total Textile Business revenues in Transition 1993, Calendar 1994,
and Calendar 1995, respectively) on a bill and hold basis under which the goods
are complete, packaged and ready for shipment; such goods are effectively
segregated from inventory which is available for
F-31
<PAGE> 146
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
sale; the risks of ownership of the goods have passed to the customer; and such
underlying customer orders are supported by written confirmation.
Concentration of Credit Risk
Financial instruments which potentially subject the Textile Business to
concentration of credit risk consist primarily of trade accounts receivable. The
Textile Business' customers consist of domestic and foreign apparel producers
and other users of textile products. The Textile Business performs ongoing
credit evaluations of its customers' financial condition and establishes an
allowance for doubtful accounts based upon factors surrounding the credit risk
of specific customers, historical trends and other information. In addition, the
Textile Business factors, on a non-recourse basis, a significant volume of
accounts receivable, thereby reducing its exposure to credit risk. Historically,
the Textile Business has not incurred material credit-related losses.
Major Customer
Sales to a group of customers under common control totaled approximately
12%, 12% and 11% of the Textile Business' sales in Transition 1993, Calendar
1994 and Calendar 1995, respectively. No other customer or similar group
accounted for more than 10% of sales in such periods.
(2) SIGNIFICANT RISKS AND UNCERTAINTIES
Nature of Operations
The Textile Business manufactures, dyes and finishes cotton, synthetic and
blended (cotton and polyester) apparel fabrics.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain Risk Concentrations
The Textile Business' significant concentration arises from apparel fabrics
being its principal product. The Textile Business' profitability, in part,
depends upon the cost of the Textile Business' principal raw materials, cotton
and polyester, and the demand for the Textile Business' products which can
significantly affect the Textile Business' ability to pass on cost increases in
the form of higher selling prices. To the extent cost increases cannot be passed
on to customers, the Textile Business' margins can be adversely affected. The
Textile Business is also impacted by competition from domestic textile producers
and foreign textile producers that have access to less expensive labor, and in
certain cases, raw materials. U.S. Government trade policy has changed in recent
years with passage of The North American Free Trade Agreement ("NAFTA") and a
new agreement under the General Agreement on Tariffs and Trade ("GATT"). These
agreements provide for either the elimination of tariffs or quantitative
restrictions on imports and could increase competitive pressures on the Textile
Business and, accordingly, have an adverse affect on the Textile Business.
(3) SEPSCO MERGER
On April 14, 1994, SEPSCO's shareholders other than Triarc approved an
agreement and plan of merger between Triarc and SEPSCO (the "SEPSCO Merger")
pursuant to which on that date a subsidiary of Triarc
F-32
<PAGE> 147
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
was merged into SEPSCO, whereby each holder of shares of SEPSCO's common stock
(the "SEPSCO Common Stock") other than Triarc, aggregating a 28.9% minority
interest in SEPSCO, received in exchange for each share of SEPSCO Common Stock,
0.8 shares of Triarc's Class A Common Stock or an aggregate of 2,691,824 shares.
Following the SEPSCO Merger, the Company became an indirect wholly-owned
subsidiary of Triarc.
The fair value as of April 14, 1994 of the 2,691,824 shares of Triarc's
Class A Common Stock issued in the SEPSCO Merger, net of certain related costs,
aggregated $52,105,000 (the "Merger Consideration"). The SEPSCO Merger has been
accounted for by Triarc in accordance with the "pushdown" method of accounting.
In accordance with the pushdown method of accounting, the excess of $23,888,000
of the Merger Consideration over Triarc's minority interest ($28,217,000) in
SEPSCO was "pushed-down" to SEPSCO ($17,004,000) and to the Company ($6,884,000)
as increases in Triarc's bases in SEPSCO and the Company, respectively, and
SEPSCO, in turn, "pushed-down" $6,884,000 to the Company in Calendar 1994 and an
aggregate additional sum of $1,159,000 was "pushed down" to the Company by
Triarc and SEPSCO in Calendar 1995 as increases in Triarc's and SEPSCO's bases
in the Company. The aggregate $14,927,000 increased "Additional paid-in capital"
reflecting Triarc and SEPSCO's increased bases in the Company and was assigned
as follows:
<TABLE>
<CAPTION>
AMOUNTS RELATED
TOTAL TO TEXTILE BUSINESS
------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Goodwill................................................ $12,192 $ 8,888
Properties.............................................. 4,429 2,684
Deferred income taxes................................... (1,694) (1,027)
------- ----------
Additional paid-in capital.............................. $14,927 $10,545
======= ==============
</TABLE>
(4) RECEIVABLES, NET
The following is a summary of the components of receivables:
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Receivables:
Trade............................................... $ 84,644 $ 92,145 $104,771
Other............................................... 1,595 1,728 2,971
---------- ---------- ------------
86,239 93,873 107,742
Less allowance for doubtful accounts (trade).......... 4,284 3,191 3,368
---------- ---------- ------------
$ 81,955 $ 90,682 $104,374
======= ======= ==========
</TABLE>
The following is an analysis of the allowance for doubtful accounts:
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED
ENDED -------------------------
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period....................... $3,454 $4,284 $3,191
Provision for doubtful accounts...................... 949 (173) 971
Recoveries of doubtful accounts...................... 85 -- 16
Uncollectible accounts written off................... (204) (920) (810)
---------- ---------- ------------
Balance at end of period............................. $4,284 $3,191 $3,368
========= ======= ==========
</TABLE>
F-33
<PAGE> 148
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(5) INVENTORIES
The following is a summary of the major classifications of inventories:
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials......................................... $ 10,145 $ 7,632 $ 8,138
Work in process....................................... 6,190 6,753 5,676
Finished goods........................................ 59,589 52,830 48,433
Supplies.............................................. 2,560 2,764 2,793
---------- ---------- ------------
$ 78,484 $ 69,979 $ 65,040
======= ======= ==========
</TABLE>
The current cost of LIFO inventories exceeded the carrying value thereof by
approximately $2,245,000, $4,332,000 and $8,400,000 at January 2, 1994, January
1, 1995 and December 31, 1995, respectively. In Calendar 1994 and Calendar 1995
certain inventory quantities were reduced resulting in liquidations of LIFO
inventory quantities carried at lower costs from prior years. The effect of such
liquidations was to decrease cost of goods sold by $2,462,000 and $1,206,000,
respectively. Liquidations of LIFO inventory quantities in Transition 1993 were
not significant.
(6) PROPERTIES
The following is a summary of the major classifications of properties:
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Land................................................. $ 1,090 $ 1,741 $ 1,737
Buildings and improvements........................... 31,574 43,150 45,756
Machinery and equipment.............................. 126,501 135,825 136,453
Automotive and transportation equipment.............. 4,013 4,215 4,310
---------- ---------- ------------
163,178 184,931 188,256
Less accumulated depreciation and amortization....... 56,179 67,135 73,480
---------- ---------- ------------
$ 106,999 $ 117,796 $114,776
======== ======== ==========
</TABLE>
F-34
<PAGE> 149
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCOME TAXES
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED
ENDED -------------------------
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................ $2,904 $1,207 $ (2,489)
State.............................................. 584 161 (372)
---------- ---------- ------------
3,488 1,368 (2,861)
---------- ---------- ------------
Deferred:
Federal............................................ 1,204 611 3,576
State.............................................. 134 126 144
---------- ---------- ------------
1,338 737 3,720
---------- ---------- ------------
$4,826 $2,105 $ 859
========= ======= ==========
</TABLE>
Deferred tax liabilities consist of the following components:
<TABLE>
<CAPTION>
JANUARY 2, 1994 JANUARY 1, 1995 DECEMBER 31, 1995
----------------------- ----------------------- -----------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT CURRENT NON-CURRENT
LIABILITY LIABILITY LIABILITY LIABILITY LIABILITY LIABILITY
--------- ----------- --------- ----------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Receivables............. $ 1,639 $ -- $ 1,220 $ -- $ 1,228 $ --
Inventories............. (10,583) -- (10,545) -- (10,839) --
Accrued salaries
and wages............. 1,361 -- 547 252 122 406
Other accrued
liabilities........... 1,009 -- 1,404 -- 1,732 --
Properties.............. -- (18,014) -- (19,339) -- (20,324)
Other, net.............. 11 (1,746) 15 (1,641) 11 (4,143)
--------- ----------- --------- ----------- --------- -----------
$ (6,563) $ (19,760) $ (7,359) $ (20,728) $ (7,746) $ (24,061)
========= =========== ========= =========== ========= ===========
</TABLE>
The increase in the aggregate net deferred tax liability from $26,323,000
at January 2, 1994 to $28,087,000 at January 1, 1995 of $1,764,000 is $1,027,000
greater than the deferred tax provision of $737,000 included in the provision
for income taxes for Calendar 1994. Such difference results from the deferred
taxes of $1,027,000 provided in connection with the pushdown of a portion of
Triarc's and SEPSCO's increased basis in the Company relating to its acquisition
of the minority interest of SEPSCO in the SEPSCO Merger as discussed in Note 3.
F-35
<PAGE> 150
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The difference between the reported provision for income taxes and a
computed tax based on income (loss) before income taxes at the statutory rate of
35% is reconciled as follows:
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED
ENDED -------------------------
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before income taxes.................... $7,499 $5,168 $ (5,490)
========= ======= ==========
Computed expected tax provision (benefit)............ $2,625 $1,809 $ (1,922)
Increases in Federal Taxes resulting from:
State income taxes net of federal benefit.......... 467 186 (148)
Provision for income tax contingencies............. -- -- 2,500
Amortization of non-deductible goodwill............ -- 73 130
Capital loss carryforward.......................... 875 -- --
Change in deferred taxes for rate increase to
35%............................................. 615 -- --
Other, net......................................... 244 37 299
---------- ---------- ------------
$4,826 $2,105 $ 859
========= ======= ==========
</TABLE>
The Internal Revenue Service ("IRS") is currently examining the Company's
Federal income tax returns for the tax years from 1989 through 1992 and has
issued to date notices of proposed adjustments increasing the Company's taxable
income by approximately $41,000,000, the majority of which will be contested by
the Company, the tax effect of which has not yet been determined. During
Calendar 1995, the Company provided $2,500,000 in the provision for income taxes
relating to such examination. The amount and timing of any payments required as
a result of such proposed adjustments cannot presently be determined. However,
the Company believes that it has adequate reserves for any tax liabilities,
including interest, that may result from the resolution of such proposed
adjustments.
As a result of SEPSCO's merger with Triarc on April 14, 1994 (see Note 3),
the Company and its subsidiaries became eligible to join in Triarc's
consolidated Federal tax return. Under the tax sharing agreement with Triarc,
the Company pays to Triarc an amount equal to the Federal income tax liability
that the Company and its subsidiaries would have paid if they had filed a
separate consolidated Federal income tax return. The Company has continued to
file separate state income tax returns.
(8) LONG-TERM DEBT
The following information relates to the Company's long-term debt, all of
which is attributable to the Textile Business. Avondale is not expected to
assume any of this indebtedness.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JANUARY JANUARY DECEMBER
2, 1, 31,
1994 1995 1995
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Term loan......................................... $ 72,500 $ 61,000 $ 85,200
Revolving loan.................................... 89,324 103,038 113,435
Capitalized lease obligations (Note 9)............ 793 853 574
Notes collateralized by machinery and equipment... 506 6,282 11,162
--------- --------- -----------
163,123 171,173 210,371
Less current portion of long-term debt....... 12,174 16,541 13,701
--------- --------- -----------
$150,949 $154,632 $ 196,670
========= ========= ============
</TABLE>
F-36
<PAGE> 151
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate annual maturities of the long-term debt as of December 31, 1995
are as follows (in thousands):
<TABLE>
<S> <C>
1996........................................................... $ 13,701
1997........................................................... 14,453
1998........................................................... 14,405
1999........................................................... 14,304
2000........................................................... 151,707
Thereafter..................................................... 1,801
--------
$210,371
========
</TABLE>
On April 23, 1993 the Company and C. H. Patrick entered into an
$180,000,000 senior secured credit facility (the "Graniteville Credit Facility")
with the Company's commercial lender as agent for itself and various lenders,
repaid its prior term loan and repurchased all receivables that had been sold to
such commercial lender under the Company's non-notification factoring
arrangement. On August 3, 1995 the Company amended the Graniteville Credit
Facility (the "Amended Credit Facility"). The Amended Credit Facility consists
of a senior secured revolving credit facility of up to $130,000,000 (the
"Revolving Loan") with a $5,000,000 sublimit for letters of credit and an
$86,000,000 senior secured term loan (the "Term Loan"), of which $800,000 was
repaid in Calendar 1995, and expires in 2000. As part of the Amended Credit
Facility, Graniteville's commercial lender continues to factor the Company's and
C. H. Patrick's receivables through April 23, 1999, with credit balances
assigned to secure the Amended Credit Facility (the "Factoring Arrangement").
The Revolving Loan does not require any amortization of principal prior to
its expiration in 2000. Borrowings under the Revolving Loan bear interest, at
the Company's option, at either the prime rate plus 1.00% per annum or the
90-day London Interbank Offered Rate (the "LIBOR rate") plus 2.75% per annum
(weighted average interest rate of 8.95% at December 31, 1995). All LIBOR rate
loans have a 90-day interest period and are limited to 75% of the outstanding
balance in multiples of $10,000,000 under the Amended Credit Facility. The
borrowing base for the Revolving Loan is the sum of 95% of accounts receivable
(90% effective August 3, 1996) which are credit-approved by the factor ("Credit
Approved Receivables"), plus 90% of all other eligible accounts receivable (85%
effective August 3, 1996) not to exceed $18,000,000, plus 65% of eligible
inventory, provided that advances against eligible inventory shall not exceed
$42,000,000 at any one time. The Company, in addition to the aforementioned
interest, pays a commission of 0.35% on all Credit-Approved Receivables,
including a 0.20% bad debt reserve which is shared equally by Graniteville's
commercial lender and the Company after deducting customer credit losses.
Minimum annual factoring commissions of $1,200,000 are payable under the
Factoring Arrangement through April 23, 1999.
At December 31, 1995, the Company had approximately $15,000,000 available
under the Revolving Loan.
The Term Loan is repayable $11,600,000 in 1996, $12,400,000 in 1997 through
1999 and $36,400,000 in 2000. Until the unpaid principal of the Term Loan is
equal to or less than $60,000,000 at the end of any year, the Company must make
mandatory prepayments in an amount equal to 50% of Excess Cash Flow, as defined,
for such years. In accordance therewith, no prepayments were required in
Transition 1993, Calendar 1994 or Calendar 1995. The Term Loan bears interest,
at the Company's option, at the prime rate plus 1.50% per annum or the 90-day
LIBOR plus 3.25% per annum (weighted average interest rate of 9.20% at December
31, 1995). When the unpaid principal balance of the Term Loan is less than or
equal to $72,000,000, the interest rate thereon will be reduced to the prime
rate plus 1.50% or the 90-day LIBOR rate plus 3.00%. When the unpaid principal
balance of the Term Loan is less than or equal to $57,000,000, the LIBOR rate
option will be reduced to the 90-day LIBOR plus 2.75%. In each case, the LIBOR
rate is limited to the unpaid principal balance less the principal amount of the
next two (2) quarterly payments. In the event that the Company
F-37
<PAGE> 152
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
prepays the Term Loan, in whole or in part, in the three year period commencing
August 1995, then a prepayment fee shall be payable as follows: 2.0% of the
amount prepaid if the prepayment occurs in the first year, 1.0% of the
prepayment during the second year and 1/2 of 1.0% in the third year.
On August 4, 1995, the Company borrowed $36,000,000 under the Amended
Credit Facility which it loaned to Triarc.
The Amended Credit Facility is secured by all of the assets of the Company
and C. H. Patrick, including all accounts receivable, notes receivable,
inventory, machinery and equipment, trademarks, patents and other intangible
assets, and all real estate. The Company has also pledged as collateral the
stock of C. H. Patrick. Additionally, Triarc and Graniteville International
Sales, Inc. ("Graniteville International") have unconditionally guaranteed all
obligations under the Amended Credit Facility. As collateral for such guarantee,
Triarc Companies pledged all of the issued and outstanding stock of the Company
(including the 50% owned by SEPSCO and subject to a pre-existing pledge of the
50% owned by Triarc in connection with Triarc's intercompany note payable to
SEPSCO in the principal amount of $26,538,000), and the issued and outstanding
common stock of SEPSCO owned by Triarc.
The Amended Credit Facility contains various covenants which (a) require
meeting certain financial amount and ratio tests; (b) limit, among other items
(i) the incurrence of indebtedness, (ii) investments, (iii) asset dispositions,
(iv) capital expenditures and (v) affiliate transactions other than in the
normal course of business; and (c) restrict the payment of dividends (see
below).
At December 31, 1995, the Company was not in compliance with certain of the
covenants under the Amended Credit Facility. On March 22, 1996, the Company
received waivers and negotiated amended covenants through December 31, 1996. As
a result, the related debt under the Amended Credit Facility is classified as
long-term in the accompanying statement of assets and liabilities.
The Company will be permitted to pay dividends or make loans or advances to
its affiliates in an amount equal to 50% of the net income of the Company
accumulated from the beginning of the first year commencing on or after December
20, 1994, provided that the outstanding principal balance of the Term Loan is
less than $50,000,000 at the time of the payments and certain other conditions
are met. Accordingly, based upon scheduled repayments of the Term Loan, the
Company is unable to pay any dividends or make any loans or advances to its
stockholders, including Triarc, prior to December 31, 1998.
On August 25, 1995 the Company entered into a two-year interest rate cap
agreement required by the Amended Credit Facility which effectively caps the
Company's interest rate on $108,000,000 of its borrowings by providing for the
Company to receive payment of the excess, if any, of the 90-day LIBOR rate
(5.88% at December 31, 1995) over 9.00% on the $108,000,000 contract amount.
In April 1994 and June 1995, the Company entered into seven year loan
agreements to finance the acquisition of certain machinery and equipment. The
loans, in the original amount of $6,500,000 and $6,600,000, respectively, are
repayable in equal monthly installments of principal plus accrued interest. In
connection with the April 1994 loan, the Company entered into an interest rate
swap agreement (the "Swap Agreement") that effectively fixed the interest rate
on such borrowings at 6.9% per annum for the seven year term of the loan. The
June 1995 loan bears interest at a fixed rate of 8.19% per annum.
(9) LEASE COMMITMENTS
The Textile Business leases certain machinery and equipment under long-term
lease obligations which are accounted for as capital leases and are included in
"Properties, at cost" in the accompanying statement of assets and liabilities in
the amount of $1,006,000 at January 2, 1994 and $1,299,000 at both January 1,
1995 and December 31, 1995.
F-38
<PAGE> 153
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The future minimum lease payments (net of sublease rentals which are not
significant) under capital leases and operating leases with an initial
noncancellable term in excess of one year are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
1996.......................................................... $ 257 $ 1,397
1997.......................................................... 199 712
1998.......................................................... 140 641
1999.......................................................... 33 416
2000.......................................................... -- 389
Thereafter.................................................... -- 1,910
------- ---------
Total minimum lease payments.................................... 629 $ 5,465
=======
Less amounts representing interest.............................. 55
-------
Present value of minimum lease payments (Note 8)................ $ 574
=====
</TABLE>
Rental expense under operating leases which is primarily for the rental of
real estate and equipment, was $1,911,000 in Transition 1993, $2,261,000 in
Calendar 1994 and $1,498,000 in Calendar 1995.
(10) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Postretirement benefits other than pensions consist of health care and life
insurance benefits provided to a group of former employees who retired prior to
January 1, 1990, and a limited health care benefit program provided to early
retirees who have attained age 55 and have ten years of service with the Textile
Business. With the exception of a group of retirees who retired prior to January
1, 1982, a portion of the cost of these benefits is paid by the retiree.
Net periodic postretirement benefit cost consists of the following:
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED
ENDED ---------------------------
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the period... $ 6 $ 5 $ 7
Interest cost on accumulated postretirement
benefit obligation............................. 74 65 61
Net amortization of unrecognized gain............ -- (10) (20)
--- ---------- ------
$ 80 $ 60 $ 48
========= ======= ==========
</TABLE>
F-39
<PAGE> 154
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The accumulated postretirement benefit obligation is included in "Other
liabilities" in the accompanying statements of assets and liabilities and
consists of the following:
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
----------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Retirees and dependents............................. $ 1,013 $ 751 $ 631
Active employees eligible to retire................. 96 50 93
Active employees not eligible to retire............. 131 61 117
----------- ---------- ------------
Accumulated postretirement benefit
obligation.............................. 1,240 862 841
Unrecognized net gain (loss)........................ (97) 224 179
----------- ---------- ------------
Accrued postretirement benefit obligation recognized
in the statements of assets and liabilities....... $ 1,143 $1,086 $1,020
========= ======= ==========
</TABLE>
The determination of net periodic postretirement benefit cost and
accumulated postretirement benefit obligation is based upon the Plan's benefit
provisions and the following assumptions:
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED
ENDED -------------------------
JANUARY 2, JANUARY 1, DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
<S> <C> <C> <C>
Assumed health care cost trend rate used to measure
expected costs..................................... 12.0% 11.0% 10.0%
Ultimate health care cost trend rate (to be achieved
in 1999)........................................... 6.0% 6.0% 6.0%
Discount rate for accumulated benefits............... -- 8.0% 7.0%
Discount rate for net periodic costs................. 7.0% 7.0% 8.0%
</TABLE>
If the health care cost trend rate were increased by 1%, the accumulated
postretirement benefit obligation as of December 31, 1995 would have been
increased by approximately $63,000. The effect of this change on the aggregate
of the service cost and interest cost components of the net periodic
postretirement benefit cost for Calendar 1995 would be an increase of
approximately $10,000.
(11) TRANSACTIONS WITH AFFILIATES
By agreement, Triarc provides certain management services including, among
others, legal, insurance and financial services and incurs certain costs on
behalf of the Textile Business. In Transition 1993, Calendar 1994 and Calendar
1995, such costs aggregated $5,424,000, $4,721,000 and $4,556,000, respectively
and is included in "Selling and administrative expenses allocated from parent"
in the accompanying statements of operations. The Textile Business, through
Triarc, also leased space from an affiliate for approximately $612,000 in
Transition 1993. In July 1993, Triarc Companies gave notice to terminate the
lease effective January 31, 1994 and the Textile Business recorded a charge of
$1,614,000 in Transition 1993 representing the allocated cost of such lease
termination (see Note 14).
Prior to December 1993, the Textile Business maintained certain property
insurance coverage with Chesapeake Insurance Company Limited ("Chesapeake
Insurance"), an affiliated company registered in Bermuda. Premiums attributable
to such insurance coverage amounted to $84,000 in Transition 1993. The Textile
Business also maintained certain insurance coverage with an unaffiliated
insurance company for which Chesapeake Insurance reinsured a portion of the
risk. Net premiums attributable to such reinsurance were approximately
$1,643,000 in Transition 1993. In addition, prior to July 1, 1993, Insurance and
Risk Management Inc., an affiliate until April 23, 1993, acted as agent or
broker in connection with insurance coverage obtained by the Textile Business
and provided claims processing services for the Textile Business.
F-40
<PAGE> 155
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The commissions and payments for such services paid to such company were $77,000
in the applicable period of Transition 1993.
In prior years, the Textile Business had a $2,500,000 investment in the
convertible preferred stock of Chesapeake Insurance. During its quarter ended
September 30, 1993, Chesapeake Insurance increased its reserve for insurance and
reinsurance losses by $10,000,000 and as a result reduced the stockholders'
equity of Chesapeake Insurance to $308,000. In December 1993, Triarc decided to
cease writing insurance and reinsurance of any kind through Chesapeake
Insurance. As a result, Chesapeake Insurance will not have any future operating
cash flows and its remaining liabilities, including payment of claims on
insurance previously written, will be liquidated with assets on hand.
Accordingly, the preferred stock investment is not recoverable and the Textile
Business wrote off its investment in such stock in Transition 1993 since the
decline in value was deemed to be other than temporary.
The Textile Business purchases dyes and chemicals from C. H. Patrick. Such
purchases aggregated $24,859,000, $27,930,000 and $28,981,000 in Transition
1993, Calendar 1994 and Calendar 1995, respectively.
The Textile Business has certain intercompany obligations with C. H.
Patrick which bear interest at prime plus 1.25%. Interest expense on these
obligations aggregated $492,000, $607,000 and $643,000 in Transition 1993,
Calendar 1994 and Calendar 1995, respectively, and is reported as "Interest
expense with affiliate" in the accompanying statements of operations.
(12) LEGAL MATTERS
The Textile Business participates in regional wastewater treatment
facilities and considers that it is in substantial compliance with water
pollution regulations. In 1987, the Textile Business was, however, notified by
the South Carolina Department of Health and Environmental Control ("DHEC") that
DHEC discovered certain contamination of Langley Pond near Graniteville, South
Carolina and asserted that the Textile Business may be one of the parties
responsible for such contamination. In 1990 and 1991, the Textile Business
provided reports to DHEC summarizing its required study and investigation of the
alleged pollution and its sources which concluded that pond sediments should be
left undisturbed and in place and that other less passive remediation
alternatives either provided no significant additional benefits or themselves
involved adverse effects on (i) human health, (ii) to existing recreational uses
or (iii) to the existing biological communities. In March 1994, DHEC appeared to
conclude that while environmental monitoring at Langley Pond should be
continued, based on currently available information, the most reasonable
alternative is to leave the pond sediments undisturbed and in place. DHEC
requested the Textile Business to submit a proposal by mid-April 1995 concerning
periodic monitoring of sediment deposition in the pond. The Textile Business
submitted a proposed protocol for monitoring sediment deposition in Langley Pond
on April 26, 1995. DHEC responded to this proposal on October 30, 1995
requesting some additional information. This information was provided to DHEC in
February 1996. Management is unable to predict at this time what further
actions, if any, may be required in connection with Langley Pond or what the
cost thereof may be. However, given DHEC's recent conclusion and the absence of
reasonable remediation alternatives, the Textile Business believes the ultimate
outcome of this matter will not have a material adverse effect on its future
results of operations or financial position.
The Textile Business owns a nine acre property in Aiken County, South
Carolina (the "Vaucluse Landfill"), which was used as a landfill from
approximately 1950 to 1973. The Vaucluse Landfill was operated jointly by the
Textile Business and Aiken County and may have received municipal waste and
possibly industrial waste from the Textile Business and sources other than the
Textile Business. In March 1990, a "Site Screening Investigation" was conducted
by DHEC. The Textile Business conducted an initial investigation in June 1992
which included the installation and testing of two ground water monitoring
wells. The United States Environmental Protection Agency conducted an Expanded
Site Inspection (an "ESI") in January 1994 and the Textile Business conducted a
supplemental investigation in February 1994. In response to the ESI, DHEC
F-41
<PAGE> 156
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
has indicated its desire to have an investigation of the Vaucluse Landfill. On
April 7, 1995, the Textile Business submitted a conceptual investigation
approach to DHEC. On August 22, 1995 DHEC requested that the Textile Business
enter into a consent agreement to conduct an investigation. The Textile Business
has responded to DHEC that a consent agreement is inappropriate considering the
Textile Business' demonstrated willingness to cooperate with DHEC's requests and
asked DHEC to approve the Textile Business' April 7, 1995 conceptual
investigation approach. The cost of the study proposed by the Textile Business
is estimated to be between $125,000 and $150,000. Since an investigation has not
yet commenced, the Textile Business is currently unable to estimate the cost to
remediate the landfill. Such cost could vary based on the actual parameters of
the study. Based on currently available information, the Textile Business does
not believe that the outcome of this matter will have a material adverse effect
on its future results of operations or financial position.
The Textile Business is a defendant in certain other legal proceedings
arising out of the ordinary conduct of its business. In the opinion of
management, the ultimate outcome of these legal proceedings will not have a
material adverse effect on the Textile Business' future results of operations or
financial position.
(13) RETIREMENT AND INCENTIVE COMPENSATION PLANS
The Textile Business maintains a 401(k) defined contribution plan which
covers substantially all employees. Prior to March 1994 employees could
contribute from 1% to 8% of their total earnings, subject to certain
limitations. In addition, the Textile Business may make discretionary
contributions to the plan. Discretionary retirement contribution expense was
$1,000,000 in Transition 1993 and is included in "General and administrative
expenses" in the accompanying statement of operations.
Effective March 1994, the Textile Business made various changes to the
retirement plan including an increase in allowable employee contributions.
Employees may now contribute up to 15% of earnings and the Textile Business will
match up to 75% of employee contributions based on years of service but limited
to the first 4% of employee compensation. Employer matching contributions
aggregated $1,198,000 in Calendar 1994 and $1,356,000 in Calendar 1995 and are
included in "Selling and administrative expenses" in the accompanying statements
of operations.
Prior to Transition 1993, the Textile Business maintained management
incentive plans (the "Incentive Plans") which provided for incentive
compensation of up to 10% of operating earnings and up to 10% of earnings from
sales or other dispositions of assets. The plans were administered by the
Compensation Committee of the Board of Directors of Triarc and awards for
elected corporate officers were approved by the Board. In Transition 1993, the
Textile Business reversed prior year accruals of $968,000 due to the termination
of the plans.
During Transition 1993, the Textile Business replaced the previous
Incentive Plans with annual and mid-term cash incentive plans (the "New
Incentive Plans") for certain officers and key employees. The New Incentive
Plans provide for discretionary cash awards depending upon the Textile Business'
financial performance as compared to target performance. The New Incentive Plans
are designed to yield a target award in cash if the Textile Business achieves an
agreed-upon profit over a one-year and three-year performance cycle. An amount
is accrued each year based upon the amount by which the Textile Business' profit
for such year exceeds the target performance. A new three-year performance cycle
begins each year, such that after the third year the annual amount paid to
participants will equal the target award if the Textile Business' profit goals
have been achieved. Amounts provided under the New Incentive Plans aggregated
$1,998,000 in Transition 1993 and $1,018,000 in Calendar 1994. In Calendar 1995,
the Textile Business reversed prior year accruals of $381,000.
F-42
<PAGE> 157
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Net incentive compensation expense under the Incentive Plans and the New
Incentive Plans was $1,030,000, $1,018,000 and ($381,000) in Transition 1993,
Calendar 1994, and Calendar 1995, respectively, and is included in "Selling and
administrative expenses" in the accompanying statements of operations.
During Transition 1993, Triarc granted 50,000 restricted shares of Triarc
Class A common stock to the Textile Business' chief executive officer under
Triarc's Amended and Restated 1993 Equity Participation Plan (the "Triarc Equity
Plan"). The value of the award at date of grant of $900,000 was being accrued by
the Textile Business as compensation expense over the applicable vesting period
through December 31, 1996. In December 1995, the Board of Directors of Triarc
authorized the termination of the "restriction period" related to the restricted
stock award. Accordingly, in Calendar 1995 the Textile Business accrued the
remaining balance of the compensation expense related to this award. In
addition, during Transition 1993 and Calendar 1994 Triarc granted stock options
to certain key employees of the Textile Business under the Triarc Equity Plan.
Of the Transition 1993 options, 65,000 were granted at an option price of $20.00
that was lower than the fair market value of Triarc's Class A common stock at
the date of grant of $31.75. The aggregate difference of $764,000 between the
option price and the fair market value at the date of grant is being recognized
in compensation expense over the applicable vesting period through September 28,
1998. Compensation expense resulting from the grant of restricted shares and
below market stock options, including the additional amortization resulting from
the termination of the "restriction period", aggregated $455,000 in Calendar
1994 and $690,000 in Calendar 1995 and is included in "Selling and
administrative expenses" in the accompanying statements of operations.
(14) SIGNIFICANT CHARGES IN TRANSITION 1993
The accompanying Transition 1993 statement of operations includes the
following significant charges (in thousands):
<TABLE>
<S> <C>
Estimated cost allocated to the Textile Business by Triarc to
terminate the lease on Triarc's existing corporate
headquarters.................................................. $ 1,614
Costs allocated to the Textile Business by Triarc related to a
five-year consulting agreement extending through April 1998
between Triarc and the former Vice Chairman of Triarc......... 229
-------
Total facilities relocation and corporate restructuring costs
(A)........................................................... 1,843
Estimated cost allocated to the Textile Business by Triarc for
compensation paid to the Special Committee of the Board of
Directors of Triarc (B)....................................... 1,660
Income tax benefit relating to the above charges................ (1,179)
-------
$ 2,324
=======
</TABLE>
(A) In Transition 1993, results of operations were significantly impacted by
facilities relocation and corporate restructuring charges allocated to the
Textile Business by Triarc aggregating $1,843,000 consisting of: (i)
estimated allocated costs of $1,614,000 to relocate Triarc's existing
corporate headquarters and to terminate the lease on its existing corporate
facilities, and (ii) total allocated costs of $229,000 relating to a
five-year consulting agreement (the "Consulting Agreement") extending
through April 1998 between Triarc and Steven Posner, the former Vice
Chairman of Triarc. All of such charges are related to a series of
transactions by which DWG Acquisition Group, L.P. ("DWG Acquisition")
acquired control of Triarc in April 1993 (the "Change in Control"). In
connection with the Change in Control, Victor Posner and Steven Posner
resigned as officers and directors of Triarc. In order to induce Steven
Posner to resign, Triarc entered into the Consulting Agreement with him.
The allocated cost related to the Consulting Agreement was recorded as a
charge in Transition 1993 because the Consulting Agreement does not require
any substantial services and Triarc does not expect to receive
F-43
<PAGE> 158
TEXTILE BUSINESS OF GRANITEVILLE COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
any services that will have substantial value. As a part of the Change in
Control, Triarc's Board of Directors was reconstituted. The first meeting
of Triarc's reconstituted Board of Directors was held on April 24, 1993. At
that meeting, based on a report and recommendations from a management
consulting firm that had conducted an extensive review of Triarc and
subsidiaries operations and management structure, Triarc's Board of
Directors approved a plan of decentralization and restructuring which
entailed, among other things, the following features: (i) the strategic
decision to manage Triarc in the future on a decentralized rather than on a
centralized basis; (ii) the hiring of new executive officers for Triarc;
(iii) the termination of a significant number of employees as a result of
both the new management philosophy and the hiring of an almost entirely new
management team; and (iv) the relocation of the Triarc and certain
affiliates corporate headquarters. The Textile Business' allocated costs to
relocate the corporate headquarters of Triarc and terminate the lease on
Triarc's existing corporate facilities ($1,614,000) stemmed from the
decentralization and restructuring plan formally adopted at the April 24,
1993 meeting of Triarc's reconstituted Board of Directors and accordingly,
were recorded in Transition 1993.
(B) In accordance with certain court proceedings and related settlements, five
directors, including three court-appointed directors, were appointed in
1991 to serve on a special committee (the "Triarc Special Committee") of
Triarc's Board of Directors. Such committee was empowered to review and
pass on transactions between Triarc and Victor Posner, the then largest
shareholder of Triarc, and his affiliates.
The Textile Business has been charged $1,660,000 as an allocation of the
cash portion of a success fee paid to the Triarc Special Committee
attributable to the Change in Control. Such amount has been provided in
"Management fees and other administrative expenses allocated from parent"
in the accompanying statement of operations for Transition 1993.
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of applicable financial instruments and related
underlying assumptions are as follows as of January 2, 1994, January 1, 1995 and
December 31, 1995:
Long-term debt -- The Textile Business estimates that the carrying value of
$163,123,000, $171,173,000 and $210,371,000 at January 2, 1994, January 1, 1995
and December 31, 1995, respectively, approximates the fair value of debt based
upon the floating rate of interest applicable to the Graniteville Credit
Facility or the Amended Credit Facility and the recent origination of other
debt.
Interest rate swap -- As of January 1, 1995, the fair value of the Swap
Agreement was an asset of approximately $338,000 and at December 31, 1995 such
fair value was a liability of approximately $53,000. Such amounts represent the
estimated amount the Textile Business would pay or receive to terminate the Swap
Agreement, as quoted by the financial institution. The Swap Agreement has been
entered into with a major financial institution which, therefore, is expected to
be able to fully perform under the terms of the agreement, thereby mitigating
any credit risk of the transaction.
(16) FIRE AND INSURANCE SETTLEMENT
On February 3, 1995, the Textile Business suffered fire damage to equipment
in the weaving department at one of its manufacturing facilities. The Textile
Business negotiated a property settlement with its insurance company for the
fire damaged equipment. A gain of $1,875,000 has been recognized based upon the
excess of the insurance proceeds over the book value of the damaged equipment
and certain related costs.
F-44
<PAGE> 159
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. i
Prospectus Summary..................... 1
Risk Factors........................... 17
Use of Proceeds........................ 23
Capitalization......................... 24
Pro Forma Financial Information........ 25
Selected Historical Consolidated
Financial Data....................... 31
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 34
Industry Overview...................... 45
Business -- The Company................ 47
Business -- Graniteville............... 59
The Exchange Offer..................... 62
The Transactions....................... 69
Management............................. 72
Security Ownership of Certain
Beneficial Owners and
Management........................... 78
Certain Transactions................... 79
Description of Certain Indebtedness.... 80
Description of the Notes............... 82
Certain Federal Income Tax
Consequences......................... 108
Plan of Distribution................... 108
Legal Matters.......................... 109
Experts................................ 109
Index to Financial Statements.......... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
[AVONDALE LOGO]
Avondale Mills, Inc.
$125,000,000
Offer to Exchange
Its
10 1/4% Senior Subordinated
Notes Due 2006
For
10 1/4% Senior Subordinated
Notes Due 2006
That Have Been Registered
Under the
Securities Act of 1933
Prospectus
- ------------------------------------------------------
<PAGE> 160
SCHEDULE II
AVONDALE INCORPORATED
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND (A) END OF
DESCRIPTION OF PERIOD EARNINGS DEDUCTIONS PERIOD
-------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended August 27, 1993...... Allowance for doubtful accounts $1,797 $ 277 $ (178) $1,896
Year Ended August 28, 1994...... Allowance for doubtful accounts 1,896 926 (669) 2,153
Year Ended August 25, 1995...... Allowance for doubtful accounts 2,153 1,206 (1,120) 2,239
</TABLE>
- ---------------
(A) Deductions represent customer account balances written off during the
period.
S-1
<PAGE> 161
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Avondale Incorporated's rights and obligations with respect to
indemnification of its controlling persons, directors and officers are governed
by the following provisions from its charter, bylaws and applicable state law:
Avondale Incorporated's Restated and Amended Articles of Incorporation
eliminate, to the fullest extent permitted by applicable law, the personal
liability of directors to Avondale Incorporated or its shareholders for
monetary damages for breach of duty of care or any other duty owed to
Avondale Incorporated as a director. The Georgia Business Corporation Code
currently provides that such provision shall not eliminate or limit the
liability of a director (a) for any appropriation, in violation of his
duties, of any business opportunity of Avondale Incorporated, (b) for acts
or omissions that involve intentional misconduct or a knowing violation of
law, (c) for unlawful corporate distributions or (d) for any transaction
from which the director received an improper personal benefit.
Under Article VI of Avondale Incorporated's Bylaws, Avondale
Incorporated is required to indemnify its directors, officers, employees
and agents or pay any judgment, settlement, penalty or fine, and against
expenses (including attorney's fees and expenses), incurred in connection
with any action, suit or proceedings brought against such person because he
was a director, officer, employee or agent of Avondale Incorporated,
without regard to any limitations in the Georgia Business Corporation Code;
provided, however, that Avondale Incorporated shall have no obligation to
indemnify any such person in connection with any such proceeding if such
person is adjudged liable to Avondale Incorporated or is subjected to
injunctive relief in favor of Avondale Incorporated (a) for any
appropriation, in violation of such person's duties, of any business
opportunity of Avondale Incorporated, (b) for acts or omissions that
involve intentional misconduct or a knowing violation of law, (c) for
unlawful corporate distributions or (d) for any transaction from which such
person received an improper personal benefit. Avondale Incorporated's
directors and officers are insured against losses arising from any claim
against them as such for wrongful acts or omissions, subject to certain
limitations.
The Company's rights and obligations with respect to indemnification of its
controlling persons, directors and officers are governed by the following
provisions from its bylaws and applicable state law:
Sections 10-2B-8.51 and 10-2B-8.56, Code of Alabama 1975 (the "Code"),
allow indemnification by a corporation, under certain circumstances, of any
person who was or is a party (or is threatened to be made a party) to any
threatened, pending or completed claims, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trustee, employee benefit plan or other enterprise; provided, that such
person acted in good faith and in a manner he reasonably believed to be, in
the case of conduct in his or her official capacity with the corporation,
in its best interests, and, in all other cases, in or not opposed to its
best interests and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. A corporation also
has the power under Section 10-2B-8.57 of the Code to purchase and maintain
indemnity insurance against such threatened, pending or completed claim,
action suit or proceeding on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or who is or was serving at
the request of the corporation as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise.
Article IV of the Bylaws of the Company provides that the Company
shall indemnify any current or former director or officer of the Company
and may, at the discretion of the Board of Directors, indemnify any current
or former employee or agent of the Company against expenses reasonably
incurred by him in connection with any action, suit or proceeding to which
he is a party by reason of his being or having been a director, officer or
employee of the Company or his serving, at the Company's request, as a
director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
Articles of Incorporation of the Company are silent as to indemnification.
II-1
<PAGE> 162
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
2.1 -- Asset Purchase Agreement, dated March 31, 1996 among the Company, Avondale
Incorporated, Graniteville Company and Triarc Companies, Inc.
3.1 -- Restated and Amended Articles of Incorporation of Avondale Incorporated.
3.2 -- Bylaws of Avondale Incorporated.
3.3* -- Articles of Incorporation of the Company, as amended.
3.4 -- Bylaws of the Company.
4.1 -- Indenture for the Notes between the Company and The Bank of New York, as Trustee.
4.2 -- Registration Rights Agreement, dated April 23, 1996 among the Company, Avondale
Incorporated and the CS First Boston Corporation.
4.3 -- Amended and Restated Credit Agreement, dated as of April 29, 1996, among the
Company, the Banks listed therein and Wachovia Bank of Georgia, N.A., as Agent.
4.4 -- Amended and Restated Security Agreement, dated April 29, 1996, between the Company
and Wachovia Bank of Georgia, N.A., as agent for the Banks which are parties to the
Amended and Restated Credit Agreement.
4.5 -- Amended and Restated Parent Guaranty, dated April 29, 1996, executed by Avondale
Incorporated in favor of Wachovia Bank of Georgia, N.A., as agent for the Banks
which are parties to the Amended and Restated Credit Agreement.
4.6 -- Amended and Restated Stock Pledge Agreement, dated April 29, 1996, between Wachovia
Bank of Georgia, N.A., as agent for the Banks which are parties to the Amended and
Restated Credit Agreement, and Avondale Incorporated.
4.7 -- Agreement to Provide Certain Debt Instruments to the Commission upon Request.
5.1* -- Opinion of King & Spalding.
10.1 -- Receivables Purchase Agreement, dated April 29, 1996, among the Company, the
Company, as Servicer, and Avondale Receivables Company.
10.2 -- Pooling and Servicing Agreement, dated April 29, 1996, among Avondale Receivables
Company, the Company and Manufacturers and Traders Trust Company.
10.3 -- Series 1996-1 Supplement to the Pooling and Servicing Agreement, dated April 29,
1996, among Avondale Receivables Company, the Company and Manufacturers and Traders
Trust Company.
10.4 -- The Certificate Purchase Agreement, dated April 29, 1996, among Avondale
Receivables Company, the Company, the purchasers described therein and First
National Bank of Chicago, as agent.
10.5 -- Note Purchase Agreement, dated December 28, 1995, among Oneita, Robert M. Gintel
and the Company.
10.6 -- Registration Rights Agreement, dated January 25, 1996, among Oneita and the Holders
as listed therein.
10.7 -- 10% Subordinated Promissory Note, dated January 25, 1996, executed by Oneita in
favor of the Company.
10.8 -- Registration Rights Agreement, dated April 29, 1996 between Avondale Incorporated
and the Persons listed therein.
10.9 -- Shareholders Agreement, dated April 29, 1996 among Avondale Incorporated, the
Investors listed therein, the Shareholders listed therein and Clipper Capital
Partners, L.P., in its capacity as Purchaser Representative under the Agreement.
10.10 -- Post-Merger Stock Transfer and Repurchase Agreement, dated August 27, 1993 by and
among Walton Monroe Mills, Inc., Metropolitan Life Insurance Company, 1985 Merchant
Investment Partnership, Merchant LBO, Inc., G. Stephen Felker, John F. Maypole and
Jack R. Altherr, Jr.
</TABLE>
II-2
<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
10.11 -- Post-Merger Stock Transfer and Repurchase Agreement, dated August 27, 1993 by and
among Walton Monroe Mills, Inc., Metropolitan Life Insurance Company, 1985 Merchant
Investment Partnership, Merchant LBO, Inc., G. Stephen Felker, John F. Maypole and
T. Wayne Spraggins.
10.12 -- Avondale Incorporated Stock Option Plan.
10.13 -- Avondale Mills, Inc. Associate Profit Sharing and Savings Plan.
10.14 -- Avondale Mills, Inc. Fiscal 1995 Management Incentive Plan for G. Stephen Felker.
10.15 -- Avondale Mills, Inc. Fiscal 1995 Management Incentive Plan for Jack R. Altherr, Jr.
10.16 -- Avondale Mills, Inc. Fiscal 1995 Management Incentive Plan for Richard H. Monk, Jr.
10.17 -- Avondale Mills, Inc. Fiscal 1995 Management Incentive Plan for T. Wayne Spraggins.
10.18 -- Avondale Mills, Inc. Fiscal 1995 Management Incentive Plan for C. Michael
Billingsley.
10.19 -- Phantom Unit Awards to G. Stephen Felker.
10.20 -- Phantom Unit Awards to Richard H. Monk, Jr.
10.21 -- Phantom Unit Awards to Jack R. Altherr, Jr.
10.22 -- Phantom Unit Awards to C. Michael Billingsley.
10.23 -- Phantom Unit Awards to T. Wayne Spraggins.
10.24* -- Supply Agreement dated March 31, 1996 between the Company and C. H. Patrick & Co.,
Inc.
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
23.1* -- Consent of King & Spalding (included as part of its opinion filed as Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP, independent public accountants.
23.3 -- Consent of Deloitte & Touche LLP, independent public accountants.
25.1 -- Statement of Eligibility of Trustee on Form T-1 (bound separately).
99.1 -- Form of Letter of Transmittal for 10 1/4% Senior Subordinated Notes Due 2006.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Acknowledgement of Ernst & Young LLP
</TABLE>
- ---------------
* To be filed by Amendment.
(b) Financial Statement Schedule.
Schedule II -- Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1993 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
II-3
<PAGE> 164
securities being registered, the registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
them is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 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 the registration statement through the date
of responding to the request.
The undersigned registrants hereby undertake 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 the registration statement when it became effective.
II-4
<PAGE> 165
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
each of the registrants has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Monroe, State of Georgia, on the 7th day of June, 1996.
AVONDALE INCORPORATED
By: /s/ G. STEPHEN FELKER
------------------------------------
G. Stephen Felker
Chairman of the Board, President
and Chief Executive Officer
AVONDALE MILLS, INC.
By: /s/ G. STEPHEN FELKER
------------------------------------
G. Stephen Felker
Chairman of the Board, President
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints G. Stephen Felker and Jack R. Altherr, Jr. and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission granting
unto said attorneys-in-fact and agents 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 he might or could do
in person, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his 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 by the following persons in the
capacities indicated on the 7th day of June, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ G. STEPHEN FELKER Chairman of the Board, President and Chief
- --------------------------------------------- Executive Officer of the Company and
G. Stephen Felker Avondale Incorporated
/s/ JACK R. ALTHERR, JR. Vice Chairman, Chief Financial Officer,
- --------------------------------------------- Secretary and Director of the Company and
Jack R. Altherr, Jr. Avondale Incorporated (Principal Financial
and Accounting Officer)
/s/ KENNETH H. CALLAWAY Director of the Company and Avondale
- --------------------------------------------- Incorporated
Kenneth H. Callaway
</TABLE>
II-5
<PAGE> 166
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ ROBERT B. CALHOUN Director of the Company and Avondale
- --------------------------------------------- Incorporated
Robert B. Calhoun
/s/ HARRY C. HOWARD Director of the Company and Avondale
- --------------------------------------------- Incorporated
Harry C. Howard
/s/ C. LINDEN LONGINO, JR. Director of the Company and Avondale
- --------------------------------------------- Incorporated
C. Linden Longino, Jr.
/s/ DALE J. BODEN Director of the Company and Avondale
- --------------------------------------------- Incorporated
Dale J. Boden
/s/ JOHN P. STEVENS Director of the Company and Avondale
- --------------------------------------------- Incorporated
John P. Stevens
</TABLE>
II-6
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and among
AVONDALE MILLS, INC.,
AVONDALE INCORPORATED,
GRANITEVILLE COMPANY,
and
TRIARC COMPANIES, INC.
As of March 31, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1.
PURCHASE AND SALE
Section 1.1. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2. Included Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.4. Assumption of Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.5. Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 2.
PURCHASE PRICE
Section 2.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.2. Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.3. Statement of Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.4. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.5. Post-Closing Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.6. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.2. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.3. Absence of Restrictions and Conflicts . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.4. Capitalization of Seller; Subsidiaries . . . . . . . . . . . . . . . . . . . . . 16
Section 3.5. Ownership of Assets and Related Matters . . . . . . . . . . . . . . . . . . . . . 16
Section 3.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.7. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.8. Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.10. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.11. Seller Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.12. Tax Returns; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.13. Officers, Directors and Employees . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.14. Seller Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.15. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.17. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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<TABLE>
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Section 3.18. Patents, Trademarks, Trade Names . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.19. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.20. Brokers, Finders and Investment Bankers . . . . . . . . . . . . . . . . . . . . 38
Section 3.21. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.2. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.3. Absence of Restrictions and Conflicts . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.4. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.5. Brokers, Finders and Investment Bankers . . . . . . . . . . . . . . . . . . . . . 41
Section 4.6. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
Section 5.1. Conduct of Business by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.2. Inspection and Access to Information . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.3. No Solicitation of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.4. Reasonable Efforts; Further Assurances; Cooperation . . . . . . . . . . . . . . . 48
Section 5.5. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.6. Supplements to Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.7. Offer of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.8. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.9. Conveyance Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 5.10. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 5.11. Seller Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 5.12. Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 5.13. Nonsolicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.14. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.15. Purchase of Dyes and Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.16. Timber Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 6.
CONDITIONS
Section 6.1. Conditions to Each Party's Obligations . . . . . . . . . . . . . . . . . . . . . 61
Section 6.2. Conditions to Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . . 62
Section 6.3. Conditions to Obligations of Seller . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
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ARTICLE 7.
CLOSING
Section 7.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.2. Items to be Delivered at Closing . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.3. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 8.
TERMINATION
Section 8.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.2. Specific Performance and Other Remedies . . . . . . . . . . . . . . . . . . . . . 69
Section 8.3. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE 9.
INDEMNIFICATION
Section 9.1. Indemnification Obligations of Seller . . . . . . . . . . . . . . . . . . . . . . 70
Section 9.2. Indemnification Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . 74
Section 9.3. Indemnification Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 9.4. Claims Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 9.5. Liability Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 9.6. Compliance with Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 9.7. Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE 10.
MISCELLANEOUS PROVISIONS
Section 10.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 10.2. Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 10.3. Assignment; Successors in Interest . . . . . . . . . . . . . . . . . . . . . . . 82
Section 10.4. Number; Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 10.5. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 10.6. Controlling Law; Integration; Amendment . . . . . . . . . . . . . . . . . . . . 83
Section 10.7. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 10.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 10.9. Enforcement of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 10.10. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 10.11. Valuation for Tax Reporting Purposes . . . . . . . . . . . . . . . . . . . . . 84
Section 10.12. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 10.13. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 10.14. Cooperation on Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 10.15. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
</TABLE>
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SCHEDULES
---------
<TABLE>
<S> <C> <C>
Schedule 1.3(b) - Excluded Real Property
Schedule 1.3(m) - List of other Excluded Assets
Schedule 1.4 - List of Assumed Liabilities
Schedule 3.1 - List of jurisdictions in which Seller is qualified to do business
Schedule 3.3 - Other governmental and regulatory consents of Seller
Schedule 3.4 - Ownership interests held by Seller
Schedule 3.5(a)(i) - List of Real Property and related matters
Schedule 3.5(a)(ii) - List of Liens on Real Property
Schedule 3.5(a)(iii) - List of exceptions to possession of Real Property and improvements
Schedule 3.5(a)(iv) - List of structural defects of buildings on Real Property
Schedule 3.5(a)(v) - List of real property sold, assigned, transferred or otherwise disposed of by
Seller after July 30, 1995
Schedule 3.5(b)(i) - Real Property Leases
Schedule 3.5(b)(ii) - List of Leased Property held by employees
Schedule 3.5(c)(i) - Detailed Fixed Asset Ledger of the Business
Schedule 3.5(c)(ii) - List of Personal Property held by employees
Schedule 3.5(d)(i) - Title exceptions to the Assets
Schedule 3.5(d)(ii) - List of defects in production equipment
Schedule 3.5(d)(iii) - Assets owned by third parties which are located on premises of Seller
Schedule 3.5(g) - List of third party options
Schedule 3.6 - Excluded Assets reflected on financial statements
Schedule 3.7 - List of certain liabilities and obligations of Seller involving or affecting
the Business or the Assets
Schedule 3.8(b) - List of certain changes since December 31, 1995
Schedule 3.9 - List of legal proceedings
Schedule 3.10(i) - List of all Licenses
Schedule 3.10(ii) - List of OSHA violations since 1/1/93
Schedule 3.11(i) - List of certain Seller Contracts
Schedule 3.11(ii) - List of Defaults
Schedule 3.12 - List of claims for taxes
Schedule 3.13 - List of (i) officers of Seller and their annual compensation, (ii) all
salaried employees of Seller, (iii) the approximate number of current hourly
employees, and (iv) all former employees entitled to post-retirement benefits
or any other compensation
Schedule 3.14 - Seller Benefit Plans
Schedule 3.15 - List of certain labor relations matters
Schedule 3.16 - List of Seller's insurance policies and coverages relating to the Assets
and/or the Business
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Schedule 3.17 - List of certain environmental matters
Schedule 3.17(f) - List of environmental fines, penalties and assessments
Schedule 3.18 - List of (i) all Intellectual Property, (ii) agreements relating to
Intellectual Property and (iii) all jurisdictions in which Seller is operating
the Business under a tradename and jurisdictions in which any such tradenames
are registered
Schedule 3.19 - List of transactions with Affiliates
Schedule 3.21 - List of Bank Accounts
Schedule 4.3 - Other governmental and regulatory consents of Purchaser
Schedule 6.2(e) - List of Purchaser's debt and equity investors
Schedule 6.2(f) - Consents required to be delivered at Closing
Schedule 9.1(i) - Indemnification for certain contracts
</TABLE>
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EXHIBITS
<TABLE>
<S> <C>
Exhibit AA July 30 Balance Sheet
Exhibit A Form of Statement of Net Assets
Exhibit B Legal Opinion of The McNair Law Firm, P.A.
Exhibit C Legal Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
Exhibit D Supply Agreement
Exhibit E Legal Opinion of King & Spalding
Exhibit F Legal Opinion of Wyche, Burgess, Freeman & Parham
Exhibit G Form of Assumption Agreement
Exhibit H IRS Records Retention Agreement
</TABLE>
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DEFINED TERMS
The following is a list of the defined terms used in this Agreement:
<TABLE>
<CAPTION>
Defined Terms Section
- ------------- -------
<S> <C>
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
actual knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.15
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
Assumption Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8(a)(ii)
Avondale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.21
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Business Year-End Financial Statements . . . . . . . . . . . . . . . . . 3.6
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(a)
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.17(b)
CIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5(a)
CIT Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5(a)
Claims Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(h)
Commercially Reasonable Costs . . . . . . . . . . . . . . . . . . . . . . 9.1
Competing Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19
Cutoff Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(a)
Deficit Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
Delivery Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Disputed Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
D&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(d)
Employment Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(c)
environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.17(e)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.17(a)
Enterprise Mill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(b)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(o)
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(o)
Excluded Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(e)
Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5
</TABLE>
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<TABLE>
<S> <C>
Excluded Real Property . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(b)
Excluded Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(c)
E&Y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
Factoring Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5(a)
February 1996 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . 3.6
FIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(c)
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
First Union Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5(a)
FMLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(n)
GICs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,8(a)(i)
hazardous materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.17
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3
Illiquid GICs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8(a)(i)
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3(a)
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3(a)
Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . 3.6
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . 3.18
January 1996 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . 3.6
January 1996 Income Statement . . . . . . . . . . . . . . . . . . . . . . 3.6
July 30 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.15
knows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.15
Licensed Intellectual Property . . . . . . . . . . . . . . . . . . . . . 3.18
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5(a)
LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(c)
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1
Master Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8(a)(i)
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
NLRB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
Notice of Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
NPC Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(e)
Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4(b)
OSHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10
Patrick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5(a)
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19
Personal Property Leases . . . . . . . . . . . . . . . . . . . . . . . . 3.5(b)
Personal Property Lists . . . . . . . . . . . . . . . . . . . . . . . . . 3.5(c)
Proprietary Intellectual Property . . . . . . . . . . . . . . . . . . . . 3.18
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
</TABLE>
viii
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<TABLE>
<S> <C>
Purchaser Ancillary Documents . . . . . . . . . . . . . . . . . . . . . . 4.2
Purchaser Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . 9.1
Purchaser Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1
Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2(g)
Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2(e)
release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.17(e)
Review Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Seller Ancillary Documents . . . . . . . . . . . . . . . . . . . . . . . 3.2
Seller Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
Seller Basket Amount . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5(a)
Seller Cap Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5(b)
Seller Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11
Seller Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . 9.2
Seller Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2
Seller Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8(a)(i)
Seller Surviving Obligations . . . . . . . . . . . . . . . . . . . . . . 9.4(a)
Seller Surviving Representations . . . . . . . . . . . . . . . . . . . . 9.4(a)
Seller Year-End Financial Statements . . . . . . . . . . . . . . . . . . 3.6
Statement of Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1
Title IV Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(b)
Triarc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Wachovia Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5(a)
WARN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
Williston Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(b)
Work Papers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
Year-End Financial Statements . . . . . . . . . . . . . . . . . . . . . . 3.6
</TABLE>
ix
<PAGE> 11
EXCEPT TO THE EXTENT THAT THE UNITED STATES ARBITRATION ACT APPLIES, SECTION
2.4 OF THIS AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT TO CHAPTER 48 OF TITLE
15 OF THE CODE OF LAWS OF SOUTH CAROLINA.
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of March 31, 1996 (the
"Agreement"), is made and entered into by and among AVONDALE MILLS, INC., an
Alabama corporation ("Purchaser"), AVONDALE INCORPORATED, a Georgia corporation
("Avondale"), GRANITEVILLE COMPANY, a South Carolina corporation ("Seller"),
and TRIARC COMPANIES, INC., a Delaware corporation ("Triarc").
W I T N E S E T H:
WHEREAS, Seller, an indirect wholly owned subsidiary of Triarc,
manufactures, dyes, finishes and sells cotton, synthetic and blended (cotton
and polyester) apparel fabrics for utility wear, including uniforms and other
occupational apparel, piece-dyed fabrics for sportswear, casual wear and
outerwear, indigo-dyed fabrics for jeans, sportswear and outerwear, and
speciality fabrics for recreational, industrial and military end-uses, and dyes
customer owned finished garments (the "Business"), which business does not
include C.H. Patrick & Co., Inc., a South Carolina corporation ("Patrick"); and
WHEREAS, Seller and Purchaser desire to enter into this Agreement
pursuant to which Seller proposes to sell to Purchaser, and Purchaser proposes
to purchase from Seller, substantially all of the assets and properties of
Seller used or held for use in the Business, and Purchaser proposes to assume
substantially all of the liabilities and obligations of Seller relating to the
Business (the "Acquisition"), in each case, on such conditions and subject to
the terms set forth herein; and
<PAGE> 12
WHEREAS, Triarc agrees to guarantee certain obligations of Seller
hereunder, and Avondale agrees to guarantee certain obligations of Purchaser
hereunder, in each case on such conditions and subject to the terms set forth
herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements set forth herein, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1.
PURCHASE AND SALE
Section 1.1. Purchase and Sale. Subject to the terms and conditions of
this Agreement, at the Closing (as hereinafter defined) and except as otherwise
specifically provided in this Article 1, Seller shall grant, sell, assign,
transfer and deliver to Purchaser, and Purchaser will purchase and acquire from
Seller, all right, title and interest of Seller in and to all of the assets,
properties and rights of Seller as of the Closing Date (as hereinafter defined)
constituting the Business as a going concern or used or held for use therein,
of every kind and description, real, personal and mixed, tangible and
intangible, wherever situated (which Business, assets, properties and rights
are hereinafter collectively referred to as the "Assets").
Section 1.2. Included Assets. Except as otherwise expressly set forth
in Section 1.3 hereof, the Assets shall include, without limitation, the
following assets, properties and rights of Seller as of the Closing Date:
(a) all accounts receivable, prepaid expenses and
credits;
(b) all notes receivable, security deposits, other
deposits and advances;
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<PAGE> 13
(c) all inventories, including finished products,
work-in-process, raw materials, spare parts, stores and supplies,
office supplies and other inventory items;
(d) all machinery, equipment, business machines, computer
hardware, vehicles, furniture, fixtures, tools, dies, molds, parts,
leasehold and building improvements and other tangible property;
(e) all right, title and interest of Seller in all leases
pursuant to which Seller leases real property (the "Real Property
Leases") to the extent that the transfer of such right, title and
interest is permitted under the terms thereof or a consent or waiver
has been obtained;
(f) all right, title and interest of Seller in all
contracts (written or oral), agreements or other instruments relating
to the Business including, without limitation, all purchase orders for
cotton, polyester, yarn, greige fabric and other raw materials,
machinery, equipment, inventory, supplies and other items, contracts
with customers and suppliers and all leases of personal property to
the extent that the transfer of such right, title and interest is
permitted under the terms thereof or a consent or waiver has been
obtained;
(g) (i) all real property, including the buildings,
structures, fixtures and improvements located thereon, (ii) all
licenses, permits, approvals, qualifications, easements and other
rights relating thereto, to the extent that the transfer is permitted
under the terms thereof or a consent or waiver has been obtained
(other than the Excluded Real Property), and (iii) all easements and
similar rights of Seller that are utilized in or necessary to the
Business with respect to the Excluded Real Property or other real
property (collectively, the "Real Property");
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<PAGE> 14
(h) all goodwill, patents, copyrights, know-how,
software, technical documentation, trade secrets, registered
trademarks and trade names (including "Graniteville") (and all rights
thereto and applications therefor);
(i) all rights to causes of action, lawsuits, judgments,
claims and demands of any nature available to or being pursued by
Seller with respect to the Business or the ownership, use, function or
value of any Asset, whether arising by way of counterclaim or
otherwise;
(j) all guarantees, warranties, indemnities and similar
rights in favor of Seller or Triarc, and all proceeds under insurance
policies, each with respect to any Asset or the Business;
(k) all governmental permits, licenses or similar rights
relating to the Business;
(l) all other tangible and intangible assets of any kind
or description, wherever located, which are owned by Seller; and
(m) all information, files, correspondence, records,
data, plans, contracts and recorded knowledge, including customer and
supplier lists and all accounting books and records, relating to the
Business.
Section 1.3. Excluded Assets. Notwithstanding anything to the contrary
set forth herein, the Business and the Assets shall not include the following
assets, properties and rights of Seller as of the Closing Date (collectively,
the "Excluded Assets"):
(a) all cash, commercial paper, certificates of deposit
(other than any certificate of deposit that has been posted as a
security deposit) and other bank deposits, all other cash equivalents
and marketable securities (collectively, "Cash"), in each case at or
prior to 8:00 a.m. (Atlanta time) on the Closing Date (the "Cutoff
Time");
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<PAGE> 15
(b) all property, whether real or personal, tangible or
intangible, including the buildings, structures, fixtures and
improvements located thereon and all licenses, permits, approvals,
qualifications, easements and other rights relating thereto, (i)
referred to as the "Enterprise Mill" located in Augusta, Georgia, (ii)
referred to as the "Williston Facility" located in Williston, South
Carolina, (iii) referred to as "Tract 0-2" located in Graniteville,
South Carolina, and (iv) specifically set forth on Schedule 1.3(b)
which comprises certain non-textile related property owned by Seller
(collectively with any proceeds from the sale of such property prior
to the Closing Date, the "Excluded Real Property");
(c) all of the outstanding capital stock of Graniteville
Holdings, Inc., a Delaware corporation, Chesapeake Insurance Company
Limited, a Bermuda corporation, G.M.W. Industries, Inc., a Delaware
corporation, Graniteville International Sales, Inc., a South Carolina
corporation, Patrick and any subsidiary of Seller formed to hold
and/or own any or all of the Excluded Assets, and all of the assets,
properties and rights owned by each such entity together with all
liabilities and obligations of any nature whatsoever of each such
entity (such corporations are referred to collectively as the
"Excluded Subsidiaries");
(d) all accounts receivable and/or notes receivable owed
to Seller from Triarc, including accrued interest;
(e) all intercompany agreements (collectively, the
"Excluded Agreements") relating to Patrick or Triarc or any of their
respective Affiliates, other than (i) agreements between Patrick and
Seller relating to the purchase and sale of dyes and chemicals in the
ordinary course of business and (ii) that certain Lease, dated January
8, 1996, between Seller and National Propane Corporation (the "NPC
Contract");
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<PAGE> 16
(f) any governmental permit, license or similar right
that by its terms is not transferable to Purchaser;
(g) all rights to contribution (or similar rights) in
respect of any claim as to which Seller is obligated to indemnify
Purchaser pursuant to Section 9 hereof and all rights to causes of
action, lawsuits, judgments, claims and demands of any nature to the
extent related to the Excluded Assets and the Excluded Liabilities;
(h) the corporate seal, articles of incorporation, minute
books, stock books, tax returns and other constituent records relating
to the corporate organization of Seller, and all books and records
relating exclusively to the Excluded Assets and the Excluded
Liabilities;
(i) all rights of Seller under this Agreement and the
Seller Ancillary Documents;
(j) all rights to any federal, state, local or foreign
income tax refunds, offsets or credits, including interest and
abatement of penalties, and including the rights under any tax sharing
agreement;
(k) all rights to refunds or similar payments including,
without limitation, any federal, state or local income tax refunds and
any refunds with respect to payment of rent relating to that certain
Sublease, dated July 31, 1973, between Monsanto Company and
Graniteville McCampbell Sales Division of Seller and any related
rights, including the right to make demands and claims and bring
lawsuits;
(l) security deposits held by Triarc; and
(m) the other assets, properties or rights set forth on
Schedule 1.3(m) hereto.
Section 1.4. Assumption of Assumed Liabilities. Subject to the terms
and conditions of this Agreement, at the Closing and except as otherwise
specifically provided in Section 1.5 hereof,
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<PAGE> 17
Purchaser shall assume and agree to pay, discharge or perform, as appropriate,
all liabilities and obligations of Seller existing as of the Closing Date,
whether accrued or contingent, arising out of the conduct of or relating to the
Business and/or the Assets prior to the Closing Date (collectively, the
"Assumed Liabilities"), including, without limitation, the Assumed Liabilities
set forth on Schedule 1.4.
Section 1.5. Excluded Liabilities. Notwithstanding anything to the
contrary set forth herein, the Assumed Liabilities shall not include, and in no
event shall Purchaser assume, agree to pay, discharge or perform or incur any
liability or obligation under this Agreement or otherwise become responsible in
respect of, the following (collectively the "Excluded Liabilities"):
(a) any indebtedness (including principal and accrued
interest) outstanding under any bank credit agreement or other
agreement or instrument for borrowed money or funded indebtedness to
which Seller or any of its Affiliates is a party (either as debtor or
guarantor) including, without limitation, under (i) the Revolving
Credit Term Loan and Security Agreement dated as of April 23, 1993, as
amended, among Seller, Patrick, the financial institutions party
thereto and The CIT Group/ Commercial Services, Inc., as agent ("CIT")
(the "CIT Agreement"), (ii) the Term Loan Agreement, dated as of June
23, 1995, between Seller and Wachovia Bank of South Carolina, N.A.
(the "Wachovia Agreement"), (iii) the Amended and Restated Non-
Notification Factoring Agreement dated as of April 23, 1993, among
Seller, Patrick and CIT (the "Factoring Agreement") and (iv) the Term
Loan Agreement dated as of April 7, 1994, between Seller and First
Union National Bank of Georgia (the "First Union Agreement");
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<PAGE> 18
(b) any liability or obligation of Seller that did not
arise out of the conduct of or relate to the Business and/or the
Assets;
(c) any liability or obligation arising under or relating
to any of the Excluded Assets (including, without limitation, any
liability or obligation of or relating to any of the Excluded
Subsidiaries or any other Affiliate of Seller);
(d) any liability or obligation, including, without
limitation, any accounts payable (other than accounts payable owed to
Patrick from the sale of dyes and chemicals to Seller but excluding
any interest, late fees or penalties relating to such accounts
payable), of Seller to any Excluded Subsidiary or any other Affiliate
of Seller including, without limitation, any management fees owed to
Triarc;
(e) any federal, state or local income tax and all
penalties and interest relating thereto, including, without
limitation, any such taxes which (i) are payable by Seller, Triarc or
any member of any affiliated group of which Seller is a member, (ii)
are imposed upon Seller, Triarc or any member of any affiliated group
of which Seller is a member incident to or arising as a consequence of
the negotiation or consummation of this Agreement and the transactions
contemplated hereby or (iii) are related to any Seller Benefit Plan;
(f) any liability or obligation of Seller relating to or
arising from any fraudulent act of Seller or any intentional and
knowing material violation of or material noncompliance with any
material law, statute, rule or regulation of any country, state,
municipality, or any subdivision thereof, applicable to the Business;
(g) any liability or obligation of Seller arising out of
or incurred in connection with the operation and administration of any
employee benefit plan or program sponsored by Seller
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<PAGE> 19
or an ERISA Affiliate or to which Seller or an ERISA Affiliate
is or was obligated to make contributions (other than claims for
benefits by employees and former employees of the Business under the
Seller Benefit Plans), including, without limitation, the Triarc
Companies, Inc. Healthcare Plan, the Triarc Companies, Inc. Life
Insurance Plan, the Triarc Companies, Inc. Long-Term Disability Plan
and the Triarc Companies, Inc. Business Travel Accident Plan, any
multiemployer plan or any other plan subject to Title IV of ERISA;
(h) any liability or obligation of Seller arising or
incurred in connection with the negotiation, preparation and execution
of this Agreement and the transactions contemplated hereby and any
fees and expenses of counsel, accountants, brokers, financial advisors
or other experts of Seller or any of its Affiliates, except as
otherwise provided for herein; or
(i) any liability or obligation arising under or incurred
in connection with any of the Excluded Agreements.
ARTICLE 2.
PURCHASE PRICE
Section 2.1. Purchase Price. Subject to the post-Closing adjustment
described in Section 2.5, the purchase price for the Assets will be an amount
equal to Two Hundred Fifty-Five Million Dollars ($255,000,000) (the "Purchase
Price").
Section 2.2. Payment of Purchase Price. The Purchase Price will be
paid as follows:
(a) Purchaser shall pay to Seller on the Closing Date the
amount of $255,000,000; and
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<PAGE> 20
(b) if there is a Deficit Amount (as determined pursuant
to Section 2.5), Seller shall pay to Purchaser, on the date specified
in Section 2.5, an amount equal to the Deficit Amount plus interest as
calculated in accordance with Section 2.6.
Any amounts payable pursuant to clauses (a) or (b) above shall be paid
by wire transfer of immediately available federal funds to an account to be
designated in writing to the paying party by the receiving party at least two
business days prior to the date such payment is required to be made pursuant to
this Agreement. Any post-Closing payment pursuant to Section 2.5 or any
indemnity payments to or from Seller or to or from Purchaser (other than
interest) shall be treated by Purchaser and Seller as purchase price
adjustments for all tax purposes.
Section 2.3. Statement of Net Assets. As promptly as practicable after
the Closing Date, but in any case not later than 90 days thereafter, Purchaser
shall cause to be prepared and delivered to Seller a statement of the Net
Assets (as hereinafter defined) (the "Statement of Net Assets") in accordance
with the following guidelines (the date on which such Statement of Net Assets
is delivered by Purchaser to Seller is referred to herein as the "Delivery
Date"):
(a) the Statement of Net Assets shall be in the form
attached as Exhibit A and shall set forth the net book values of the
Assets and Assumed Liabilities as of the Closing Date (the "Net
Assets"), which net book values shall be (i) derived from and in
accordance with the books and records of the Business, and (ii)
determined in accordance with generally accepted accounting principles
applied on a basis consistent with the principles used in the
preparation of the balance sheet of the Business as of July 30, 1995
(the "July 30 Balance Sheet"), including, without limitation, with
respect to the establishment of reserves for uncollectible
receivables, contingent liabilities and other items;
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<PAGE> 21
(b) the Statement of Net Assets shall have been audited
by Ernst & Young LLP ("E&Y") and shall be accompanied by their report
thereon;
(c) all inventories reflected on the Statement of Net
Assets shall be valued at the lower of cost or market consistent with
past practice with cost determined under the last-in, first-out
("LIFO") or the first-in, first-out ("FIFO") valuation method, as
appropriate for the particular inventory, consistent with past
practice; and
(d) Seller and Deloitte & Touche LLP ("D&T") shall have
the right to observe all steps (including any physical inventory)
taken by Purchaser, in connection with the preparation of the
Statement of Net Assets and to review all work papers and procedures
relating thereto and shall have complete access to all books and
records of the Business during normal business hours relevant to the
preparation of the Statement of Net Assets.
The Statement of Net Assets shall be accompanied by a statement
reflecting the amount of Cash in the Bank Accounts as of the Cutoff Time.
Seller shall (and shall instruct its bank(s) to) make available to Purchaser
and E&Y such bank records as are necessary to permit such determination by
Purchaser and E&Y.
Upon receipt by Seller of the Statement of Net Assets, Seller and D&T
shall have 60 days after the Delivery Date to review the Statement of Net
Assets delivered by Purchaser pursuant to Section 2.3 (the "Review Period"). If
Seller disputes the Statement of Net Assets so delivered by Purchaser, Seller
shall, on or prior to the last day of the Review Period, prepare and submit to
Purchaser a notice of dispute (a "Notice of Dispute") which shall set forth
Seller's proposed Statement of Net Assets and shall specifically enumerate the
items and calculations objected to in the Statement of Net Assets delivered by
Purchaser (the "Disputed Items"). If Seller fails to deliver a
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<PAGE> 22
Notice of Dispute prior to the last day of the Review Period, the Statement
of Net Assets delivered by Purchaser to Seller pursuant to Section 2.3 shall be
the final Statement of Net Assets for purposes of this Agreement. Upon receipt
of a Notice of Dispute, Seller and Purchaser will, for a period of 20 days
following delivery of such Notice of Dispute, seek in good faith to resolve all
Disputed Items and agree on a Statement of Net Assets.
Section 2.4. Arbitration. After receipt of a Notice of Dispute, if
Seller and Purchaser are unable to agree on a Statement of Net Assets within
the 20-day period referred to in the last sentence of Section 2.3, D&T and E&Y
shall jointly choose a nationally recognized firm of independent public
accountants as promptly as practicable (the "Arbitrator"), and each of Seller
and D&T, on the one hand, and Purchaser and E&Y, on the other hand, shall,
within 45 days after the date on which the Notice of Dispute was delivered by
Seller to Purchaser, prepare and submit to the other and to the Arbitrator its
respective proposed Statement of Net Assets together with a statement of its
position with respect to any unresolved Disputed Items. The Arbitrator shall,
after the submission of such information by Purchaser and Seller, review such
Disputed Items only and submit its written decision to Seller and Purchaser
within 45 days after receipt of such information by Purchaser and Seller, and
the Statement of Net Assets as adjusted by the Arbitrator shall be the final
Statement of Net Assets for purposes of this Agreement. In connection with such
review, the Arbitrator shall have complete access to all books and records of
the Business relevant to preparation of the Statement of Net Assets. Any
determination by the Arbitrator with respect to any disputes regarding the
Statement of Net Assets shall be final and binding on Seller and Purchaser. The
costs of the Arbitrator shall be borne 50% by Seller and 50% by Purchaser.
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<PAGE> 23
Section 2.5. Post-Closing Adjustment. For purposes of this Agreement,
the "Deficit Amount" shall equal the excess (if any) of (a) $242,000,000 over
(b) the actual amount of Net Assets shown on the final Statement of Net Assets.
Within five days after the final and conclusive determination of the Statement
of Net Assets pursuant to Section 2.3 or 2.4, as the case may be, Seller shall
pay to Purchaser the additional payment required by Section 2.2(b).
Section 2.6. Interest. The Deficit Amount, if any, shall accrue
interest at the "Prime Rate" (as reported in the "Money Rates" table of The
Wall Street Journal) from the Closing Date through and including the date on
which the Deficit Amount is paid. The "Prime Rate" shall be adjusted as of the
first day of each month based on the rate reported in The Wall Street Journal
as of the first business day of such month.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
Section 3.1. Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of South Carolina and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Seller is duly
qualified to transact business and is in good standing as a foreign corporation
in each jurisdiction where the character of its activities requires such
qualification other than in such jurisdictions where the failure to so qualify
would not, individually or in the aggregate, be reasonably likely to have a
material adverse effect on the assets, liabilities, results of operations,
financial condition or business of the Business ("Material Adverse Effect"),
and Schedule 3.1 contains a true and correct list of such jurisdictions. Seller
has heretofore made available to Purchaser true, correct
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<PAGE> 24
and complete copies of its articles of incorporation and bylaws as in effect as
of the date of this Agreement and has permitted Purchaser to review the minute
books of Seller.
Section 3.2. Authorization. Each of Seller and Triarc has the full
corporate power and authority to execute and deliver this Agreement and any
other certificate, agreement, document or other instrument to be executed and
delivered by it in connection with the transactions contemplated hereby
(collectively, the "Seller Ancillary Documents"), to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and each of the
Seller Ancillary Documents by Seller or Triarc, as applicable, the performance
by Seller and Triarc of their respective obligations hereunder and thereunder
and the consummation of the transactions provided for herein and therein have
been duly and validly authorized by all necessary corporate action on the part
of Seller and Triarc. The board of directors and sole stockholder of Seller and
the board of directors of Triarc have approved the execution, delivery and
performance of this Agreement and each of the Seller Ancillary Documents as
applicable and the consummation of the transactions contemplated hereby and
thereby. This Agreement has been, and each of the applicable Seller Ancillary
Documents will be as of the Closing Date, duly executed and delivered by Seller
and Triarc, as applicable, and do or will, as the case may be, constitute the
valid and binding agreements of each of Seller and Triarc, enforceable against
it in accordance with their respective terms, subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
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<PAGE> 25
Section 3.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement and the Seller Ancillary Documents,
the consummation of the transactions contemplated by this Agreement and the
Seller Ancillary Documents and the fulfillment of and compliance with the terms
and conditions of this Agreement and the Seller Ancillary Documents do not or
will not (as the case may be), with the passing of time or the giving of notice
or both, violate or conflict with, constitute a breach of or default under or
permit the acceleration of any obligation under, (a) any term or provision of
the articles of incorporation or bylaws of Seller or Triarc, (b) any Seller
Contract, Real Property Lease or Personal Property Lease (all as hereinafter
defined), (c) any judgment, decree or order of any court or governmental
authority or agency to which Seller or Triarc is a party or by which Seller or
Triarc or any of their respective properties (other than Excluded Assets) are
bound or (d) any material statute, law, rule or regulation applicable to
Seller, Triarc or the Business. Except for compliance with the applicable
requirements of (i) the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (ii) state bulk sales laws, (iii) filing of UCC-3
termination statements and documents with respect to release of mortgages and
(iv) as set forth in Schedule 3.3, no consent, approval, order or authorization
of, or registration, declaration or filing with, any governmental agency or
public or regulatory unit, agency, body or authority with respect to Seller or
Triarc is required in connection with the execution, delivery or performance of
this Agreement or the Seller Ancillary Documents by Seller or Triarc or the
consummation of the transactions contemplated by this Agreement or the Seller
Ancillary Documents by Seller or Triarc, the failure of which to obtain would
adversely affect the Business in any material respect or adversely affect the
valid and legal consummation by Triarc or Graniteville
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<PAGE> 26
of the transactions contemplated hereby or Triarc's or Graniteville's ability
to perform their respective obligations hereunder.
Section 3.4. Capitalization of Seller; Subsidiaries. All issued
and outstanding shares of capital stock of Seller are beneficially owned,
indirectly through one or more wholly owned subsidiaries, by Triarc. Other than
the Excluded Subsidiaries and except as set forth in Schedule 3.4, Seller does
not own, directly or indirectly, any capital stock or any other equity
securities of any corporation, firm, partnership, joint venture, association or
other entity. The Excluded Subsidiaries (i) as of the Closing Date will not
own or possess any assets that are utilized in or necessary to the operation of
the Business, other than the inventory of dyes and chemicals owned by Patrick
in connection with the normal business relations between Patrick and Seller,
and (ii) other than Patrick, are not material to the Business either
individually or in the aggregate. Since July 30, 1995, no assets or properties
have been transferred from Seller to any of its Affiliates other than the
Excluded Assets and any returns of dyes and chemicals to Patrick in the
ordinary course of business consistent with past practice.
Section 3.5. Ownership of Assets and Related Matters.
(a) Real Property. Schedule 3.5(a)(i) sets forth a true,
correct and complete list of all of the Real Property. The legal
description of each parcel of Real Property attached to the deeds
conveying such Real Property on the Closing Date will be true, correct
and complete. The Real Property includes, without limitation, all real
property owned by Seller or its Affiliates that is used or held for
use in the Business. Except as set forth in Schedule 3.5(a)(ii),
Seller has (and at the Closing will convey to Purchaser) good and
marketable title to the Real Property free and clear of all liens,
pledges, security interests, charges, claims,
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<PAGE> 27
leasehold interests, tenancies, restrictions, encumbrances, rights-of
way, building use restrictions, exceptions, variances, reservations or
limitations of any nature whatsoever (collectively, "Liens") other
than (i) liens for taxes, assessments or governmental charges or
levies if the same shall not at the time be delinquent; (ii) statutory
liens of landlords and Liens of carriers, workmen, warehousemen,
mechanics, materialmen and repairmen incurred in the ordinary course
of business and not yet due or delinquent; (iii) pledges or deposits
to secure obligations under workmen's compensation laws, unemployment
insurance, or other social security or retirement benefits or similar
legislation; (iv) purchase money liens upon or in any Assets (other
than Real Property) acquired or held by Seller in the ordinary course
of business; (v) zoning, building or other restrictions, variances,
covenants, rights-of-way, encumbrances, easements and minor
irregularities in title, none of which, individually or in the
aggregate, (A) will interfere in any material respect with the present
use or the occupancy of any of the Real Property, (B) have a material
effect on the value or use of any individual Real Property or (C)
would impair in any material respect the ability of Purchaser to sell
any such Real Property for its present use; and (vi) rights of setoff
existing as a matter of law (collectively, "Permitted Liens"). Except
as set forth on Schedule 3.5(a)(iii), Seller is in possession of all
of the Real Property and all buildings, structures, fixtures and
improvements located thereon. Except for the easements and other
rights described on Schedule 3.5(a)(ii), none of the Excluded Real
Property is used in the Business, and none of the Excluded Real
Property (other than the property referred to as the "Enterprise Mill"
located in Augusta, Georgia and the properties referred to as "Tract
N/N-6" and "Tract O-2" located in
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<PAGE> 28
Graniteville, South Carolina) is contiguous (including by
virtue of being across a public right-of-way) to any of the Real
Property.
Seller has heretofore made available to Purchaser true,
correct and complete copies of all deeds, deeds of trust, certificates
of occupancy, title insurance policies, title reports, surveys and
similar documents (including all amendments thereof) in the possession
of Seller relating to the Real Property. Except as set forth in
Schedule 3.5(a)(iv), to the knowledge of Seller, there are no
structural defects (excluding those arising from ordinary wear and
tear taking into account the age of such buildings) in the buildings
on the Real Property that are likely to (A) interfere in any material
respect with the present use or the occupancy of such buildings or (B)
require any capital expenditure to repair such defect in excess of
$100,000 with respect to any single defect or $500,000 with respect to
all such defects. To the knowledge of Seller, there are no
condemnation or appropriation proceedings pending or threatened
against any of the Real Property or the improvements thereon.
Schedule 3.5(a)(v) sets forth a true, correct and complete
list of each parcel of real property with a fair market value of more
than $25,000 sold, assigned, transferred or otherwise disposed of by
Seller since July 30, 1995; provided that the aggregate fair market
value of the parcels excluded from such Schedule as a result of the
$25,000 threshold does not exceed $200,000.
(b) Leases. Schedule 3.5(b)(i) sets forth a true, correct
and complete list or copy of the Real Property Leases and each lease
and agreement of Seller granting possession of or rights to personal
property with an annual payment in excess of $10,000 individually (the
"Personal Property Leases"); provided that the aggregate annual
payments under all leases
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and agreements excluded from such Schedule as a result of the $10,000
threshold do not exceed $200,000 in the aggregate. Seller has
heretofore delivered to Purchaser true, correct and complete copies of
all of the Real Property Leases and the Personal Property Leases set
forth on Schedule 3.5(b)(i). All of the Real Property Leases and the
Personal Property Leases are valid and enforceable in accordance with
their respective terms with respect to Seller and, to the knowledge of
Seller, each other party thereto. Seller has physical possession of
all real property, equipment and other assets which are covered by the
Real Property Leases and Personal Property Leases, except for such
equipment and other assets (including automobiles) which Seller has
loaned or made available to its employees for use in connection with
their employment, a correct and complete list of which is set forth on
Schedule 3.5(b)(ii).
(c) Personal Property. Seller has previously delivered to
Purchaser certain lists (the "Personal Property Lists") detailing the
following assets of Seller (in each case other than the Excluded
Assets): (i) production equipment; (ii) computer equipment; and (iii)
automobiles and other registered motor vehicles. Each of the assets
listed on the Personal Property Lists is included in the Assets
(except for assets disposed of in the ordinary course of business
consistent with past practice since the date indicated on the
applicable Personal Property List), and each of the Personal Property
Lists is a substantially complete list of assets of Seller within the
respective categories of assets purported to be listed thereon. The
detailed fixed asset ledger of the Business at December 31, 1995
attached hereto as Schedule 3.5(c)(i) is true, accurate and complete
in all material respects. Each asset listed on the Personal Property
List which Seller has loaned to its employees for use in connection
with their employment is set forth on Schedule 3.5(c)(ii).
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(d) Assets. All assets owned by Seller or its Affiliates
that are used or held for use in the Business are included in the
Assets. Except as set forth in Schedule 3.5 (a)(ii) with respect to
the Real Property and Schedule 3.5(d)(i) with respect to all other
property, Seller has (and will convey to Purchaser at the Closing)
good and marketable title to the Assets free and clear of all Liens
other than Permitted Liens, if applicable. Since December 31, 1995,
Seller has not transferred any assets from the Real Property to the
Excluded Real Property with a fair market value in excess of $25,000
in the aggregate. Except as set forth on Schedule 3.5(d)(ii), Seller
has no knowledge of any material defects (except for such defects
resulting from ordinary wear and tear taking into account the age of
such production equipment) which would prevent any production
equipment contained in the Assets from being usable in the regular and
ordinary course of the Business and in conformance in all material
respects with all applicable laws, ordinances, codes, rules and
regulations applicable thereto. Except as set forth on Schedule
3.5(d)(iii), no person other than Seller owns any equipment or other
tangible assets or properties situated on the premises of Seller which
are necessary to the operation of the Business, except for the leased
items that are subject to the Personal Property Leases.
(e) Inventories. The inventories of Seller (i) are of
such quantities as have been maintained in the ordinary course of
business consistent with past practice, (ii) consist of items which
are good and merchantable based on customary trade practices (subject
to applicable reserves consistent with past practice), (iii) are of a
quality and quantity presently usable or saleable in the ordinary
course of business of the Business (subject to applicable reserves
consistent with past practice), (iv) are valued on the books and
records of the
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Business at the lower of cost or market with the cost determined under
the LIFO or FIFO (as applied consistent with past practice) inventory
valuation method consistent with past practice and (v) are subject to
reserves determined in accordance with generally accepted accounting
principles, consistently applied. No previously sold inventory is
subject to returns in excess of those historically experienced by the
Business in the ordinary course of business consistent with past
practice.
(f) Accounts Receivable. The accounts receivable of
Seller arose from bona fide transactions in the ordinary course of
business and have been executed on terms consistent with the past
practice of the Business. The valuation of the accounts receivable of
Seller and the corresponding reserves for uncollectibility have been
recorded in accordance with generally accepted accounting principles
applied on a consistent basis.
(g) No Third Party Options. Except as set forth in
Schedule 3.5(g), there are no existing agreements granting any person
the right to acquire any of Seller's assets, properties or rights or
any interest therein (other than the Excluded Assets and other than
sales of assets in the ordinary course of business consistent with
past practice).
Section 3.6. Financial Statements. Seller has delivered to
Purchaser the following: (a) the audited balance sheets of Seller and its
consolidated subsidiaries as of January 2, 1994, January 1, 1995 and December
31, 1995, (b) the audited statements of income, stockholders' equity and cash
flows of Seller and its consolidated subsidiaries for the ten-month period
ended January 2, 1994 and the years ended January 1, 1995 and December 31, 1995
(the financial statements referred to in clauses (a) and (b) being referred to
herein collectively as the "Seller Year-End Financial Statements"), (c) the
audited balance sheets of the Business as of January 2, 1994, January 1, 1995
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and December 31, 1995, (d) the audited statements of income, stockholders'
equity and cash flows of the Business for the ten-month period ended January 2,
1994 and the years ended January 1, 1995 and December 31, 1995 (the financial
statements referred to in clauses (c) and (d) are referred to herein
collectively as the "Business Year-End Financial Statements" and, together with
the Seller Year-End Financial Statements, the "Year-End Financial Statements"),
and (e) all significant work papers relating to the preparation of the Business
Year-End Financial Statements showing the consolidating accounts and
adjustments made to the Seller Year-End Financial Statements to derive the
Business Year-End Financial Statements (the "Work Papers"). In addition, Seller
has delivered to Purchaser: (v) the July 30 Balance Sheet, (w) the unaudited
balance sheet of the Business at January 28, 1996 (the "January 1996 Balance
Sheet"), (x) the unaudited balance sheet of the Business at February 25, 1996
(the "February 1996 Balance Sheet"), (y) the unaudited statements of income,
stockholders' equity and cash flows of the Business for the four production
week period ended January 28, 1996 (the "January 1996 Income Statement"), and
(z) the unaudited statements of income, stockholders' equity and cash flows of
the Business for the four production week period ended February 25, 1996
(together with the July 30 Balance Sheet, the January 1996 Balance Sheet, the
February 1996 Balance Sheet and the January 1996 Income Statement, the "Interim
Financial Statements," together with the Year-End Financial Statements, the
"Financial Statements"). The Financial Statements have been prepared from, and
are in accordance with, the books and records of Seller, and such books and
records have been maintained on a basis consistent with the past practice of
Seller or the Business, as the case may be. Each of the balance sheets included
in the Financial Statements (including the related notes and schedules) fairly
presents in all material respects the financial position of Seller or the
Business, as the case may be, as of the date thereof, and each of the
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statements of income, stockholders' equity and cash flows included in the
Financial Statements (including any related notes and schedules) fairly
presents in all material respects the results of operations and changes in cash
flows, as the case may be, of Seller or the Business, as the case may be, for
the periods set forth therein, in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as may be noted therein (subject, in the case of the Interim
Financial Statements, to the lack of footnotes and normal year-end audit
adjustments). The January 1996 Balance Sheet and the February 1996 Balance
Sheet have been prepared on a basis consistent with the principles used in the
preparation of the July 30 Balance Sheet, including, without limitation, with
respect to the establishment of reserves for uncollectible receivables,
contingent liabilities and other items. The Business Year-End Financial
Statements and the Interim Financial Statements have been prepared on a basis
consistent with the principles used in the preparation of the Seller Year-End
Financial Statements. Except as set forth on Schedule 3.6, none of the July 30
Balance Sheet, the January 1996 Balance Sheet or the February 1996 Balance
Sheet reflects as an asset any Excluded Assets with a book value in excess of
$100,000 in the aggregate.
Section 3.7. No Undisclosed Liabilities. Except as disclosed in
Schedule 3.7, Seller does not have any liabilities or obligations, contingent
or otherwise, relating to, involving or affecting the Business or the Assets
which would be required in accordance with generally accepted accounting
principles to be reflected on the February 1996 Balance Sheet that are not
adequately reflected or provided for in the February 1996 Balance Sheet, except
liabilities and obligations incurred since the date of the February 1996
Balance Sheet in the ordinary course of business of the Business.
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Section 3.8. Absence of Certain Changes.
(a) Since December 31, 1995, there has not been (i) any material
adverse change (or, to the knowledge of Seller, any event relating specifically
to Seller or the Business which could reasonably be expected to result in a
material adverse change) in the assets, liabilities, business, financial
condition or results of operations of the Business, except as relates solely to
the Excluded Assets and excluding general industry, business or economic
conditions, or (ii) any damage, destruction, loss or casualty to property or
assets of the Business, whether or not covered by insurance, which property or
assets are material to the Business. Since December 31, 1995, Seller has (w)
maintained such quantities of supplies and inventory of the Business as have
been maintained in the ordinary course of business consistent with past
practice, (x) extended credit to customers, collected accounts receivable and
paid accounts payable and similar obligations in the ordinary course of
business consistent with past practice, (y) funded obligations with respect to
the Seller Benefit Plans on a timely basis in the ordinary course of business
consistent with past practice and (z) conducted the Business in the ordinary
course on a basis consistent with past practice and not engaged in any new line
of business or entered into any agreement, transaction or activity or made any
commitment with respect to the Business except those in the ordinary course of
business.
(b) Except as set forth in Schedule 3.8(b), since December 31,
1995, there have not been with respect to the Business (i) any liability or
obligation (absolute, accrued or contingent) incurred except in the ordinary
course of business, (ii) any guaranteed checks, notes or accounts receivable
which have been written off or reserved against as uncollectible, except bad
debt reserves established in the ordinary course of business consistent with
past practice, (iii) any write-down of the value of any asset or investment on
the books or records of the Business in excess of $25,000 individually for
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any asset or investment or $100,000 in the aggregate, except for depreciation
and amortization taken in the ordinary course of business consistent with past
practice, (iv) any cancellation of any debts or waiver of any claims or rights
(excluding credit memos issued in the ordinary course of business) except in
transactions in the ordinary course of business consistent with past practice
and which in any event are not in excess of $25,000 individually or $100,000 in
the aggregate (other than Excluded Liabilities), (v) any sale, transfer or
other disposition of any properties or assets (real, personal or mixed,
tangible or intangible), other than (A) Excluded Assets, (B) finished goods
inventory in the ordinary course of business consistent with past practice or
(C) other assets sold, transferred or otherwise disposed of in the ordinary
course of business consistent with past practice and which do not exceed
$100,000 in any single transaction with respect to greige goods and $50,000 in
any single transaction with respect to other assets, (vi) any credit memos
issued in excess of $25,000 individually or other than in the ordinary course
of business consistent with past practice, (vii) any capital expenditures or
commitments in excess of $50,000 individually or $250,000 in the aggregate,
(viii) any increase in the compensation of officers, directors or employees,
whether now or hereafter payable, other than increases in compensation of
non-officer employees made in the ordinary course of business consistent with
past practice, (ix) any increase of any reserves for contingent liabilities, or
(x) any agreements to do any of the foregoing.
Section 3.9. Legal Proceedings. Except as set forth in Schedule
3.9, there are no suits, actions, claims, proceedings or investigations pending
or, to the knowledge of Seller, threatened in writing against, relating to or
involving Seller, the Business or the Assets before any court, arbitrator or
administrative or governmental body, except for any suits, actions, claims,
proceedings or investigations relating solely to the Excluded Assets or the
Excluded Liabilities. None of such suits,
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actions, claims, proceedings or investigations are reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect. Neither
Seller nor the Business is subject to any judgment, decree, injunction or order
of any court which, in either case, imposes any restriction on the Business or
requires the payment of more than $25,000 individually or $100,000 in the
aggregate. The Business is not subject to any governmental restriction specific
to Seller and its Affiliates which is reasonably likely (a) to have a Material
Adverse Effect or (b) to cause a material limitation on Purchaser's ability to
operate the Business after the Closing in the same manner as heretofore
conducted by Seller.
Section 3.10. Compliance with Law. Seller has all material
authorizations, approvals, licenses, permits and orders of and from all
governmental and regulatory officers and bodies necessary to carry on the
Business as it is currently being conducted, to own or hold under lease the
properties and assets it owns or holds under lease and to perform all of its
obligations under the agreements to which it is a party (collectively, the
"Licenses"). Seller is in compliance in all material respects with all
applicable laws, regulations and administrative orders (including, without
limitation, laws relating to employment of labor or use or occupancy of
properties or any part thereof) of any country, state or municipality or of any
subdivision thereof to which the Business is subject. Schedule 3.10(i) sets
forth a true, correct and complete list of all Licenses. Seller has made
available to Purchaser all reports and filings made or filed by Seller pursuant
to the Occupational Safety and Health Act and related to the Business since
January 1, 1993. Except as set forth in Schedule 3.10(ii), since January 1,
1993, Seller has not violated in any material respect or failed to comply in
any material respect with, or been the subject of any written allegation by the
Occupational Safety and Health Administration ("OSHA") that it has violated or
failed to comply with, the Occupational Health and Safety Act.
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Section 3.11. Seller Contracts. Schedule 3.11(i) sets forth a true,
correct and complete list or a copy of each of the contracts, agreements,
commitments, arrangements, understandings, or other instruments (in each case
whether oral or written) (but with respect to items (i) through (iv), not
including purchase orders or sales orders) relating to the Business (including
every amendment, modification or supplement to the foregoing) (i) which
involves an annual payment to or by Seller in excess of $50,000, (ii) which
requires more than 90 days prior notice by Seller to terminate without any
liability to Seller, (iii) which limits or restricts Seller from engaging in
any business in any jurisdiction, (iv) which is material to the Business, (v)
which constitute a purchase order with over $50,000 remaining to be paid with
respect to such order, or (vi) which constitute a sales order with over
$500,000 remaining to be paid with respect to such order (which, together with
the Seller Benefit Plans listed separately in Schedule 3.14, but excluding the
Real Property Leases and the Personal Property Leases, are herein referred to
as the "Seller Contracts"). True, correct and complete copies of all written
Seller Contracts listed on Schedule 3.11(i), the Real Property Leases, the
Personal Property Leases and all polyester, cotton, yarn and greige purchase
contracts have been delivered to Purchaser. The Seller Contracts, the Real
Property Leases and the Personal Property Leases are valid and enforceable in
accordance with their respective terms with respect to Seller and, to the
knowledge of Seller, each other party thereto, subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether such enforcement is considered in a procedure
at law or in equity). Except as set forth on Schedule 3.11(ii), there is no
existing default of Seller under any Seller Contract, Real Property Lease or
Personal Property Lease or, to the knowledge of Seller, of any of the other
parties thereto (or events or conditions which with
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notice or lapse of time or both would constitute a default), which default will
result in a total loss to Buyer (including reasonable attorneys' fees and other
out of pocket expenses, but excluding the original principal amount owed not
taking the default into account with respect to any obligations for the payment
of money that are past due as of the Closing Date) of more than $10,000
individually for any single Seller Contract or $60,000 in the aggregate for all
Seller Contracts, Real Leases or Personal Property Leases. Seller has delivered
to Purchaser true, correct and complete copies of the monthly financial
packages provided to CIT since December 31, 1995 under the terms of the CIT
Agreement and the Factoring Agreement.
Section 3.12. Tax Returns; Taxes. The aggregate liability for all
taxes (other than income taxes) reflected in the February 1996 Balance Sheet is
sufficient for the payment of all such unpaid taxes other than income taxes
(including any interest, penalties and additions to tax), whether or not
disputed, that are accrued or applicable for the period ended February 25, 1996
and for all years and periods ended prior thereto. Except as set forth on
Schedule 3.12, since January 1, 1991, no tax deficiencies have been asserted
against Seller as a result of any examination by any taxing authority with
respect to such taxes. Except as set forth on Schedule 3.12, there are no
pending claims asserted for any federal, state or local taxes of Seller (other
than income taxes or any interest, penalties or additions to tax). Seller has
made all required tax payments or deposits shown as due on returns as filed
(other than with respect to income taxes or any interest, penalties or
additions to tax).
Section 3.13. Officers, Directors and Employees. Schedule 3.13
contains a true and complete list of (a) all of the officers of Seller
specifying their office and annual rate of compensation, (b) all salaried
employees of Seller (including a notation indicating which employees are plant
managers), (c) the approximate number of current hourly employees and (d) all
former employees entitled to
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post-retirement benefits or any other compensation funded by Seller under each
Seller Benefit Plan (other than COBRA). Seller has (or will have as of the
Closing Date) paid any bonuses earned by any employee of the Business in
respect of any period ending on or prior to December 31, 1995 and has properly
accrued on its books and records any bonuses earned by any employee of the
Business (whether or not yet due and payable) in respect of any portion of 1996
ending on or prior to the Closing Date.
Section 3.14. Seller Employee Benefit Plans. Except as disclosed in
Schedule 3.14:
(a) there are not any existing or former plans, programs,
policies or arrangements providing compensation or benefits of any
kind or description whatsoever (whether current or deferred and
whether paid in cash or in kind) to, or on behalf of, any current or
former employee or director of Seller or any of their dependents under
which Seller has any existing or continuing liability or obligation to
any such employee or director of Seller, including, but not limited
to, any such plan, program, practice, policy or arrangement subject to
ERISA but excluding any such plan, program, practice, policy or
arrangement relating solely to an Excluded Subsidiary (individually a
"Seller Benefit Plan" and collectively the "Seller Benefit Plans");
(b) Seller neither makes nor has any obligation to make,
or has made or had any obligation to make, either directly or
indirectly (for example, by reimbursing another employer),
contributions to any plan, program or arrangement, including a
multiemployer plan, that is subject to Title IV of ERISA ("Title IV
Plan");
(c) Seller is not a party to and does not have any
obligation whatsoever under any contract or other arrangement under
which Seller has agreed to employ any person for any
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period (individually an "Employment Contract" and collectively the
"Employment Contracts");
(d) Seller has furnished to Purchaser: (i) a true,
correct, complete and current copy of (A) each written Seller Benefit
Plan and Employment Contract and any amendments thereto and (B) with
respect to each Seller Benefit Plan, all Internal Revenue Service,
Department of Labor or Pension Benefit Guaranty Corporation rulings or
determinations, annual reports, summary plan descriptions, actuarial
and other financial reports; (ii) a complete written description of
each unwritten Seller Benefit Plan and unwritten Employment Contract;
and (iii) such other documentation with respect to any Seller Benefit
Plan or Employment Contract as is reasonably requested by Purchaser;
(e) except with respect to the Graniteville Retirement
Savings Plan, the Graniteville Company Profit Sharing Plan for the
Employees of the McCampbell Sales Division, any terminated defined
benefit plans identified with respect to Section 3.14(b) above and the
Graniteville Company Long-Term Disability Trust, no assets have been
set aside in a trust or other separate account to pay directly or
indirectly benefits under any Seller Benefit Plan or Employment
Contract. All assets of the Graniteville Retirement Savings Plan are
shown on the books and records of the master trust at their current
fair market value;
(f) each Seller Benefit Plan, Employment Contract and
each Title IV Plan has been established, maintained and administered
in compliance in all material respects with all applicable laws and
with the terms of such plans as furnished to Buyer under Section
3.14(d) above;
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(g) Seller does not have an obligation to indemnify or
hold harmless any person or entity in connection with any liability
attributable to any acts or omissions by such person or entity with
respect to any Seller Benefit Plan or Employment Contract;
(h) Seller has not incurred (and no facts exist which are
reasonably likely to subject Seller to) any liability for any material
tax or penalty with respect to any Seller Benefit Plan, Employment
Contract, Title IV Plan or any group health plan (as described in
Section 5000 of the Internal Revenue Code of 1986, as amended (the
"Code")) of an ERISA Affiliate including, without limitation, any tax
or penalty under ERISA;
(i) neither Seller nor any ERISA Affiliate has (within
the last three years) terminated or withdrawn from or sought a funding
waiver for, and, to the knowledge of Seller, no facts exist which
could reasonably be expected to result in a termination or withdrawal
from or a request for a funding waiver for, any Title IV Plan;
(j) Seller has not incurred, and to the knowledge of
Seller, no facts exist which are reasonably likely to subject Seller
to, any liability as a result of a termination or withdrawal from or a
funding waiver for any Title IV Plan maintained by an ERISA Affiliate;
(k) there are no pending or threatened claims with
respect to a Seller Benefit Plan, Employment Contract or Title IV Plan
(other than routine claims made in the ordinary course of plan or
contract operations) or with respect to the terms and conditions of
employment or termination of employment of any employee or former
employee of Seller, which claims could reasonably be expected to
result in any material liability to Seller, and no audit or
investigation by any domestic or foreign governmental or other law
enforcement agency is pending or has
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been proposed with respect to any Seller Benefit Plan, Employment
Contract or Title IV Plan maintained by Seller or an ERISA Affiliate;
(l) no written, or to the knowledge of Seller, oral
representations have been made by Seller to employees or former
employees of the Business (or their dependents or beneficiaries) to
the effect that coverage or benefits, including post-retirement
medical or life insurance coverage or benefits, under any Seller
Benefit Plan cannot be terminated, amended, reduced or otherwise
changed unilaterally by Seller or, after the Closing Date, by
Purchaser;
(m) the sale of the Business as contemplated by this
Agreement will not result in any additional payments to or increase
the vested interest of any current or former employee or director or
their dependents under any Seller Benefit Plan and, to the extent any
such payments or increase in vesting are required as a result of the
transactions contemplated by this Agreement, they will not result in
any "excess parachute payments" within the meaning of Section 280G of
the Code;
(n) Seller has provided Purchaser with a copy of Seller's
policy for providing leaves of absence under the Family and Medical
Leave Act ("FMLA") and has identified (i) each employee who is
eligible to request FMLA leave; (ii) the amount of FMLA leave utilized
by each such employee during the current leave year; (iii) each
employee who is on FMLA leave at the Closing Date and his or her job
title and description, salary and benefits; (iv) each employee who has
requested FMLA leave to begin after the Closing Date and a description
of the leave requested; and (v) a copy of all notices provided to such
employee regarding that leave; and
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(o) the Seller Savings Plan (as defined below) has at all
times satisfied the applicable qualification requirements under
Section 401(a) of the Code and related Sections and regulations.
For purposes of this Section 3.14, (x) "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended from time to time, and any
regulations or published rulings promulgated or issued thereunder, and (y)
"ERISA Affiliate" shall mean any trade or business (whether incorporated or
unincorporated) which is a member of a group described in Section 414(b), (c),
(m) or (o) of Code, of which Seller is also a member.
Section 3.15. Labor Relations. Since January 1, 1993, except as set
forth in Schedule 3.9 or Schedule 3.15, (a) employees of Seller have not been
and are not represented by a labor organization which was either National Labor
Relations Board ("NLRB") certified or voluntarily recognized or recognized
under foreign law; (b) Seller has not been and is not a signatory to a
collective bargaining agreement with any labor organization; (c) to the
knowledge of Seller, no representation election petition has been filed by
employees of Seller or is pending with the NLRB and no union organizing
campaign involving employees of Seller has occurred or is in progress; (d) to
the knowledge of Seller, no NLRB unfair labor practice claims have been filed
and/or are presently pending against Seller or any labor organization
representing its employees; (e) to the knowledge of Seller, no handbilling,
picketing, work stoppage (sympathetic or otherwise), or other "concerted
action" involving the employees of Seller has occurred or is in progress; (f)
to the knowledge of Seller, no written claim for unpaid wages or overtime or
for child labor or recordkeeping violations has been filed or is pending under
the Fair Labor Standards Act, Davis-Bacon Act, Walsh-Healey Act, or Service
Contract Act or any other Federal, state, local or foreign law, regulation, or
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ordinance, in each case relating to the Business; (g) no citation has been
issued by OSHA against Seller and no notice of contest or OSHA administrative
enforcement proceeding involving Seller has been filed or is pending; (h) no
citation of Seller has occurred and no enforcement proceeding has been
initiated or is pending under Federal or foreign immigration law; and/or (i)
except as may result from Buyer's failure to rehire any current employees of
Seller, Seller has not taken any action that would constitute a "mass layoff"
or "plant closing" within the meaning of the Worker Adjustment and Retraining
Notification Act of 1988, as amended, or any similar state or local law
("WARN") or otherwise trigger notice requirements or liability under any local
or state plant closing notice law. Seller is in compliance in all material
respects with all federal, state and local laws respecting employment and
employment practices, terms and conditions of employment, wages and hours.
Section 3.16. Insurance. Schedule 3.16 sets forth a true, correct
and complete list of Seller's current insurance policies and coverages relating
to the Assets and/or the Business, including names of carriers, amounts of
coverage and premiums therefor. Seller has heretofore made available to
Purchaser true, correct and complete copies of all such insurance policies. The
Assets and the Business have been and are insured by financially sound and
reputable insurers in such amounts and against such risks as are reasonable in
relation to the Business, and Seller will maintain such insurance at least
through the Closing Date.
Section 3.17. Environmental Matters. Except as set forth in
Schedule 3.17 or as to any matters relating solely to the Excluded Assets:
(a) Seller possesses, and is in compliance in all
material respects with, all material permits, licenses and government
authorizations and has filed all notices that are required for the
conduct of the Business under local, state, federal and foreign laws
and regulations
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relating to protection of the environment, pollution control and
hazardous materials (as defined below) as of the date hereof
("Environmental Laws"), and Seller is in compliance in all material
respects with all other applicable limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables of Environmental Laws or contained in any
code, plan, order, decree, judgment, notice, permit or demand letter
issued, entered, promulgated or approved thereunder.
(b) To the knowledge of Seller, there are no facts or
circumstances which could form the basis for the assertion of any
material claim against Seller under any Environmental Laws including,
without limitation, the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or any analogous local,
state or foreign law with respect to any on-site or off-site location.
(c) Since January 1, 1993, Seller has not entered into
and is not currently bound by any consent decree or order under, and
is not subject to any judgment, decree or judicial or administrative
order relating to compliance with, or the cleanup of regulated
substances under, any applicable Environmental Laws.
(d) Seller has not been alleged in a writing delivered to
Seller to be in violation of, and has not been subject to any
administrative or judicial proceeding pursuant to, applicable
Environmental Laws either now or any time during the past five years.
(e) To the knowledge of Seller, Seller is not subject to
any material claim, obligation, liability, loss, damage or expense of
whatever kind or nature, contingent or otherwise, incurred or imposed
pursuant to or based upon any provision of any Environmental Law and
arising out of any act or omission of Seller, its employees, agents or
representatives
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or arising out of the ownership, use, control or operation by Seller
of any plant, facility, site, area or property (including, without
limitation, any plant, facility, site, area or property currently or
previously owned or leased by Seller included in the Real Property or
Real Property Leases) from which any substance was released into the
environment (the term "release" meaning any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment, and the
term "environment" meaning any surface or ground water, drinking water
supply, soil, surface or subsurface strata or medium, or the ambient
air).
(f) Seller has heretofore provided Purchaser with true,
correct and complete copies of or access to all files of Seller
relating to environmental matters and Schedule 3.17(f) sets forth the
amount of all fines or penalties paid within the last five years by
Seller with respect to environmental matters, including the date of
payment and the basis for the assertions of liability.
As used in this Agreement, the term "hazardous materials" means any
waste, pollutant, hazardous substance, toxic, ignitable, reactive or corrosive
substance, hazardous waste, special waste, industrial substance, by-product,
process intermediate product or waste, petroleum or petroleum-derived substance
or waste, chemical liquids or solids, liquid or gaseous products, or any
constituent of any such substance or waste, the use, handling or disposal of
which by Seller is in any way governed by or subject to any applicable law,
rule or regulation of any governmental or regulatory authority.
Section 3.18. Patents, Trademarks, Trade Names. Schedule 3.18 sets
forth a true and complete list of: (a) all patents, registered trademarks and
trade names (including all federal, state and
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foreign registrations pertaining thereto) and all copyright registrations owned
by Seller and used or held for use in, or otherwise relating to, the Business
(together with all software owned by Seller, collectively, the "Proprietary
Intellectual Property"); and (b) all patents, trademarks, trade names,
copyrights, software, technology and processes used by Seller in the Business
that are used pursuant to a license or other right granted by a third party
(collectively, the "Licensed Intellectual Property", and together with the
Proprietary Intellectual Property herein referred to as "Intellectual
Property"); provided that Schedule 3.18 does not require the listing of any
"shrink wrap" software that Seller uses pursuant to the standard form license
of the software licensor. Seller owns, or has the right to use pursuant to
valid and effective agreements set forth in Schedule 3.18, all Intellectual
Property material to the conduct of the Business, and all such rights shall be
assigned and transferred to Purchaser in connection with the transactions
contemplated hereby. No written, or to the knowledge of Seller, oral claims are
pending against or have been delivered to Seller by any person with respect to
the use of any Intellectual Property or challenging or questioning the validity
or effectiveness of any license or agreement relating to the same, and the
current use by Seller of the Intellectual Property does not infringe in any
material respect on the rights of any third party. Schedule 3.18 sets forth a
list of all jurisdictions in which Seller is operating the Business under a
trade name, and each jurisdiction in which any such tradename is registered.
Section 3.19. Transactions with Affiliates. Except as set forth in
Schedule 3.19, (i) no shareholder, officer or director of Seller or officer or
director of Triarc, (ii) to the knowledge of Seller or Triarc, any person with
whom any such shareholder, officer or director has any direct or indirect
relation by blood, marriage or adoption, or any entity in which any such person
owns any beneficial interest (other than a publicly held corporation whose
stock is traded on a national securities
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exchange or in the over-the-counter market and less than 5% of the stock of
which is beneficially owned by all such persons), (iii) to the knowledge of
Seller or Triarc, any Affiliate of any of the foregoing or (iv) Triarc, or to
the knowledge of Triarc or Seller, any other Affiliate of Seller, has any
interest in: (a) any contract, arrangement or understanding with, or relating
to, the Business, the Assets or the Assumed Liabilities other than contracts,
arrangements or undertakings relating to the purchase of dyes and chemicals
from Patrick in the ordinary course of business consistent with past practice;
(b) any loan, arrangement, understanding, agreement or contract for or relating
to the Business or the Assets; or (c) any property (real, personal or mixed),
tangible or intangible, used or currently intended to be used in the Business.
Any accounts payable of the Business due and payable to Patrick that are
Assumed Liabilities are recorded on the books and records of the Business at
the fair market value thereof. For purposes of this Agreement, "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", when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. In addition, for
purposes of this definition, "Person" means any individual, corporation,
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.
Section 3.20. Brokers, Finders and Investment Bankers. Neither
Seller nor any of its officers, directors or employees, has employed any
broker, finder or investment banker or incurred any liability for any
investment banking fees, financial advisory fees, brokerage fees or finders'
fees in connection with the transactions contemplated herein, except that
Seller (i) has retained Morgan
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Stanley & Co. Incorporated and Lazard Freres & Co. LLC as its financial
advisors and (ii) may incur fees in connection with any prepayments of the CIT
Agreement and any other indebtedness described in Section 1.5(a).
Section 3.21. Bank Accounts. Schedule 3.21 sets forth a true,
correct and complete description of each of Seller's bank accounts, lock box
accounts and other accounts in which it holds the assets described in Section
1.3(a) (the "Bank Accounts").
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
Section 4.1. Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Alabama and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Section 4.2. Authorization. Each of Purchaser and Avondale has the
full corporate power and authority to execute and deliver this Agreement and
any other certificate, agreement, document or other instrument to be executed
and delivered by it in connection with the transactions contemplated hereby
(collectively, the "Purchaser Ancillary Documents"), to perform its respective
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and each of the Purchaser Ancillary Documents by Purchaser or Avondale, as
applicable, the performance by Purchaser and Avondale of their respective
obligations hereunder and thereunder and the consummation of the transactions
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provided for herein and therein have been duly and validly authorized by all
necessary corporate action on the part of Purchaser and Avondale. The boards of
directors of Purchaser and Avondale have approved the execution, delivery and
performance of this Agreement and each of the Purchaser Ancillary Documents, as
applicable, and the consummation of the transactions contemplated hereby and
thereby. This Agreement has been, and each of the Purchaser Ancillary Documents
will be as of the Closing Date, duly executed and delivered by Purchaser and
Avondale, as applicable, and do or will, as the case may be, constitute the
valid and binding agreements of Purchaser and Avondale, enforceable against it
in accordance with their respective terms, subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
Section 4.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement and the Purchaser Ancillary
Documents, the consummation of the transactions contemplated by this Agreement
and the Purchaser Ancillary Documents and the fulfillment of and compliance
with the terms and conditions of this Agreement and the Purchaser Ancillary
Documents do not or will not (as the case may be), with the passing of time or
the giving of notice or both, violate or conflict with, constitute a breach of
or default under or permit the acceleration of any obligation under, (a) any
term or provision of the articles of incorporation or bylaws of Purchaser or
Avondale, (b) any contract, agreement, commitment, arrangement, understanding
or other instrument (in each case whether oral or written) to which Purchaser
or Avondale is a party or to which Purchaser or Avondale or any of their
respective properties are subject, (c) any judgment, decree or order of any
court or governmental authority or agency to which
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Purchaser or Avondale is a party or by which Purchaser or Avondale or any of
their respective properties are bound or (d) any material statute, law, rule or
regulation applicable to Purchaser or Avondale. Except for compliance with the
applicable requirements of (i) the HSR Act, (ii) state bulk sales laws, (iii)
filing of UCC-3 termination statements and documents with respect to release of
mortgages and (iv) as set forth in Schedule 4.3, no consent, approval, order or
authorization of, or registration, declaration or filing with, any government
agency or public or regulatory unit, agency, body or authority with respect to
Purchaser or Avondale is required in connection with the execution, delivery or
performance of this Agreement and the Purchaser Ancillary Documents by
Purchaser or Avondale or the consummation of the transactions contemplated by
this Agreement and the Purchaser Ancillary Documents by Purchaser or Avondale.
Section 4.4. Legal Proceedings. There are no actions or
proceedings pending or, to the knowledge of Purchaser, threatened in writing
against, relating to or involving Purchaser, Avondale or any of their assets or
properties which are reasonably likely to result in the issuance of an order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated herein.
Section 4.5. Brokers, Finders and Investment Bankers. Neither
Purchaser nor any of its officers, directors or employees has employed any
broker, finder or investment banker or incurred any liability for any
investment banking fees, financial advisory fees, brokerage fees or finders'
fees in connection with the transactions contemplated herein, except that, (i)
Purchaser has retained CS First Boston Corporation as its financial advisor and
(ii) may incur fees in connection with any prepayments of the CIT Agreement.
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Section 4.6. Financing. Purchaser has sufficient cash or available
credit facilities or commitment letters from banks or other suitable financing
sources for funds to pay the Purchase Price and to make all other necessary
payments of fees and expenses in connection with the transactions contemplated
by this Agreement and the Purchaser Ancillary Documents.
ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
Section 5.1. Conduct of Business by Seller. From the date hereof
until the Closing Date, Seller will with respect to the conduct of Business,
except as required in connection with the transactions contemplated by this
Agreement and except as otherwise consented to in writing by Purchaser:
(a) conduct the Business in the ordinary course on a
basis consistent with past practice and not engage in any new line of
business or enter into any agreement, transaction or activity or make
any commitment with respect to the Business except those in the
ordinary course of business and not otherwise prohibited under this
Section 5.1;
(b) use its commercially reasonable efforts to preserve
intact the goodwill of the Business in all material respects, keep the
officers and employees of Seller available to Purchaser (except to the
extent of voluntary terminations of employment) and preserve the
relationships of Seller with customers, suppliers and others having
business relations with the Business, except for the termination of
relationships in the ordinary course of business;
(c) not create any new subsidiary except to hold Excluded
Assets or Excluded Liabilities, acquire any capital stock or other
equity securities of any corporation or acquire
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any equity or ownership interest in any business other than in the
ordinary course of business in connection with the collection of
accounts receivable;
(d) not dispose of or, to the extent practicable, permit
to lapse any rights to the use of any material patent, trademark,
trade name, license or copyright relating to the Assets or the
Business, including, without limitation, any material Intellectual
Property, or dispose of or disclose to any person, any trade secret,
formula, process, technology or know-how other than in the ordinary
course of Business material to the Assets or the Business not
heretofore a matter of public knowledge;
(e) not (i) sell any assets other than Excluded Assets
and finished goods inventory sold in the ordinary course of business,
(ii) contractually incur any liability or obligation (absolute,
accrued or contingent) except in the ordinary course of business
consistent with past practice; (iii) write-off (or establish reserves
against uncollectibility for) any guaranteed checks, notes or accounts
receivable except in the ordinary course of business consistent with
past practice, (iv) write-down the value of any asset or investment
(including, without limitation, any of the Assets) on the books or
records of the Business, except for depreciation and amortization in
the ordinary course of business consistent with past practice, (v)
cancel any debt or waive any claims or rights except in the ordinary
course of business consistent with past practice, (vi) make any
commitment for any capital expenditure relating to the Business to be
made on or after April 29, 1996 (or, if the Closing occurs after April
29, 1996, on or after May 31, 1996), in excess of $5,000 in the case
of any single expenditure or $50,000 in the case of all capital
expenditures, or (vii) establish any new reserves or increase any
reserves already existing on Seller's books other than in the ordinary
course of business
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consistent with past practice based on information of which Seller
first becomes aware following the date hereof, provided that clauses
(iii), (iv) and (vii) of this Section 5.1(e) will not prohibit Seller
from taking any action required in accordance with generally accepted
accounting principles applied on a consistent basis with Seller's past
practices so long as Seller has given Purchaser advance notice of such
action;
(f) except as necessary to comply with applicable law,
not enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers, directors
or employees nor grant any increase in the compensation of officers,
directors or employees involved in the Business, whether now or
hereafter payable, including any such increase pursuant to any option,
bonus, stock purchase, pension, profit-sharing, deferred compensation,
retirement or other plan, arrangement, contract or commitment,
provided that Seller shall be permitted to increase the compensation
of any salaried, non-officer employee in the ordinary course of
business consistent with past practice if such increase does not
exceed 6% of such employee's current salary;
(g) maintain supplies and inventory of the Business in
quantities historically maintained in the ordinary course of business
consistent with past practice;
(h) continue to extend customers credit, collect accounts
receivable and pay accounts payable and similar obligations in the
ordinary course of business consistent with past practice;
(i) neither amend or modify any Seller Benefit Plan nor
commit to make any such amendment to any Seller Benefit Plan or adopt
any new Seller Benefit Plan for the benefit of any employees of the
Business, except as necessary in order to comply with applicable law;
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(j) perform in all material respects all of its
obligations under all, and not default in any material respect or
suffer to exist any event or condition which with notice or lapse of
time or both would constitute a default under any, Seller Contracts,
Real Property Leases and Personal Property Leases (except those being
contested in good faith) and not amend any contract or commitment that
is or would be a Seller Contract, Real Property Lease or Personal
Property Lease, other than in the ordinary course of business
consistent with past practice;
(k) to the extent available at commercially reasonable
rates, maintain in full force and effect and in the same amounts
policies of insurance comparable in amount and scope of coverage to
that now maintained with respect to the Business;
(l) prepare and file all federal, state, local and
foreign returns for taxes and other tax reports, filings and
amendments thereto required to be filed by it, and allow Purchaser, at
its reasonable request, to review all such returns, reports, filings
and amendments, other than with respect to Excluded Assets or Excluded
Liabilities at Seller's offices during normal business hours upon
prior request prior to the filing thereof, which review shall not
interfere with the timely filing of such returns;
(m) continue to maintain and service the Assets used in
the conduct of the Business in the same manner as is consistent past
practice;
(n) continue to enter into contracts for the purchase of
cotton, polyester, yarn, greige fabrics and other raw materials in the
ordinary course of business consistent with past practice;
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(o) continue to maintain its books and records in
accordance with generally accepted accounting principles, consistently
applied (to the extent applicable), and on a basis consistent with the
past practice of the Business;
(p) continue its cash management practices in the
ordinary course of business consistent with past practice;
(q) continue to fund its obligations with respect to the
Seller Benefit Plans on a timely basis in the ordinary course of
business consistent with past practice; and
(r) promptly notify Purchaser of any event or occurrence
that has had or may reasonably be expected to have a Material Adverse
Effect.
In connection with the continued operation of the Business between the
date of this Agreement and the Closing Date, Seller shall advise and, to the
extent permitted by applicable law, use its good faith reasonable efforts to
confer in good faith on a regular basis with the chief executive officer of
Purchaser and his designees with respect to material matters affecting or
impacting the operations of the Business and will advise and, to the extent
permitted by applicable law, use its good faith reasonable efforts to consult
in general with respect to the ongoing operations of the Business including,
without limitation, material matters regarding litigation (including, without
limitation, any proposed settlement thereof), capital expenditures, credit
approvals, environmental matters and Seller's general plans and strategies with
respect to purchases of cotton, polyester, yarn, greige fabrics and other raw
materials. Seller acknowledges that Purchaser does not and will not waive any
rights it may have under this Agreement as a result of such consultations nor,
if the Acquisition is not consummated, shall Purchaser be responsible for any
decisions made by the officers or directors of Seller with respect to matters
which are the subject of such consultation.
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Section 5.2. Inspection and Access to Information. Except to the
extent that any inspection or access to information violates any law, Order,
Seller Contract or License, from the date of this Agreement to the Closing Date
or until this Agreement is terminated as provided in Article 8, Seller shall
(and shall cause its subsidiaries and officers, directors, employees, auditors
and agents to) provide Purchaser and its accountants, investment bankers,
counsel, environmental consultants and other authorized representatives, as
often as may be reasonably requested, full access, upon prior notice, during
normal business hours and under reasonable circumstances, to any and all of its
premises, employees (including executive officers), properties, contracts,
commitments, books, records and other information (including tax returns filed
and those in preparation) and shall cause its officers to furnish to Purchaser
and its authorized representatives, promptly upon reasonable request therefor,
any and all financial, technical and operating data and other information
pertaining to the Business (other than tax returns with respect to Excluded
Assets or Excluded Liabilities), and otherwise fully cooperate with Purchaser's
conduct of its due diligence.
Section 5.3. No Solicitation of Transactions. Neither Seller nor
Triarc nor any of their Affiliates shall directly or indirectly, through any
officer, director, agent or otherwise, initiate, solicit or knowingly encourage
(including by way of furnishing non-public information or assistance), or take
any other action to facilitate knowingly, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction (as hereinafter defined), or enter into discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of the officers, directors or employees
of Seller, Triarc or any of their Affiliates or any investment banker,
financial advisor, attorney, accountant or other representative retained by
such
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entities to take any such action, except, in each case, as may be otherwise
required under applicable law in the exercise of the fiduciary duties of the
board of directors of Triarc. Seller shall notify Purchaser orally (within one
business day) and in writing (as promptly as practicable) of all relevant terms
of any such inquiries and proposals which Seller, Triarc or any of their
Affiliates or any such officer, director, employee, investment banker,
financial advisor, attorney, accountant or other representative may receive
relating to any of such matters, and if such inquiry or proposal is in writing,
Seller shall deliver to Purchaser a copy of such inquiry or proposal. For
purposes of this Agreement, "Competing Transaction" shall mean any of the
following with regard to all or any portion of the Business or the Assets: (a)
any merger, consolidation, share exchange, business combination, stock sale or
other similar transaction involving Seller; (b) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of any material portion of the
Assets or Business in a single transaction or series of transactions (other
than the sale of Assets contemplated by this Agreement); or (c) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
Section 5.4. Reasonable Efforts; Further Assurances; Cooperation.
Subject to the other provisions of this Agreement and except as may be
otherwise required under applicable law in the exercise of the fiduciary duties
of the board of directors of Triarc, the parties hereto shall each use
reasonable, good faith efforts to perform their obligations herein and to take,
or cause to be taken, or do, or cause to be done, all things necessary, proper
or advisable under applicable law to obtain all regulatory approvals and
satisfy all conditions to the obligations of the parties under this Agreement
and to cause the transactions contemplated herein to be effected on or prior to
April 30, 1996 in accordance with the terms hereof and shall cooperate fully
with each other and their
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respective officers, directors, employees, agents, counsel, accountants and
other designees in connection with any steps required to be taken as a part of
their respective obligations under this Agreement, including, without
limitation:
(a) Seller and Purchaser shall promptly make their
respective filings and submissions and shall take all actions
necessary, proper or advisable under applicable laws and regulations
to obtain any required approval of any foreign, federal, state or
local governmental agency or regulatory body with jurisdiction over
the transactions contemplated by this Agreement. Seller and Purchaser
shall furnish all information required for any application or other
filing to be made pursuant to the rules and regulations of any
applicable law, including, without limitation, under the HSR Act, in
connection with the transactions contemplated by this Agreement;
(b) Each of Seller and Purchaser will use their good
faith reasonable efforts vigorously to contest and resist any action,
including legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order (whether temporary, preliminary or
permanent) (an "Order") that is in effect and that restricts, prevents
or prohibits the consummation of the transactions contemplated by this
Agreement, including, without limitation, by vigorously pursuing all
available avenues of administrative and judicial appeal and all
available legislative action. Each of Seller and Purchaser also agrees
to discuss and consider in good faith any and all actions, including
without limitation the disposition of assets or the withdrawal from
doing business in particular jurisdictions, required by regulatory
authorities as a condition to the granting of any approvals required
in order to permit the consummation of the transactions contemplated
by this
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Agreement or as may be required to avoid, lift, vacate or reverse any
legislative or judicial action which would otherwise cause any
condition to Closing not to be satisfied;
(c) (i) Seller shall give any notices to third parties, and
Seller and Purchaser shall each use its good faith commercially
reasonable efforts (which shall not require payments of money to third
parties in order to obtain waivers or consents from such third
parties) (in consultation with each other) to obtain any third party
consents (A) necessary or proper to consummate the transactions
contemplated in this Agreement, (B) disclosed or required to be
disclosed in the Schedules to this Agreement, (C) required to avoid a
material breach of or default under any material Seller Contracts,
Real Property Leases or Personal Property Leases in connection with
the consummation of the transactions contemplated in this Agreement or
(D) required to prevent a Material Adverse Effect from occurring prior
to the Closing Date or a material adverse effect on the Business as
currently conducted after the Closing Date;
(ii) In the event that Seller shall fail to obtain any
third party consent described in subsection (c)(i) above, Seller shall
use its good faith reasonable efforts (which shall not include the
payment of money by Seller unless fully reimbursed by Purchaser), and
shall take any such actions reasonably requested by Purchaser, to
minimize any adverse effect upon the Business as currently conducted
resulting, or which could reasonably be expected to result after the
Closing Date, from the failure to obtain such consent. Subject to the
immediately preceding sentence, such actions shall include, without
limitation, if reasonably requested by Purchaser and if such grant
would not constitute a violation of applicable law or a breach of the
applicable contract, the granting of a limited power of attorney by
Seller to Purchaser to permit Purchaser to act on Seller's behalf
under the applicable contracts and agreements,
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in which event Purchaser shall indemnify Seller under Section 9.2(d)
for any Losses incurred by Seller as a result of Purchaser acting
pursuant to such power of attorney (other than any third party claim
for breach to the extent resulting from the actual grant by Seller of
the limited power of attorney); provided, that clause (ii) of Section
9.2(d) shall not be operative solely by reason of the fact that Seller
has been unable to obtain such third party consent;
(d) Each party shall give prompt notice to the other of
(i) the occurrence, or failure to occur, of any event which occurrence
or failure would be likely to cause any representation or warranty of
Seller or Purchaser, as the case may be, contained in this Agreement
to be untrue or inaccurate in any material respect at any time from
the date hereof to the Closing Date or that will or may result in the
failure to satisfy any of the conditions specified in Article 6 hereof
and (ii) any failure of Seller or Purchaser, as the case may be, to
comply with or satisfy any covenant, condition or agreement in any
material respect to be complied with or satisfied by any of them
hereunder; and
(e) Without the prior written consent of Purchaser,
Seller will not terminate any employee if such termination would
result in the payment of any amounts pursuant to "change in control"
provisions of any employment agreement or arrangement.
Section 5.5. Public Announcements. The timing and content of all
announcements regarding any aspect of this Agreement or the transactions
contemplated hereby to the financial community, government agencies, employees
or the general public shall be mutually agreed upon in advance by Purchaser and
Triarc (unless Seller or Purchaser is advised by counsel that any such
announcement or other disclosure not mutually agreed upon in advance is
required to be made by law or applicable stock exchange rule and then only
after making a reasonable attempt to comply with the
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provisions of this Section), provided that upon the signing of this Agreement,
Triarc may file a current report on Form 8-K and issue a press release
regarding this Agreement and the transactions contemplated hereby, subject to
Avondale's right to review and comment on such Form 8-K and press release prior
to their issuances.
Section 5.6. Supplements to Schedules. From time to time up to the
Closing Date, Seller will promptly supplement or amend the Schedules which it
has delivered pursuant to this Agreement with respect to any matter hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in such Schedules or which is
necessary to correct any information in such Schedules which has been rendered
inaccurate thereby. No supplement or amendment to any Schedule shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Section 6.2 or 6.3 of this Agreement unless such supplement or amendment is
accepted by Purchaser in writing in its reasonable discretion; provided,
however, that if the Closing occurs, all Schedules hereto shall be deemed
amended to reflect any supplements or amendments delivered to Buyer pursuant to
this Section 5.6.
Section 5.7. Offer of Employment. Purchaser may offer employment
as of the Closing Date to such employees of the Business as Purchaser desires
to employ. In connection with and immediately following the Closing, Purchaser
shall not act or fail to act in any manner which results in Seller being in
violation of or incurring a Loss under the WARN Act.
Section 5.8. Employee Benefit Plans
(a) Retirement Savings Plan.
(i) On or prior to or as soon as practicable after the
Closing Date, Seller shall (A) spinoff the assets and liabilities of
the Graniteville Company Retirement Savings Plan
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attributable to the current and former employees of Patrick into a
separate plan in a manner that satisfies the requirements of Section
414(l) of the Code and Title I of ERISA and (B) cause the trustee of
the Triarc Companies, Inc. 401(k) Master Trust (the "Master Trust") to
liquidate assets representing an amount equal to the full account
balances of the current and former employees of Seller then
participating in the Graniteville Retirement Savings Plan as it exists
after the spinoff referred to in clause (A) above (the "Seller Savings
Plan"); provided, however, that to the extent the Seller Savings Plan
is invested in guaranteed investment contracts ("GICs") that cannot by
their terms be liquidated in connection with the sale of the Assets to
Purchaser (the "Illiquid GICs"), then such Illiquid GICs as are
reasonably acceptable to Purchaser (as determined by Purchaser based
on the conclusion that would be reached by a reasonably prudent
person, acting in a commercially reasonable manner, under similar
circumstances) and the total value of which bear the same proportion
to the total value of all Illiquid GICs as the total value of the
accounts of the Seller Savings Plan invested in the GIC fund under the
Master Trust as of the last day of the month immediately preceding the
Closing Date bears to the total value of the GIC fund as of such date
shall be allocated to the Seller Savings Plan; further provided that
in no event will the value of such Illiquid GICs allocated to the
Seller Savings Plan exceed $7,500,000.
(ii) Seller will provide Purchaser on or prior to April 3,
1996, correct and complete copies (including all schedules) of the
contracts for the Illiquid GICs and will hereafter provide such
additional information regarding the GICs in the Master Trust as is
reasonably requested by Purchaser. Purchaser shall notify Seller in
writing of those Illiquid GICs (if any) that are not reasonably
acceptable to Purchaser as determined by Purchaser
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pursuant to clause (i) above on or prior to April 11, 1996. Seller
agrees to pay all expenses, charges and penalties associated with the
liquidation of the GICs held by the Master Trust (including, without
limitation, any GIC breakage costs). Following the liquidation of such
assets as can be liquidated and the identification and allocation of
the Illiquid GICs, the trustee of the Master Trust shall segregate
cash and cash equivalent assets and the Illiquid GICs allocable to the
Seller Savings Plan in a manner that satisfies Section 414(1) of the
Code and Title I of ERISA, and shall notify Seller and Purchaser in
writing that such segregation is complete. As soon as practicable
after the later of receipt of such notice or the Closing Date,
Purchaser shall assume and become the sponsor of the Seller Savings
Plan as the successor or assignee of Seller (the "Assumption Time"),
and Seller shall have no responsibility as a plan sponsor, plan
administrator, named fiduciary or as a contributing employer with
respect to the operation and administration of the Seller Savings Plan
after the Assumption Time. Seller shall continue to serve as the plan
sponsor for and shall be responsible for the operation and
administration of the Seller Savings Plan until the Assumption Time,
and Seller shall indemnify Purchaser, its Affiliates and each officer,
employee and director of Purchaser and its Affiliates and each person
or entity that is a fiduciary of the Seller Savings Plan after the
Assumption Time against, and hold each of them harmless from, any and
all Losses incurred or suffered by any of them arising out of, in
respect of or in connection with the operation and administration of
the Seller Savings Plan prior to the Assumption Time. Seller shall
make any and all filings and submissions to the appropriate
governmental agencies required to be made on behalf of the Seller
Savings Plan, including, but not limited to Form 5500, for any period
before the Assumption Time.
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(iii) Notwithstanding the foregoing, (A) if Purchaser
notifies Seller on or prior to April 11, 1996, that the Illiquid GICs
proposed to be allocated to the Seller Savings Plan are not reasonably
acceptable to Purchaser (as determined by Purchaser pursuant to clause
(i) above), and the parties are unable to agree upon mutually
acceptable alternative arrangements prior to Closing or (B) if Seller
notifies Purchaser on or prior to April 3, 1996, that it desires to
remain as sponsor of the Seller Savings Plan, Seller shall retain
sponsorship of the Seller Savings Plan. In such event, Purchaser
agrees to allow any eligible rollover distributions made from the
Seller Savings Plan (including an eligible rollover distribution of
notes held in connection with participant loans from the Seller
Savings Plan) to those employees of the Business who are employees of
Purchaser to be rolled over into a qualified plan maintained by
Purchaser provided such employees are employees of Purchaser at the
time of the rollover to Purchaser'S plan.
(b) Other Employee Benefit Plans. Purchaser shall enroll
those employees of Seller who become employees of Purchaser or its Affiliates
in its employee benefit plans, effective as of the Closing (or as soon as
practicable thereafter), including its 401(k) plan, section 125 cafeteria plan,
medical plan, dental plan, life insurance plan, and disability plan, under the
same terms and conditions applicable to other similarly situated employees of
Purchaser, giving such employees service credit for their employment with
Seller for eligibility and vesting purposes for Purchaser'S 401(k) plan and all
other Purchaser employee benefit plans (including, without limitation, job
posting, vacation and service awards, but excluding credit for early retirement
benefits under Purchaser'S medical plan) as if such service had been performed
with Purchaser and waiving any preexisting
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condition exclusion with respect to Purchaser'S medical plan, to the extent
that such preexisting condition would have been covered under Seller'S
healthcare plan. Purchaser shall also enroll in its medical plan all former
employees of Seller or their dependents who are entitled as of the Closing Date
to continued coverage under Seller'S healthcare plan either as a result of the
requirements of the Consolidated Omnibus Reconciliation Act of 1985 or as
retirees. Purchaser shall credit each such current employee and former employee
with all deductible payments and co-payments paid by such current employee or
former employee under Seller'S healthcare plan prior to the Closing Date during
the current plan year for purposes of determining the extent to which any such
current or former employee has satisfied his or her deductible and whether he
or she has reached the out-of-pocket maximum under the Purchaser'S medical plan
for such plan year. Purchaser shall pay claims for benefits by employees and
former employees of the Business under the Seller Benefit Plans incurred but
not paid prior to the Closing Date according to such transition claims
procedures as may be developed by Purchaser and Seller, and Triarc agrees to
provide such assistance as may be necessary to implement such transition claims
procedures.
Section 5.9. Conveyance Taxes. Purchaser and Seller shall
cooperate in the preparation, execution, filing and audit of all returns,
questionnaires, applications, or other documents with respect to any real
property transfer or gains, sales, use, transfer, value added, stock transfer
and stamp taxes, any transfer, recording, registration and other fees, and any
similar taxes (including any interest and penalties) which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Closing. Seller shall be responsible for
the payment of all real property transfer taxes ("Transfer Taxes") based on its
good faith, reasonable estimate of the value of the Real Property (which value
shall be used by Seller in the preparation and filing of its 1996 federal,
state and local tax returns) (the "Seller Value"). If the highest value
allocated to the
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Real Property by Purchaser in any federal, state or local tax return or on its
books (the "Purchaser Value") is higher than the Seller Value, and the amount
of Transfer Taxes initially paid by Seller is challenged by any taxing
authority such that Seller is required to pay additional Transfer Taxes,
Purchaser will reimburse Seller for the lesser of (a) such additional Transfer
Taxes or (b) the applicable Transfer Tax rate times the excess of the Purchaser
Value over the Seller Value; provided that in no event will Purchaser be
required to pay more than 50% of the total Transfer Taxes payable as a result
of the transactions contemplated hereby. Each of Purchaser and Seller shall pay
any of such fees and taxes (other than Transfer Taxes) that such party is
obligated to pay under applicable law, and each of Purchaser and Seller shall
indemnify the other for any failure of such party to pay such fees and taxes
(including interest and penalties imposed thereon).
Section 5.10. Financial Statements. Prior to the Closing, Seller
shall deliver to Purchaser within fifteen (15) business days following the end
of each accounting period, (a) regularly prepared financial statements
including a balance sheet of the Business as of the last day of such accounting
period after the date of this Agreement together with the statement of income,
stockholders' equity and cash flows of the Business for such accounting period
which financial statements shall have been prepared (i) from and shall be in
accordance with the books and records of Seller and shall fairly present in all
material respects the financial position of the Business as of the date thereof
and the results of operations and changes in cash flows for the periods set
forth therein and (ii) in accordance with generally accepted accounting
principles consistently applied during the periods involved (subject to lack of
footnotes and normal year-end audit adjustments), and (b) a certificate of the
chief financial officer of Seller certifying that such financial statements
delivered pursuant to clause (a) have been prepared in accordance with the
requirements of this Section 5.10.
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Section 5.11. Seller Bank Accounts. On the Closing Date, Seller
shall effect the transfer of all amounts held in the Bank Accounts as of the
Cut-Off Time to an account designated by Seller. Thereafter, Seller will cause
all amounts received in the Bank Accounts after the Cut-Off Time (other than
any proceeds included within the Excluded Assets) to be paid to Purchaser on a
daily basis by wire transfer of immediately available funds to an account
designated by Purchaser. Seller shall take all action reasonably necessary to
cause the administrator of the lock box account maintained for the collection
of trade receivables to deliver all remittance advices and statements to
Purchaser. Promptly following the end of each month through and including
December 1996 (and at any time thereafter as reasonably requested by
Purchaser), Seller shall deliver to Purchaser a statement certified as accurate
by the chief financial officer of Seller or Triarc indicating the amount of
cash received in each Bank Account during such month and the amount transferred
to Purchaser during such month.
Section 5.12. Access to Books and Records. Following the Closing,
Purchaser shall provide Seller with reasonable access to all books and records
and provide Seller with such cooperation, assistance and access to personnel as
Seller may reasonably request with respect to the tax basis of the Assets and
the filing of all transfer tax returns during normal business hours upon prior
notice, provided that such access shall be subject to the execution of a
mutually agreeable confidentiality agreement (which agreement shall not be
unreasonably withheld). Seller shall provide Purchaser with reasonable access
to all books and records and provide Purchaser with such cooperation,
assistance and access to personnel as Purchaser may reasonably request with
respect to the Excluded Assets and Excluded Liabilities during normal business
hours upon prior notice to the extent reasonably necessary in connection with
the ongoing operations of the Business.
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Section 5.13. Nonsolicitation. Except as disclosed to Purchaser in
writing on or prior to the date hereof, Seller and Triarc hereby agree that
neither Seller, Triarc nor any of their respective Affiliates shall, during the
period ending two years after the date hereof, in any manner, directly or by
assisting others, employ or attempt to employ, on their behalf or on behalf of
any other person, firm or corporation, any employee of the Business who is
offered employment by the Purchaser.
Section 5.14. Insurance. Seller shall in good faith cooperate with
Purchaser and take all actions reasonably requested by Purchaser that are
necessary or desirable to permit Purchaser to have available to it following
the Closing the benefits (whether direct or indirect) of the insurance policies
maintained by Seller with respect to the Business which are currently in force.
All costs relating to the actions described in this Section shall be borne by
Purchaser.
Section 5.15. Purchase of Dyes and Chemicals. From the date hereof
until the Closing Date, Purchaser will not enter into any commitment with
respect to the purchase of any dye or chemical for use primarily in Buyer's
textile manufacturing operations that has a term longer than three (3) months.
Section 5.16. Timber Contract. Seller shall use its commercially
reasonable good faith efforts to cause the current timber cutting on "Tract L"
included within the Real Property to cease as soon as possible; provided that
(i) Seller will not be required to pay any money in excess of a pro rata
portion of amounts previously paid to Seller for such timber rights, based on
the ratio of the number of acres as to which such rights were granted that
remain to be cut to the total number of acres as to which such rights were
granted, and (ii) Seller shall not effect any amendment or other settlement
with respect to such timber rights without the prior consent of Purchaser. At
the Closing, Seller shall pay Purchaser an amount equal to $241,642 minus any
amount paid by Seller (with Purchaser's consent) to terminate such timber
cutting on Tract L.
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ARTICLE 6.
CONDITIONS
Section 6.1. Conditions to Each Party's Obligations. The
respective obligations of each party to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing of each
of the following conditions:
(a) Injunction. As of the Closing, there shall be no
effective injunction, writ or preliminary restraining order or any
order of any nature issued by a court or governmental or regulatory
agency of competent jurisdiction to the effect that the purchase and
sale of the Business and the Assets may not be consummated as herein
provided, no proceeding or lawsuit shall have been commenced by any
court, governmental or regulatory agency for the purpose of obtaining
any such injunction, writ or preliminary restraining order and no
written notice shall have been received from any such court or agency
indicating an intent to restrain, prevent, materially delay or
restructure the transactions contemplated by this Agreement.
(b) Consents. All consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any
governmental agency or public or regulatory unit, agency, body or
authority required in connection with the execution, delivery or
performance of this Agreement shall have been obtained or made, except
where the failure to have obtained or made any such consent, approval,
order, authorization, declaration or filing would not have a Material
Adverse Effect prior to the Closing or a material adverse effect on
the Business as currently conducted after the Closing.
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Section 6.2. Conditions to Obligations of Purchaser. The
obligations of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing of
each of the following additional conditions:
(a) Representations and Warranties. The representations
and warranties of Seller set forth in Article 3 of this Agreement
shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except for those representations or warranties made
as of a specific date which shall be true and correct in all material
respects as of such date).
(b) Performance of Obligations of Seller. Seller shall
have performed in all material respects all covenants and agreements
required to be performed by it under this Agreement on or prior to the
Closing Date.
(c) No Material Adverse Change. Between the date of this
Agreement and the Closing, there shall not have been (nor shall
Purchaser have become aware of) any material adverse change, or any
extraordinary event which could reasonably be expected to result in a
material adverse change (which shall not include any adverse change in
general economic, business or industry conditions), in or affecting
the assets, liabilities, results or operations, financial condition or
business of the Business or Seller.
(d) Certificate. Seller shall have delivered to Purchaser
a certificate of its appropriate officers as to compliance with the
conditions set forth in Sections 6.2(a), (b) and (c).
(e) Opinion of Seller's Counsel. Purchaser and, at
Purchaser's request, such other persons listed on Schedule 6.2(e), all
of whom are providing equity or debt financing to
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Purchaser in connection with the Acquisition, shall have received an
opinion of The McNair Law Firm, P.A., and Purchaser shall have
received an opinion of Paul, Weiss, Rifkind, Wharton & Garrison, each
dated the Closing Date, substantially in the form attached hereto as
Exhibits B and C, respectively.
(f) Material Contracts. Purchaser shall have received
written consents to the assignment of all Seller Contracts, Real
Property Leases and Personal Property Leases or written waivers of the
provisions of any Seller Contracts, Real Property Leases or Personal
Property Leases requiring the consents of third parties as set forth
in Schedule 6.2(f). All such consents and waivers shall be in full
force and effect. For the purposes of this Section 6.2(f), if Seller
has satisfied in full its obligations under Section 5.4(c)(i) and
offers (pursuant to Section 5.4(c) or otherwise) to grant a limited
power of attorney to Purchaser on terms reasonably acceptable to
Purchaser to act on Seller's behalf under any Seller Contract, Real
Property Lease or Personal Property Lease requiring the consent of a
third party as set forth in Schedule 6.2(f), and delivery of such
power of attorney could reasonably be expected to afford Purchaser
substantially all of the rights and benefits available to Seller under
such Contract or Lease and would not be deemed to constitute a breach
of any such Contract or Lease or violate applicable law, such granting
of the limited power of attorney shall constitute the consent required
under this Section 6.2(f). In such circumstance, Purchaser shall
indemnify Seller under Section 9.2(d) for any Losses incurred by the
Seller as a result of Purchaser acting pursuant to such power of
attorney (other than any third party claim for breach to the extent
resulting from the actual grant by Seller of the limited power of
attorney);
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provided that clause (ii) of Section 9.2(d) shall not be operative
solely by reason of the fact that Seller has been unable to obtain
such third party consent.
(g) Supply Agreement. Patrick shall have executed and
delivered to Purchaser the Supply Agreement in the form attached
hereto as Exhibit D.
(h) Release of Liens. Seller shall have delivered to
Purchaser UCC-3 termination statements and mortgage releases which
shall be sufficient to release all Liens on the Assets (other than
Permitted Liens) including, without limitation, those set forth in
Schedules 3.5(a), affecting the Assets (including, without limitation,
the Real Property).
(i) NPC Contract. The NPC Contract shall have been
amended to provide that it can be terminated by either party thereto
upon six months' prior written notice. Such amendment shall not be
deemed to be in breach or violation of any provision of this Agreement
and shall not be required to be reflected on any Schedule hereto.
Section 6.3. Conditions to Obligations of Seller. The obligations
of Seller and Triarc to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing of
each of the following additional conditions:
(a) Representations and Warranties. The representations
and warranties of Purchaser set forth in Article 4 of this Agreement
shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except for those representations or warranties made
as of a specific date which shall be true and correct in all material
respects as of such date).
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(b) Performance of Obligations by Purchaser. Purchaser
shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement on or
prior to the Closing Date.
(c) Certificate. Purchaser shall have delivered to Seller
a certificate of its appropriate officers as to compliance with the
conditions set forth in Sections 6.3(a) and (b).
(d) Opinions of Purchaser Counsel. Seller shall have
received opinions of King & Spalding and Wyche, Burgess, Freeman &
Parham dated the Closing Date, to the effect set forth on Exhibits E
and F, respectively, and otherwise in form and substance reasonably
satisfactory to Seller.
(e) Supply Agreement. Purchaser shall have executed and
delivered to Seller the Supply Agreement in the form attached hereto
as Exhibit D.
(f) Assumption Agreement. Purchaser shall have executed
and delivered to Seller the Assumption Agreement in the form attached
hereto as Exhibit G.
ARTICLE 7.
CLOSING
Section 7.1. Closing. The consummation of the transactions
contemplated by this Agreement are herein referred to as the "Closing." The
"Closing Date" shall be the date on which the Closing occurs. The Closing shall
occur three business days after Purchaser has given written notice to Seller of
its desire to close the Acquisition; provided, however, that the Closing shall
not in any case occur on any date later than May 31, 1996, without Seller's
written consent. Subject to the preceding sentence, Purchaser and Seller
acknowledge their desire to have the Closing occur at 10:00
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a.m. on April 29, 1996, or as soon thereafter as is reasonably practicable. The
Closing shall take place at the offices of King & Spalding, 191 Peachtree
Street, Atlanta, Georgia, or at such other place as Seller and Purchaser shall
agree.
Section 7.2. Items to be Delivered at Closing. At the Closing and
subject to the terms and conditions herein contained:
(a) Seller shall deliver to Purchaser the following:
(i) such bills of sale, assignments,
endorsements, certificates of title, special or limited
warranty deeds with respect to the Real Property, and other
good and sufficient instruments and documents of conveyance
and transfer, in form reasonably satisfactory to Purchaser and
its counsel, as shall be necessary and effective to transfer
and assign to, and vest in Purchaser all of Seller's right,
title and interest in and to the Assets, including, without
limitation, (A) good and valid title in and to all of the
Assets (including, without limitation, the Real Property and
motor vehicles) owned by Seller on the Closing Date, (B) good
and valid leasehold interests in and to all of the Assets
leased by Seller as lessee on the Closing Date and (C) all of
Seller's rights under all agreements, contracts, commitments,
leases, instruments and other documents included in the Assets
to which Seller is a party or by which it has rights on the
Closing Date, and simultaneously with such delivery, all such
reasonable steps will be taken as may be required to place
Purchaser in actual possession and operating control of the
Assets; and
(ii) copies of all such documentation to be used
to effect the change of the name of Seller and any Affiliates
to a name that does not include the name
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"Graniteville" and to reflect such change in all jurisdictions
where each Seller or any such Affiliate is qualified to do
business.
(b) Purchaser shall deliver to Seller the following:
(i) the Purchase Price deliverable pursuant to
Section 2.1 hereof; and
(ii) an assumption agreement substantially in the
form of Exhibit G hereto pursuant to which Purchaser will
assume and agree to pay, discharge or perform, as appropriate,
the Assumed Liabilities.
(c) The parties hereto also shall deliver to each other
the documents and instruments referred to in Article 6 hereof and such
other documents and instruments as Seller and Purchaser (or their
respective counsel) shall reasonably request.
Section 7.3. Further Assurances. Seller from time to time shall,
at or after the Closing, at Purchaser's request, execute, acknowledge and
deliver to Purchaser such other instruments of conveyance and transfer and will
take such other actions and execute and deliver such other documents,
certifications and further assurances as Purchaser may reasonably request in
order to vest more effectively in Purchaser, or to put Purchaser more fully in
possession of, any of the Assets (including, without limitation, the Real
Property), or to better enable Purchaser to complete, perform or discharge any
of the Assumed Liabilities. Each of the parties hereto will cooperate with the
other and execute and deliver to the other such other instruments and documents
and take such other actions as may be reasonably requested from time to time by
any party hereto as necessary to carry out, evidence and confirm the intended
purposes of this Agreement.
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ARTICLE 8.
TERMINATION
Section 8.1. Termination. This Agreement may be terminated at any
time at or prior to the Closing (the "Termination Date"):
(a) in writing by mutual consent of Triarc and Avondale;
(b) by notice from Triarc to Avondale if the conditions
set forth in Sections 6.1 and 6.3 hereof shall not have been fulfilled
and such conditions cannot be fulfilled by Purchaser on or before May
31, 1996;
(c) by notice from Avondale to Triarc if the conditions
set forth in Sections 6.1 and 6.2 hereof shall not have been fulfilled
and such conditions cannot be fulfilled by Seller on or before May 31,
1996;
(d) by notice from either Avondale or Triarc to the other
if the Acquisition shall not have been consummated on or before May
31, 1996 (unless the failure to consummate the Acquisition by such
date shall be due to the action or failure to act of the party or its
Affiliate seeking to terminate this Agreement, including, without
limitation, any breach of its obligations under Section 5.4);
(e) by notice from Seller and Triarc to Purchaser and
Avondale, if the board of directors of Triarc is required under
applicable law in the exercise of its fiduciary duties to terminate
this Agreement; or
(f) by notice from Purchaser and Avondale to Seller and
Triarc, if Wachovia Bank of Georgia, N.A., as agent ("Wachovia"), has
notified Avondale in writing that it will not fund the loan for the
purpose of acquiring the Assets contemplated by that certain
commitment
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letter, dated March 11, 1996, primarily based on Wachovia's
determination that a material adverse change has occurred in either
(i) the financial condition, operations, assets, prospects or
liabilities of Purchaser and Avondale since August 25, 1995, or Seller
since January 1, 1995 or (ii) the financial markets since March 11,
1996.
Section 8.2. Specific Performance and Other Remedies. The
parties hereto each acknowledge that the rights of each party to consummate the
transactions contemplated hereby are special, unique and of extraordinary
character, and that, in the event that any party violates or fails or refuses
to perform any covenant or agreement made by it herein, the non-breaching party
may be without an adequate remedy at law. The parties each agree, therefore,
that in the event that either party violates or fails or refuses to perform any
covenant or agreement made by such party herein, the non-breaching party or
parties may, subject to the terms of this Agreement and in addition to any
remedies at law for damages or other relief, institute and prosecute an action
in any court of competent jurisdiction to enforce specific performance of such
covenant or agreement or seek any other equitable relief.
Section 8.3. Effect of Termination. In the event of termination of
this Agreement pursuant to this Article 8, this Agreement shall forthwith
become void and there shall be no liability on the part of any party or its
respective officers, directors or stockholders, except for obligations under
Section 5.5, Article 10 (other than Sections 10.11 and 10.14) and this Section,
all of which shall survive the Termination Date. Notwithstanding the foregoing,
nothing contained herein shall relieve any party from liability for any breach
of this Agreement.
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ARTICLE 9.
INDEMNIFICATION
Section 9.1. Indemnification Obligations of Seller. Subject to the
provisions of Sections 9.3, 9.4 and 9.5, Seller shall indemnify, defend and
hold harmless Purchaser and its subsidiaries and Affiliates, each of their
respective officers, directors, employees, agents and representatives and each
of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Purchaser Indemnified Parties") from, against and in
respect of any and all claims, liabilities, obligations, losses, costs,
expenses, penalties, fines and other judgments (at equity or at law) and
damages whenever arising or incurred (including, without limitation, amounts
paid in settlement in accordance with Section 9.3, costs of investigation and
reasonable attorneys' fees and expenses) (collectively, "Losses") arising out
of or relating to:
(a) any Excluded Liability;
(b) all or any portion of any Assumed Liability that is
not included as a liability on the Statement of Net Assets;
(c) all or any portion of any Assumed Liability that is
in excess of the amount of such Assumed Liability included as a
liability on the Statement of Net Assets;
(d) any breach or inaccuracy of any representation or
warranty made by Seller or any of its Affiliates in this Agreement;
(e) any breach of any covenant, agreement or undertaking
made by Seller or any of its Affiliates in this Agreement;
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(f) subject to the last paragraph of Section 9.1, any
liability or obligation resulting from (i) any violation by Seller of
or noncompliance by Seller with, in each case in any material respect,
any Environmental Law, (ii) any notification, directive or similar
instrument issued in writing by any court or other governmental agency
with respect to any Environmental Law instructing Purchaser to take
any action with respect to any environmental condition that existed or
occurred at or prior to the Closing arising out of Seller's conduct of
the Business, to the extent any liabilities or obligations resulting
from such notification, directive or similar instrument would not be
precluded from indemnification under clause (i) above or (iii) any
claim (including, without limitation, claims for nuisance or trespass
or exposure to hazardous or toxic materials in the workplace) brought
by any court or other governmental agency or any third party under any
Environmental Law with respect to any events or circumstances that
existed at or prior to the Closing, arising out of Seller's conduct of
the Business, that results in the payment of any money by, or the
imposition of any restriction upon, Purchaser as a result of any
judgment, administrative order, consent order or settlement, to the
extent any liability or obligation resulting from such claim would not
be precluded from indemnification under clause (i) above. As used in
this paragraph (f), the clause "Seller's conduct of the Business"
shall include, without limitation, the transportation by or on behalf
of Seller to or disposal by or on behalf of Seller of hazardous
materials on property not owned by Seller, and Seller's use, ownership
or occupancy of the Real Property;
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(g) any fraud by Seller or any of its Affiliates in
connection with the transactions contemplated hereby;
(h) any knowing and intentional breach of any
representation or warranty made in Section 3.4, Section 3.8 or Section
3.21 by Seller or any of its Affiliates; or
(i) any failure or inability of Seller to obtain consents
to the assignment of the Seller Contracts listed on Schedule 9.1(i);
provided, however, the Purchaser Indemnified Parties shall take such
actions that a reasonably prudent person, acting in a commercially
reasonable manner and seeking to minimize or mitigate his expenses to
the extent reasonably practical consistent with prudent business
practices (assuming such person did not have a right to indemnity
under this Agreement), would take in the circumstances, including,
without limitation, accepting a limited power of attorney from Seller
on a basis consistent with Section 6.2(f).
The Losses of the Purchaser Indemnified Parties described in this Section 9.1
as to which the Purchaser Indemnified Parties are entitled to indemnification
are hereinafter collectively referred to as "Purchaser Losses"; provided,
however, that Purchaser shall not be entitled to indemnification for any type
of Loss to the extent that there is a reserve for such type of Loss on the
Statement of Net Assets, in which case Purchaser Losses shall only include the
Losses of that type in excess of such reserve; provided, further, however, that
solely for the purposes of determining the amount of Purchaser Losses under
this Section 9.1, the reserve for Losses of the type described in Section
9.1(f) shall equal $650,000, regardless of the actual amount of the reserve for
such Losses reflected on the Statement of Net Assets; and provided, further,
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however, that Section 9.1(f) shall be the sole source of indemnification with
respect to claims arising pursuant to Environmental Laws.
With respect to claims for indemnification pursuant to Section 9.1(f),
Purchaser Losses shall not include any Losses (i) which constitute costs of
causing the operation of the Business to comply with Environmental Laws to the
extent any costs so incurred exceed the Commercially Reasonable Costs of
causing the operation of the Business to comply in all material respects with
Environmental Laws; (ii) which constitute costs of operating the Business in
the ordinary course in compliance with Environmental Laws in all material
respects except to the extent such costs constitute Commercially Reasonable
Costs arising out of violations of Environmental Laws that existed or occurred
at or prior to the Closing; (iii) which constitute costs of conducting the
investigation and remediation of environmental conditions to the extent such
costs exceed the Commercially Reasonable Costs of conducting investigation and
remediation of said environmental conditions; or (iv) which arise out of or
relate to the cost of speeding up the production line, modernizing any plant or
equipment or production improvements except to the extent such speeding up,
modernization or improvements are required in order to comply in all material
respects with Environmental Laws. For purposes of this Agreement, "Commercially
Reasonable Costs" shall mean the costs which a reasonably prudent person,
acting in a commercially reasonable manner and seeking to minimize or mitigate
his expenses to the extent reasonably practicable consistent with prudent
business practices (assuming such person did not have any right of indemnity
under this Agreement), would expend to resolve the matter.
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Section 9.2. Indemnification Obligations of Purchaser. Subject to
the provisions of Sections 9.3, 9.4 and 9.5, Purchaser shall indemnify and hold
harmless Seller, Triarc and their subsidiaries and affiliates, each of their
respective officers, directors, employees, agents and representatives and each
of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Seller Indemnified Parties") from, against and in respect
of any and all Losses arising out of or relating to:
(a) any of the Assumed Liabilities, except to the extent
such Assumed Liabilities constitute Purchaser Losses pursuant to
Section 9.1(b) or 9.1(c);
(b) any breach or inaccuracy of any representation or
warranty in this Agreement or in any Purchaser Ancillary Documents;
(c) any breach of any covenant, agreement or undertaking
made by Purchaser in this Agreement or in any Purchaser Ancillary
Document; or
(d) the conduct of the Business after the Closing Date,
except to the extent that any Loss of the Seller Indemnified Parties
arising therefrom (i) is an Excluded Liability or (ii) results
directly from facts or circumstances for which the Purchaser
Indemnified Parties are entitled to indemnification from Seller under
Section 9.1; provided, however, that with respect to Section 9.1(f),
the entitlement to indemnification must result from facts or
circumstances which constitute a breach of Seller's representation and
warranties in Article 3.
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The Losses of the Seller Indemnified Parties described in this Section
9.2 as to which the Seller Indemnified Parties are entitled to
indemnification are hereinafter collectively referred to as "Seller
Losses."
Section 9.3. Indemnification Procedure.
(a) Promptly after receipt by a Purchaser Indemnified
Party or a Seller Indemnified Party (hereinafter collectively referred
to as an "Indemnified Party") of notice by a third party of any
complaint or the commencement of any action or proceeding with respect
to which such Indemnified Party may be entitled to receive payment
from the other party for any Purchaser Losses or Seller Losses (as the
case may be), such Indemnified Party shall notify Purchaser or Seller
within 10 days, whoever is the appropriate indemnifying party
hereunder (the "Indemnifying Party"), of such complaint or of the
commencement of such action or proceeding; provided, however, that the
failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party from liability for such claim arising otherwise
than under this Agreement and such failure to so notify the
Indemnifying Party shall relieve the Indemnifying Party from liability
under this Agreement with respect to such claim only if, and only to
the extent that, such failure to notify the Indemnifying Party results
in the forfeiture by the Indemnifying Party of rights and defenses
otherwise available to the Indemnifying Party with respect to such
claim. The Indemnifying Party shall have the right, upon written
notice delivered to the Indemnified Party within 20 days thereafter,
to assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to the
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Indemnified Party and the payment of the fees and disbursements of
such counsel. In the event, however, that the Indemnifying Party
declines or fails to assume the defense of the action or proceeding
within such 20-day period, then such Indemnified Party may employ
counsel to represent or defend it in any such action or proceeding and
the Indemnifying Party shall pay the reasonable fees and disbursements
of such counsel as incurred; provided, however, that the Indemnifying
Party shall not be required to pay the fees and disbursements of more
than one counsel for all Indemnified Parties in any jurisdiction in
any single action or proceeding. In any action or proceeding with
respect to which indemnification is being sought hereunder, the
Indemnified Party or the Indemnifying Party, whichever is not assuming
the defense of such action, shall have the right to participate in
such litigation and to retain its own counsel at such party's own
expense. The Indemnifying Party or the Indemnified Party, as the case
may be, shall at all times use reasonable efforts to keep the
Indemnifying Party or the Indemnified Party, as the case may be,
reasonably apprised of the status of the defense of any action the
defense of which they are maintaining and to cooperate in good faith
with each other with respect to the defense of any such action.
(b) If the Indemnifying Party assumes the defense of a
claim pursuant to Section 9.3(a), no Indemnified Party may settle or
compromise such claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder without the
prior written consent of the Indemnifying Party, unless such
settlement, compromise or consent includes an unconditional release of
the Indemnifying Party from all liability arising out of such claim at
no cost to the
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Indemnifying Party. If the Indemnifying Party does not assume the
defense of a claim pursuant to Section 9.3(a), the Indemnified Party
will not agree to any settlement, compromise or consent with respect
to such claim without the prior written consent of the Indemnifying
Party, which shall not be unreasonably withheld (which reasonableness
shall be determined based on the actions that a reasonably prudent
person, acting in a commercially reasonable manner and seeking to
mitigate or minimize his expenses to the extent reasonably consistent
with prudent business practices (assuming such person did not have any
right of indemnity under this Agreement), would take in the
circumstances). An Indemnifying Party may not, without the prior
written consent of the Indemnified Party, settle or compromise any
claim or consent to the entry of any judgment with respect to which
indemnification is being sought hereunder unless such settlement,
compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and
does not contain any equitable order, judgment or term which in any
manner affects, restrains or interferes with the business of the
Indemnified Party or any of the Indemnified Party's respective
Affiliates.
(c) In the event an Indemnified Party shall claim a right
to payment pursuant to this Agreement, such Indemnified Party shall
send written notice of such claim to the appropriate Indemnifying
Party. Such notice shall specify in reasonable detail the basis for
such claim. As promptly as possible after the Indemnified Party has
given such notice, such Indemnified Party and the
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appropriate Indemnifying Party shall establish the merits and amount
of such claim (by mutual agreement, litigation, arbitration or
otherwise) and, within five business days of the agreement or the
final judgment (with respect to litigation and arbitration not subject
to further appeal) of the merits and amount of such claim, the
Indemnifying Party shall pay to the Indemnified Party immediately
available funds in an amount equal to such claim as determined
hereunder.
Section 9.4. Claims Period. For purposes of this Agreement, a
"Claims Period" shall be the period after the earlier of the Closing Date or
the date of any termination of this Agreement pursuant to Article 8 during
which a claim for indemnification may be asserted under this Agreement by an
Indemnified Party. The Claims Periods under this Agreement shall terminate as
follows:
(a) with respect to Purchaser Losses arising under
Section 9.1(d) with respect to any breach or inaccuracy of any
representation or warranty in Section 3.2, the fourth sentence of
Section 3.5(a), the second sentence of Section 3.5(d), Section 3.12,
Section 3.19 and Section 3.20 (collectively, the "Seller Surviving
Representations") or under Sections 9.1(a), 9.1(e), 9.1(g) and 9.1(i)
(collectively, the "Seller Surviving Obligations"), the Claims Period
shall continue indefinitely, except as limited by law (including by
applicable statutes of limitation);
(b) with respect to Purchaser Losses arising under
Section 9.1(f), the Claims Period shall terminate on the third
anniversary of the Closing Date;
(c) with respect to Seller Losses arising under Section
9.2(b) with respect to any breach or inaccuracy of any representation
or warranty under Section 4.2 or Section 4.5, or under Sections
9.2(a), (c), (d) or (e), the Claims
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Period shall continue indefinitely, except as limited by law
(including any applicable statutes of limitation); and
(d) with respect to all other Purchaser Losses or Seller
Losses arising under this Agreement, the Claims Period shall terminate
on the date that is eighteen months after the Closing Date.
Notwithstanding the foregoing, if prior to the close of business on
the last day of the applicable Claims Period, an Indemnifying Party shall have
been properly notified of a claim for indemnity hereunder and such claim shall
not have been finally resolved or disposed of at such date, such claim shall
continue to survive and shall remain a basis for indemnity hereunder until such
claim is finally resolved or disposed of in accordance with the terms hereof.
Section 9.5. Liability Limits. Notwithstanding anything to the
contrary set forth herein:
(a) Seller shall only be liable for Purchaser Losses to
the extent that any such Purchaser Losses (exclusive of Purchaser
Losses arising under or pursuant to any Seller Surviving
Representations or Seller Surviving Obligations or Section 9.1(h))
exceed, in the aggregate, $5,000,000 (the "Seller Basket Amount") and
such liability shall be only for amounts in excess of the Seller
Basket Amount; provided, however, that Purchaser Losses arising under
or pursuant to any Selling Surviving Representations and/or Seller
Surviving Obligations or under Section 9.1(h) shall not be subject to
the Seller Basket Amount, and Seller shall be liable for Purchase
Losses arising under or pursuant thereto from the first dollar;
(b) the indemnification obligations of Seller hereunder
shall not exceed
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in the aggregate $100,000,000 (the "Seller Cap Amount"); provided,
however, that Purchaser Losses arising under or pursuant to any
Selling Surviving Representations and/or Seller Surviving Obligations
or under Section 9.1(h) shall not be subject to the Seller Cap Amount
and there shall be no limitation on the indemnification obligations of
Seller with respect to Purchaser Losses arising under or pursuant to
such provisions; and
(c) the indemnity obligations of the Indemnifying Party
hereunder with respect to any Seller Losses or Purchaser Losses (as
applicable) shall not apply to the extent that the Indemnified Party
is compensated for the same Losses from insurance proceeds actually
received.
Section 9.6. Compliance with Bulk Sales Laws. Purchaser and Seller
hereby waive compliance by the parties hereto with the bulk sales law and any
other similar laws in any applicable jurisdiction in respect of the
transactions contemplated by this Agreement.
Section 9.7. Investigations. The respective representations and
warranties of Purchaser and Seller contained herein or in any certificate or
other document delivered by any party prior to the Closing and the rights to
indemnification set forth in Section 9 shall not be deemed waived or otherwise
affected by any investigation made by a party hereto.
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ARTICLE 10.
MISCELLANEOUS PROVISIONS
Section 10.1. Notices. All notices, communications and deliveries
hereunder shall be made in writing signed by or on behalf of the party making
the same, shall specify the Section hereunder pursuant to which it is given or
being made, and shall be deemed given or made (a) on the date delivered if
delivered in person, (b) on the date after delivery to a reputable overnight
courier, fees prepaid, (c) upon transmission by facsimile if receipt is
confirmed by telephone or (d) on the fifth (5th) business day after it is
mailed if mailed by registered or certified mail (return receipt requested)
(with postage and other fees prepaid), if addressed or transmitted as follows:
To Purchaser or Avondale:
Avondale Incorporated
506 South Broad Street
Monroe, Georgia 30655
Attn: G. Stephen Felker
Telecopy No.: (770) 267-2543
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attn: Michael J. Egan III
Telecopy No.: (404) 572-5145
To Seller or Triarc:
Triarc Companies, Inc.
900 Third Avenue
31st Floor
New York, NY 10022
Attn: Brian L. Schorr
Telecopy No.: (212) 230-3216
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with a copy to:
Paul, Weiss, Rifkind
Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Attn: Neale M. Albert
Telecopy No.: (212) 757-3990
and, if delivered prior to Closing, with a copy to:
Graniteville Company
133 Marshall Street
Graniteville, SC 29829-0128
Attn: John L. Barnes, Jr.
Telecopy No.: (803) 663-5016
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing.
Section 10.2. Schedules and Exhibits. The Schedules and Exhibits
hereto are hereby incorporated into this Agreement and are hereby made a part
hereof as if set out in full in this Agreement.
Section 10.3. Assignment; Successors in Interest. No assignment or
transfer by Avondale, Purchaser, Triarc or Seller of their respective rights
and obligations hereunder shall be made except with the prior written consent
of the other parties hereto. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their permitted successors and
assigns, and any reference to a party hereto shall also be a reference to a
permitted successor or assign.
Section 10.4. Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
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Section 10.5. Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise
specified to the contrary, all references to Articles and Sections are
references to Articles and Sections of this Agreement and all references to
Schedules or Exhibits are references to Schedules and Exhibits, respectively,
to this Agreement.
Section 10.6. Controlling Law; Integration; Amendment. This
Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of South Carolina without reference to South
Carolina's choice of law rules. This Agreement and the documents executed
pursuant hereto supersede all negotiations, agreements and understandings among
the parties with respect to the subject matter hereof (including, without
limitation, that certain letter agreement between Triarc and Purchaser dated
January 25, 1996, but excluding that certain Confidentiality Agreement dated
May 8, 1995 among Purchaser, Seller and Triarc and that certain Confidentiality
Agreement among Seller, Purchaser and Triarc dated July 25, 1995 which
confidentiality agreements shall survive until the Closing, or if this
Agreement is terminated, indefinitely) and constitutes the entire agreement
among the parties hereto. This Agreement may be amended, modified or
supplemented only by written agreement of the parties hereto.
Section 10.7. Severability. Any provision hereof which is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction will not invalidate or render
unenforceable such provision in
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any other jurisdiction. To the extent permitted by law, the parties hereto
waive any provision of law which renders any such provision prohibited or
unenforceable in any respect.
Section 10.8. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement or the terms hereof to
produce or account for more than one of such counterparts.
Section 10.9. Enforcement of Certain Rights. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm or corporation other than the parties hereto, and their
successors or assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, or result in such person, firm or corporation
being deemed a third party beneficiary of this Agreement.
Section 10.10. Waiver. Any agreement on the part of a party hereto
to any extension or waiver of any provision of this Agreement shall be valid
only if set forth in an instrument in writing signed on behalf of such party. A
waiver by a party of the performance of any covenant, agreement, obligation,
condition, representation or warranty shall not be construed as a waiver of any
other covenant, agreement, obligation, condition, representation or warranty. A
waiver by any party of the performance of any act shall not constitute a waiver
of the performance of any other act or an identical act required to be
performed at a later time.
Section 10.11. Valuation For Tax Reporting Purposes. Within 90 days
after the date on which the final Statement of Net Assets is delivered pursuant
to Section 2.3 or 2.4, Purchaser shall provide to Seller, for Seller's review
and comment, a written schedule indicating the respective fair market values of
the Assets, Assumed Liabilities and other items acquired hereunder as
determined in good faith by Purchaser. Purchaser and Seller shall endeavor in
good
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faith to agree on the appropriate fair market values to be used in preparing
and filing their respective Forms 8594 with the Internal Revenue Service, as
required by Section 1060 of the Code, determining Purchaser's cost basis and
Seller's amount realized, and for all other relevant federal and state tax
purposes.
Section 10.12. Fees and Expenses. Each of Seller, Triarc and
Purchaser shall pay its own fees, costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, including the
fees, costs and expenses of its financial advisors, accountants and counsel.
Notwithstanding the foregoing:
(a) If Seller and Triarc give notice of the termination of this
Agreement pursuant to Section 8.1(e), Seller shall pay to Purchaser a
termination fee of seven million five hundred thousand dollars ($7,500,000)
plus all of Purchaser's reasonable fees, costs and expenses (including, but not
limited to, fees, costs and expenses of its counsel, accountants, financial
advisors and lenders and all printer costs and expenses associated with
Purchaser's proposed financing), which fees, costs and expenses shall not
exceed in the aggregate two million five hundred thousand dollars ($2,500,000).
Such fee shall be paid within two (2) business days following the giving of
such notice by Seller and Triarc by wire transfer of immediately available
funds to an account designated by Purchaser;
(b) If Purchaser and Avondale give notice of the termination of
this Agreement pursuant to Section 8.1(f), Purchaser shall pay to Seller a
termination fee of seven million five hundred thousand dollars ($7,500,000)
plus all of Seller's reasonable fees, costs and expenses (including, but not
limited to, fees, costs and expenses of its counsel, accountants and financial
advisors), which fees, costs and expenses shall not exceed in the aggregate two
million five hundred thousand dollars ($2,500,000). Such fee shall be paid
within two (2) business days
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following the giving of such notice by Purchaser and Avondale by wire transfer
of immediately available funds to an account designated by Seller;
(c) To the extent Seller elects, in its absolute and sole
discretion, to repay all or any portion of the indebtedness (including
principal and accrued interest) outstanding under the CIT Agreement and/or the
Factoring Agreement at the Closing and Seller incurs any prepayment penalties
(including, without limitation, LIBOR breakage costs) in connection therewith,
Seller and Purchaser agree to each pay 50% of any such prepayment penalties;
provided, however, that Purchaser shall not in any case pay any amount pursuant
to this Section 10.12(c) in excess of $2,900,000; and
(d) All fees, costs and expenses of any judicial, arbitrated or
other official proceedings (other than those contemplated in Section 2.4)
brought relating to any controversy or claim arising out of or relating to this
Agreement and the transactions contemplated hereby shall be paid by the
non-prevailing party (as determined by the judge(s), jury, arbitrator(s) or the
fact finder which rendered a decision in the proceeding) to such proceeding.
Such fees, costs and expenses shall include court costs and other fees and
expenses of the fact finder that heard the proceeding and the reasonable
attorneys', accountants', experts and other out-of-pocket fees and expenses of
the prevailing party incurred in connection with such proceeding. The parties
shall instruct the fact finder in any such proceeding to make the determination
contemplated by this paragraph. If the fact finder determines that neither
party is the prevailing party, each party will bear its own costs of such
proceeding.
Section 10.13. Guarantee. Avondale hereby unconditionally and
irrevocably guarantees to Seller the due and punctual payment by Purchaser of
(a) any amounts that are due and payable to Seller pursuant to Sections 2.1,
2.2, 2.5 and Section 10.12 and (b) any amounts that are due
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and payable in respect of Purchaser's indemnification obligations under Article
9. Triarc hereby unconditionally and irrevocably guarantees to Purchaser the
due and punctual payment by Seller of (a) any amounts that are due and payable
to Purchaser under Section 2.2, Section 2.5, Section 2.6 and Section 10.12 and
(b) any amounts that are due and payable in respect of Seller's indemnification
obligations under Section 5.8(a) or Article 9. Each of Avondale and Triarc
agrees that its respective obligations hereunder are absolute and
unconditional, irrespective of the validity or enforceability of or any change
and/or amendment to this Agreement, the institution or absence of any action to
enforce the same, or any other circumstance which might otherwise constitute a
legal or equitable discharge of, or defense to, a guarantor. Each of Avondale
and Triarc hereby unconditionally waives (x) protest, presentment, filing of
claims with the court in the event of bankruptcy, liquidation, reorganization
or similar case or proceeding of Purchaser or Seller, respectively, (y) any
right to require that Seller or Purchaser proceed first against Purchaser or
Seller, respectively, or any other person or pursue any other remedy available
to Seller or Purchaser, respectively, and (z) the right to consent to any act,
omission or delay which might in any manner or to any extent vary the risk,
reduce the liability or otherwise operate as a discharge of Avondale or Triarc.
If Seller or Purchaser, respectively, elects not to pursue Purchaser or Seller,
respectively, or any other person or pursue any or all remedies available, then
upon receipt of payment from Avondale or Triarc, Seller or Purchaser,
respectively, will, to the extent permitted by applicable law, assign, transfer
or otherwise convey all rights and remedies Seller or Purchaser, respectively,
may have relating to such circumstance or claim forthwith to Avondale or
Triarc, respectively.
Section 10.14. Cooperation on Taxes. Purchaser and Seller will, in
good faith, provide each other with such cooperation and information as either
of them reasonably may request of the
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other in filing any tax return, amended tax return or claim for refund,
determining a liability for taxes or a right to a refund of taxes or conducting
any audit or any other proceeding in respect of taxes. Such cooperation and
information by Purchaser shall include any assistance reasonably requested by
Seller consistent with past practice to determine (i) the tax basis of Seller's
assets at the time of Closing and (ii) taxable income for any period through
the Closing Date in a manner similar to the level of assistance provided by
employees of the Business prior to the Closing to the extent such level of
assistance is within the reasonable control of Purchaser. Each party shall use
its reasonable efforts to make its employees and agents (including its
attorneys, accountants and other professionals) available to the other on a
mutually convenient basis to provide explanations of any documents or
information provided hereunder. Purchaser and Seller will provide such
cooperation and assistance at their own expense, provided, however, that all
out of pocket fees and expenses, including fees and expenses of outside
accountants and lawyers, shall be paid by the party requesting such cooperation
and assistance. Notwithstanding the preceding sentence, if in connection with
an examination by any taxing authority, Purchaser or Seller must expend
extraordinary employee time or other resources to provide such assistance, the
reasonable costs of such extraordinary employee time or other resources,
including a pro rata portion of salaries and benefits, shall be paid by the
party requesting such assistance. Purchaser will retain all material records or
other documents relating to tax matters of Seller for taxable periods through
the Closing Date until six months after the expiration of the statute of
limitations (including any extensions) applicable to such returns and other
documents. Any information pertaining to Seller's taxes shall be kept
confidential by Purchaser.
Upon the expiration of any statute of limitations (including any
extensions), with respect to a taxable period, Purchaser shall offer to provide
to Seller all records with respect to such
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period before destroying such records. Purchaser will comply with the terms of
the record retention agreement executed between Seller and the Internal Revenue
Service attached hereto as Exhibit H.
Section 10.15. Knowledge. For purposes of this Agreement,
"knowledge" as of any date that a representation and warranty is given by any
party hereto shall mean the "actual knowledge" (i) with respect to Seller, the
management of Seller at the level of vice president and above and all of the
plant managers of Seller as of such date, and (ii) with respect to Triarc, the
management at the level of executive vice president and above as of such date,
and "knows" has a correlative meaning.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the date first above written.
AVONDALE MILLS, INC.
By: __________________________
Title:________________________
AVONDALE INCORPORATED
By: __________________________
Title:________________________
GRANITEVILLE COMPANY
By: __________________________
Title:________________________
TRIARC COMPANIES, INC.
By: __________________________
Title:________________________
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EXHIBITS
<TABLE>
<S> <C>
Exhibit AA July 30 Balance Sheet
Exhibit A Form of Statement of Net Assets
Exhibit B Legal Opinion of The McNair Law Firm, P.A.
Exhibit C Legal Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
Exhibit D Supply Agreement
Exhibit E Legal Opinion of King & Spalding
Exhibit F Legal Opinion of Wyche, Burgess, Freeman & Parham
Exhibit G Form of Assumption Agreement
Exhibit H IRS Records Retention Agreement
</TABLE>
SCHEDULES
---------
<TABLE>
<S> <C> <C>
Schedule 1.3(b) - Excluded Real Property
Schedule 1.3(m) - List of other Excluded Assets
Schedule 1.4 - List of Assumed Liabilities
Schedule 3.1 - List of jurisdictions in which Seller is qualified to do business
Schedule 3.3 - Other governmental and regulatory consents of Seller
Schedule 3.4 - Ownership interests held by Seller
Schedule 3.5(a)(i) - List of Real Property and related matters
Schedule 3.5(a)(ii) - List of Liens on Real Property
Schedule 3.5(a)(iii) - List of exceptions to possession of Real Property and improvements
Schedule 3.5(a)(iv) - List of structural defects of buildings on Real Property
Schedule 3.5(a)(v) - List of real property sold, assigned, transferred or otherwise disposed of by
Seller after July 30, 1995
Schedule 3.5(b)(i) - Real Property Leases
Schedule 3.5(b)(ii) - List of Leased Property held by employees
Schedule 3.5(c)(i) - Detailed Fixed Asset Ledger of the Business
Schedule 3.5(c)(ii) - List of Personal Property held by employees
Schedule 3.5(d)(i) - Title exceptions to the Assets
Schedule 3.5(d)(ii) - List of defects in production equipment
Schedule 3.5(d)(iii) - Assets owned by third parties which are located on premises of Seller
Schedule 3.5(g) - List of third party options
Schedule 3.6 - Excluded Assets reflected on financial statements
Schedule 3.7 - List of certain liabilities and obligations of Seller involving or affecting
the Business or the Assets
Schedule 3.8(b) - List of certain changes since December 31, 1995
Schedule 3.9 - List of legal proceedings
Schedule 3.10(i) - List of all Licenses
Schedule 3.10(ii) - List of OSHA violations since 1/1/93
Schedule 3.11(i) - List of certain Seller Contracts
Schedule 3.11(ii) - List of Defaults
Schedule 3.12 - List of claims for taxes
Schedule 3.13 - List of (i) officers of Seller and their annual compensation, (ii) all
salaried employees of Seller, (iii) the approximate number of current hourly
employees, and (iv) all former employees entitled to post-retirement benefits
or any other compensation
Schedule 3.14 - Seller Benefit Plans
Schedule 3.15 - List of certain labor relations matters
Schedule 3.16 - List of Seller's insurance policies and coverages relating to the Assets
and/or the Business
Schedule 3.17 - List of certain environmental matters
Schedule 3.17(f) - List of environmental fines, penalties and assessments
Schedule 3.18 - List of (i) all Intellectual Property, (ii) agreements relating to
Intellectual Property and (iii) all jurisdictions in which Seller is operating
the Business under a tradename and jurisdictions in which any such tradenames
are registered
Schedule 3.19 - List of transactions with Affiliates
Schedule 3.21 - List of Bank Accounts
Schedule 4.3 - Other governmental and regulatory consents of Purchaser
Schedule 6.2(e) - List of Purchaser's debt and equity investors
Schedule 6.2(f) - Consents required to be delivered at Closing
Schedule 9.1(i) - Indemnification for certain contracts
</TABLE>
The registrants agree to furnish a copy of the Schedules and Exhibits listed
above to the Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 3.1
EXHIBIT A
RESTATED AND AMENDED
ARTICLES OF INCORPORATION
OF
AVONDALE INCORPORATED
Article I
Name
The name of the Corporation is Avondale Incorporated.
Article II
Authorized Stock
(a) Authorized Classes and Numbers of Shares. The total number of
shares of all classes of stock that the Corporation is authorized to issue is
115,000,000 shares, consisting of 100,000,000 shares of Class A Common Stock,
par value $.01 per share ("Class A Common"), 5,000,000 shares of Class B Common
Stock, par value $.01 per share ("Class B Common"), and 10,000,000 shares of
preferred stock, par value $.01 per share ("Preferred Stock"). The Class A
Common and the Class B Common are referred to herein collectively as the
"Common Stock." Notwithstanding the foregoing, with respect to the Class B
Common, the Corporation is only authorized to issue (i) 3,915.76192 shares of
Class B Common to G. Stephen Felker ("Felker"), and, (ii) in the case of the
issuance of shares of Class B Common as a dividend or other distribution or in
connection with a subdivision of the outstanding shares of Class B Common,
shares of Class B Common (A) to Felker in connection with such dividend or
subdivision, or (B) in the event Felker or a "Permitted Transferee" (as defined
in paragraph (b)(5) of this Article II) has sold, pledged, assigned,
transferred, given or otherwise disposed of (in any such case a "Transfer") any
shares of Class B Common to a Permitted Transferee, to such Permitted
Transferee in connection with such dividend or subdivision.
(b) Common Stock. The following is a statement of the designations
and the powers, preferences and rights in respect of the Common Stock.
(1) Identical Rights. Except as expressly provided in this
Article II and as otherwise required by law, all shares of Class A
Common and Class B Common shall rank equally, share ratably and be
identical in all respects as to all
<PAGE> 2
matters and shall entitle the respective holders thereof to the same
rights and privileges.
(2) Dividends. Subject to the provisions of applicable law
and the rights of the holders of the outstanding shares of Preferred
Stock, if any, the holders of shares of Common Stock shall be entitled
to receive, when and as declared by the Board of Directors of the
Corporation, out of the assets of the Corporation legally available
therefor, dividends or other distributions, whether payable in cash,
property or securities of the Corporation; provided, however, that, with
respect to any dividend or other distribution of cash or property on any
class of Common Stock, holders of shares of Class A Common and Class B
Common shall be entitled to share equally on a per share basis in such
dividends; provided, further, however, with respect to any dividends or
other distributions payable in shares of Common Stock (including any
stock splits or subdivisions of stock payable in shares of Common
Stock), such dividends or other distributions shall be at the same rate
per share of Common Stock, provided that, in payment of such dividend or
other distribution, holders of Class A Common shall receive shares of
Class A Common and holders of Class B Common shall receive shares of
Class B Common. If the Corporation shall in any manner subdivide or
combine the outstanding shares of one class of Common Stock, the
outstanding shares of the other class of Common Stock shall be
proportionately subdivided or combined so the numbers of outstanding
shares of each class of Common Stock bear the same ratio to one
another as before such subdivision or combination.
(3) Voting Rights. Except as otherwise provided by law and
these Restated and Amended Articles of Incorporation, with respect to
all matters upon which shareholders are entitled to vote or to which
shareholders are entitled to give consent, the holders or outstanding
shares of Class A Common and Class B Common shall vote together as a
single class. With respect to all such matters upon which shareholders
are entitled to vote or give consent, each holder of Class A Common
shall be entitled to one (1) vote (in person or by proxy) for each share
of Class A Common so held, and each holder of Class B Common shall be
entitled to twenty (20) votes (in person or by proxy) for each share of
Class B Common so held. Notwithstanding the foregoing or any other
provision of these Restated and Amended Articles of Incorporation, the
holders of outstanding shares of Class A Common shall be entitled to
vote or give consent as a single class on any proposed amendment to the
powers, preferences and rights of the Class B Common or the last
sentence of paragraph (a) of this Article II; provided, however, that
with respect to any such vote or consent, each holder of Class B Common
shall be entitled to vote with such holders of
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<PAGE> 3
Class A Common and shall be entitled to one (1) vote for each share of
Class A Common that would be issuable to such holder upon the conversion
under this Article II of each share of Class B Common held by such
holder on the record date for the determination of shareholders entitled
to vote; provided, further, however, that with respect to any such vote
or consent, if the Corporation (or any shareholder or shareholders
thereof) has not completed an initial public offering of the Class A
Common, the affirmative vote of the holders of two-thirds of the
outstanding voting power of the Class A Common (with the holders of the
Class B Common voting together with the holders of the Class A Common as
set forth in the immediately preceding proviso of this paragraph (b)(3))
shall be required to approve any such proposed amendment.
(4) Optional Conversion Rights. Subject to the terms of
this Article II, any holder of Class B Common shall have the right, as
its option at any time, to convert each share of Class B Common into one
share of Class A Common. The rights of conversion herein provided shall
be exercised by any holder of Class B Common by giving written notice
that such holder elects to convert a stated number of shares of Class B
Common and by surrender of a certificate or certificates for the shares
to be so converted to the Corporation at its principal office (or such
other office or agency of the Corporation as the Corporation may
designate by notice in writing to the holders of the Class B Common) at
any time during the usual business hours on the date set forth in such
notice, together with a statement of the name or names (with address) in
which the certificate or certificates for shares of Class A Common shall
be issued in accordance with paragraph (b)(7) of this Article II.
(5) Automatic Conversion. Each share of Class B Common
shall automatically convert, without any act or further action on the
part of the Corporation or any other person, into one share of Class A
Common upon the Transfer of such share of Class B Common to any party
other than a "Permitted Transferee." For purposes of these Restated
and Amended Articles of Incorporation, a Permitted Transferee
shall include (i) Felker's spouse or widow and his natural and adopted
children, (ii) any trust existing solely for the benefit of any of the
persons specified in clause (i) (for purposes of this paragraph (b)(5),
a trust shall be deemed to exist solely for the benefit of such person
or persons in clause (i) for such period of time as no other person has
a current right to receive the income from or the principal of such
trust, and, as of the time any other person (other than a person
specified in clause (i)) has such right, each share of Class B Common
held by such trust shall automatically convert into one share of Class
A Common in accordance with
-3-
<PAGE> 4
this paragraph (b)(5)), or (iii) upon Felker's death, his estate or any
executor, administrator, conservator or other legal representative of
Felker. The conversion ratio set forth in this paragraph (b)(5) and in
paragraph (b)(4) shall be equitably adjusted in the event of any
recapitalization, subdivision or combination of any outstanding Class A
Common or Class B Common.
Notwithstanding anything to the contrary set forth herein, any
holder of Class B Common may pledge such holder's shares of Class B
Common may pledge such holder's shares of Class B Common to a pledgee
pursuant to a bona fide pledge of such shares as collateral security for
indebtedness due to the pledgee, provided that such shares may not be
transferred to or registered in the name of the pledgee unless such
pledgee is a Permitted Transferee. In the event of foreclosure or other
similar action (including, without limitation, any attempt to exercise
voting rights) by the pledgee (other than a pledgee who is a Permitted
Transferee), such pledged shares of Class B Common shall convert
automatically, without any act or further action on the part of the
Corporation or any other person, into shares of Class A Common as
provided in this paragraph (b)(5); provided, however, that if within
five business days after such foreclosure or similar action such
converted shares are returned to the pledgor, such shares shall convert
automatically, without any further action on the part of the Corporation
or any other person, into shares of Class B Common.
(6) Notice of Conversion. Until such time as the Corporation
(or any shareholder or shareholders thereof) completes an initial public
offering of the Class A Common, upon the conversion of any shares of
Class B Common into shares of Class A Common pursuant to this Article
II, the Corporation shall promptly (but in any case within thirty (30)
days) give notice thereof by first class mail, postage prepaid, to each
holder of Class A Common.
(7) Issuance of Certificates Upon Conversion. Promptly after
the receipt of the written notice referred to in paragraph (b)(4) of this
Article II or the occurrence of an event giving rise to automatic
conversion pursuant to paragraph (b)(5) of this Article II and surrender
of the certificate or certificates for the shares of Class B Common
being converted together with any necessary transfer tax stamps or funds
therefor, the Corporation shall issue and deliver, or cause to be issued
and delivered, to such holder, registered in such name or names as such
holder may direct, subject to compliance with applicable laws to the
extent the event giving rise to such conversion shall involve a
Transfer, a certificate or certificates for the number of whole shares
of Class A Common issuable upon the conversion
-4-
<PAGE> 5
of such shares of Class B Common. To the extent permitted by law, other
than as set forth in paragraph (5) of this Article III, such conversion
shall be deemed to have been effected as of the close of business on the
date on which the certificate or certificates for such share or shares
shall have been surrendered as aforesaid, and at such time the rights of
the holder of such share or shares of Class B Common shall cease, and
the person or persons in whose name or names any certificate or
certificates for shares of Class A Common shall be issuable upon such
conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby.
(8) Reservation of Shares. The Corporation hereby reserves and
shall at all times reserve and keep available, out of its authorized and
unissued shares of Class A Common, solely for the purpose of issuance
upon conversion of the outstanding shares of Class B Common hereunder,
such number of shares of Class A Common as shall be issuable upon
conversion of all outstanding shares of Class B Common; provided,
however, that nothing contained herein shall be construed to preclude
the Corporation from satisfying its obligations in respect of the
conversion of the outstanding shares of Class B Common by delivery of
purchased shares of Class A Common which are held in the treasury of the
Corporation. If any shares of Class A Common required to be reserved
for purposes of conversion hereunder require registration with or
approval by any governmental authority under federal or state law, or
listing or inclusion in any securities exchange or exchanges or national
market system providing for the listing or trading of such shares,
before such shares of Class A Common may be issued upon conversion, the
Corporation will cause such shares to be duly registered, approved or
listed, as the case may be. All shares of Class A common that shall be
issued upon conversion of shares of Class B Common will, upon issue, be
duly and validly authorized and issued, fully paid and nonassessable,
free from all taxes, liens and charges arising out of or by reason of
the issue thereof and not subject to any preemptive rights. Any shares
of Class B Common that have been converted into Class A Common at any
time pursuant to the provisions of this Article II shall, after such
conversion, be retired and cancelled and shall not be reissued, except
as provided in the proviso to the last sentence of paragraph (b)(5).
(9) Liquidation, Dissolution or Winding Up. Upon the
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, after any preferential amounts required to be
paid or distributed to holders of outstanding shares of Preferred Stock,
if any, are so paid or distributed, the remaining assets of the
Corporation shall be
-5-
<PAGE> 6
distributed ratably to the holders of Class A Common and Class B Common,
as a single class, in proportion to the number of shares held by them.
(10) Reorganization, Consolidation or Merger. In the event of a
reorganization, consolidation or merger of the Corporation, each holder
of a share of Common Stock shall be entitled to receive the same kind
and amount of consideration (whether consisting of cash, property or
securities) entitled to be received by each other holder of a share of
Common Stock, regardless of whether such share of Common Stock is a
share of Class A Common or Class B Common.
(11) Treasury Stock. Shares of Class A Common Stock that have
been acquired by the Corporation shall become treasury shares and may be
resold or otherwise disposed of by the Corporation for such
consideration, not less than the par value thereof, as shall be
determined by the Board of Directors, unless or until the Board of
Directors shall by resolution provide that any or all treasury shares so
acquired shall constitute authorized, but unissued shares.
(12) Class B Common Legend. Each certificate issued by the
Corporation representing shares of Class B Common shall bear, in
addition to any other legends required by law, the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED
(THE "GEORGIA ACT"), IN RELIANCE UPON THE EXEMPTION CONTAINED IN
SECTION 10-5-9(13) OF THE GEORGIA ACT, AND HAVE NOT BEEN
REGISTERED UNDER ANY OTHER STATE SECURITIES LAWS OR THE
SECURITIES ACT OF 1933, AS AMENDED (THE "FEDERAL ACT"). THESE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF, NOR WILL ANY ASSIGNEE OR TRANSFEREE THEREOF BE RECOGNIZED BY
THE CORPORATION AS HAVING ANY INTEREST IN SUCH SHARES, UNLESS
SUCH SHARES ARE THE SUBJECT OF (A) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE GEORGIA ACT, THE FEDERAL ACT AND ANY OTHER
APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL,
WHICH OPINION AND COUNSEL SHALL BE SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT THE TRANSACTION BY WHICH SUCH
SHARES WILL BE OFFERED FOR SALE, HYPOTHECATED, SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACTS OR LAWS OR IS OTHERWISE IN COMPLIANCE
WITH THE REGISTRATION REQUIREMENTS OF SUCH ACTS OR LAWS.
-6-
<PAGE> 7
THESE SECURITIES ARE SUBJECT TO CERTAIN LIMITATIONS ON TRANSFER
SET FORTH IN THE RESTATED AND AMENDED ARTICLES OF INCORPORATION
OF AVONDALE INCORPORATED A COPY OF SUCH CERTIFICATE OF
INCORPORATION IS ON FILE WITH THE SECRETARY OF AVONDALE
INCORPORATED.
(c) Preferred Stock. The Board of Directors is hereby authorized,
subject to limitations prescribed by law or the provisions of this Article II,
by filing articles of amendment pursuant to the applicable law of the State of
Georgia, to provide for the issuance of the shares of Preferred Stock in series,
to establish from time to time the number of shares to be included in each
series and to fix the designations, powers and preferences and rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof. The authority of the Board of Directors with respect to each series
shall include, but not be limited to, the determination of the following:
(1) The number of shares constituting that series and the
distinct designation of that series;
(2) The dividend rate, if any, on such shares of that
series, whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any, of payment
of dividends or other distributions on shares of that series;
(3) Wether that series shall have voting rights in addition
to the voting rights provided by law, and, if so, the terms of such
voting rights;
(4) Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such conversion, including
provision for the adjustment of the conversion rate in such events as
the Board of Directors shall determine;
(5) Whether the shares of that series shall be redeemable or
exchangeable, and, if so, the terms and conditions of such redemption or
exchange, including the date or dates upon or after which they shall be
redeemable or exchangeable, and the amount per share payable in case of
redemption or exchange, which amount may vary under different conditions
and at different redemption or exchange rates;
(6) Whether that series shall have a sinking fund for
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
-7-
<PAGE> 8
(7) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
(8) Any other relative rights, preferences and limitations
of that series.
ARTICLE III
BOARD OF DIRECTORS
Upon the filing of these Restated and Amended Articles of
Incorporation, the new Board of Directors of the Corporation shall consist of
eleven (11) members, but the number may be increased or decreased in the manner
provided in the Bylaws of the Corporation. The names and mailing addresses of
the persons who are to serve as the new directors of the Corporation upon the
filing of these Restated and Amended Articles of Incorporation are:
G. Stephen Felker
Avondale Incorporated
506 South Broad Street
Monroe, Georgia 30655
Richard H. Monk, Jr.
Avondale Mills, Inc.
900 Avondale Avenue
Sylacauga, Alabama 35150
Jack R. Altherr, Jr.
Avondale Incorporated
506 South Broad Street
Monroe, Georgia 30655
Paul R. Crotty
MetLife
200 Park Avenue
MetLife Building, 21st Floor
New York, New York 10166
Robert B. Calhoun
The Clipper Group, L.P.
55 East 52nd Street
Park Avenue Plaza
New York, New York 10055
Harry C. Howard
22 Cherokee Road, N.W.
Atlanta, Georgia 30305
-8-
<PAGE> 9
Kenneth H. Callaway
2 Olive Street
Newnan, Georgia 30263
C. Linden Longino, Jr.
Trust Company Bank
25 Park Place, N.E.
Center Code 210
Atlanta, Georgia 30303
Hansford Sams, Jr.
222 East Parkwood Rd.
Decatur, Georgia 30030
John P. Stevens
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
John F. Maypole
157 Lake Drive
Mountain Lakes, New Jersey 07046
ARTICLE IV
DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of duty of care
or other duty as a director, except for liabilities, if any, that the Georgia
Business Corporation Code as in effect from time to time expressly provides may
not be limited or eliminated. Neither the amendment or repeal of this Article
IV nor the adoption of any provision of these Restated and Amended Articles of
Incorporation inconsistent with this Article shall eliminate or adversely
affect any right or protection of a Director of the Corporation existing
immediately prior to such amendment, repeal or adoption.
ARTICLE V
PREEMPTIVE RIGHTS
No holder of shares of any class of the capital stock of the
Corporation shall have preemptive rights, and the Corporation shall have the
right to issue and to sell to any person or persons any shares of its capital
stock or any option rights or any securities having conversion or option rights,
without first offering such shares, rights, or securities to any holders of the
shares of any class of capital stock of the Corporation.
-9-
<PAGE> 10
Article VI
Amendment of Bylaws
Notwithstanding any provision of the Bylaws of the Corporation and
notwithstanding that some lesser percentage may be permissible under applicable
law, the shareholders of the Corporation shall not amend, modify or repeal, or
adopt any provision inconsistent with, Section 5 of Article II of the Bylaws of
the Corporation unless approved by the prior consent of the holders of at least
75% of the outstanding voting power of the Class A Common and Class B Common
voting together as a single class, given in person or by proxy, either in
writing or at a regular meeting or special meeting called for that purpose.
The Board of Directors of the Corporation shall not be permitted to amend,
modify or repeal, or to adopt any provision inconsistent with, Section 5 of the
Bylaws of the Corporation.
This Article VI shall terminate and be of no further force or effect on
the earlier of (a) the date on which the First Boston Parties and MILP (both as
defined in the Shareholders/Registration Rights Agreement dated August 9, 1993
among the Corporation and certain other parties) together cease to own an
aggregate of at least 10% of the outstanding Class A Common (treating for
purposes of such computation outstanding shares of Class B Common as
outstanding shares of Class A Common) or (b) the date on which the Corporation
(or any shareholder or shareholders thereof) completes an initial public
offering of the Class A Common.
Article VII
Board Consideration of
Other Constituencies
In discharging the duties of their respective positions and in
determining what is believed to be in the best interests of the Corporation,
the Board of Directors, committees of the Board of Directors and individual
directors, in addition to considering the effects of any action on the
Corporation and its shareholders, may consider the interest of the employees,
customers, suppliers and creditors of the Corporation and its subsidiaries, the
communities in which offices or other establishments of the Corporation and its
subsidiaries are located, and all other factors such directors consider
pertinent; provided, however, that this provision solely grants discretionary
authority and no constituency shall be deemed to have been given any right to
consideration hereby.
Article VIII
Registered Office and Agent
The address of the Corporation's registered office in the State of
Georgia is located in Walton County at 506 South Broad
-10-
<PAGE> 11
Street, Monroe, Georgia 30655. The name of its registered agent at such
address is Mr. Jack R. Altherr, Jr.
Article IX
Address of Corporation
The mailing address of the principal office of the Corporation is P.O. Box
1109, Monroe, Georgia 30655.
-11-
<PAGE> 12
IN WITNESS WHEREOF, these Restated and Amended Articles of
incorporation, as Exhibit A to the Certificate of Merger filed with the
Secretary of State of the State of Georgia to which they are attached, have
been signed as of this 27th day of August, 1993.
WALTON MONROE MILLS, INC.
By: /s/ G. Stephen Felker
------------------------------------
Title: Chairman, President, CEO
---------------------------------
-12-
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
AVONDALE INCORPORATED
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the
shareholders for the election of directors and for the transaction of such
other business as may properly come before the meeting shall be held at such
place, either within or without the State of Georgia, on such date, and at such
time, as the Board of Directors may by resolution provide, or if the Board of
Directors fails to provide, then such meeting shall be held at the principal
office of the Corporation at 10:00 a.m., on the fourth Friday of the fourth
calendar month after the end of the Corporation's fiscal year, if not a legal
holiday under the laws of the State of Georgia, and if a legal holiday, on the
next succeeding business day. The Board of Directors may specify by resolution
prior to any special meeting of shareholders held within the year that such
meeting shall be in lieu of the annual meeting, provided that in any such case
the notice of the meeting shall so state.
Section 2. Special Meetings. Special meetings of the
shareholders may be called by a majority of the Board of Directors, by the
Chairman of the Board of Directors, by the Chief Executive Officer or by the
Corporation upon the written request (which request shall set forth the purpose
or purposes of the meeting) of the shareholders of record (see Section 6(b) of
Article I of these Bylaws) of outstanding shares representing 25% of the votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting; provided, however, that as of date on which the Corporation
shall have greater than 100 shareholders of record, no shareholder or
shareholders shall have the right to require the Corporation to call and hold a
special meeting of shareholders. In the event such meeting is called by the
Board of Directors, by the Chairman of the Board of Directors or by the Chief
Executive Officer, such meeting may be held at such place, either within or
without the State of Georgia, as is stated in the call and notice thereof. If
such meeting is called at the request of shareholders as provided in this
Section 2, then such meeting shall be held at such place within the State of
Georgia as is stated in the notice thereof.
Section 3. Notice of Meetings. A written or printed notice
stating the place, day and hour of the meeting, and in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered or mailed by the Secretary of the Corporation to each holder of
record of stock of the Corporation at
<PAGE> 2
the time entitled to vote, at his address as it appears upon the records of
the Corporation, not less than 10 nor more than 60 days prior to such meeting.
If the Secretary fails to give such notice within 20 days after the call of a
meeting, the person calling or requesting such meeting, or any person
designated by them, may give such notice. Notice of such meeting may be waived
in writing by any shareholder. Notice of any adjourned meeting of the
shareholders shall not be required if the time and place to which the meeting
is adjourned are announced at the meeting at which the adjournment is taken,
unless the Board of Directors sets a new record date for such meeting in which
case notice shall be given in the manner provided in this Section 3.
Section 4. Quorum and Shareholder Vote. A quorum for action
on any subject matter at any annual or special meeting of shareholders shall
exist when the holders of shares entitled to vote a majority of the votes
entitled to be cast on such subject matter are represented in person or by
proxy at such meeting. If a quorum is present, the affirmative vote of such
number of shares as is required by the Georgia Business Corporation Code (as in
effect at the time the vote is taken), for approval of the subject matter being
voted upon, shall be the act of the shareholders, unless a greater vote is
required by the Articles of Incorporation or these Bylaws. If a quorum is not
present, a meeting of shareholders may be adjourned from time to time by the
vote of shares having a majority of the votes of the shares represented at such
meeting, until a quorum is present. When a quorum is present at the
reconvening of any adjourned meeting, and if the requirements of Section 3 of
this Article I have been observed, then any business may be transacted at such
reconvened meeting in the same manner and to the same extent as it might have
been transacted at the meeting as originally noticed.
Section 5. Proxies. A shareholder may vote either in person
or by proxy duly executed in writing by the shareholder. Unless written notice
to the contrary is delivered to the Corporation by the shareholder, a proxy for
any meeting shall be valid for any reconvention of any adjourned meeting.
Section 6. Fixing Record Date.
(a) Except as provided in paragraph (b) of this Section 6,
for the purpose of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders
for any other proper purpose, the Board of Directors shall have the power to
fix a date, not more than 70 days prior to the date on which the particular
action requiring a determination of shareholders is to be taken, as the record
date for any such determination of shareholders. A record date for the
determination of shareholders entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof shall not be set less than 10 days
prior to such meeting; provided that the record date for the determination of
shareholders entitled to notice of or to vote at any special meeting of
shareholders called by the Corporation at the request of holders of shares
pursuant to Section 2 of Article I hereof or any adjournment thereof shall be
20 days after the "Determination Date" (as defined in paragraph (b) of this
Section
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6), and provided further that such record date shall be 70 days prior to such
special meeting. In any case where a record date is set, under any provision
of this Section 6, only shareholders of record on the said date shall be
entitled to participate in the action for which the determination of
shareholders of record is made, whether the action is payment of a dividend,
allotment of any rights or any change or conversion or exchange of capital
stock or other such action, and, if the record date is set for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, only such shareholders of record shall be entitled to such notice
or vote, notwithstanding any transfer of any shares on the books of the
Corporation after such record date.
(b) (i) In order that the Corporation may determine the
shareholders entitled to request a special meeting of the shareholders or a
special meeting in lieu of the annual meeting of the shareholders pursuant to
Section 2 of Article I hereof, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which date shall not
be more than 10 days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. Any shareholder of record seeking
to have the shareholders request such a special meeting shall, by written
notice to the Secretary, request the Board of Directors to fix a record date.
The Board of Directors shall, within 10 business days after the date on which
such a request is received, adopt a resolution fixing the record date. If no
record date has been fixed by the Board of Directors within 10 business days
after the date on which such a request is received, the record date for
determining shareholders entitled to request such a special meeting shall be
the first day on which a signed written request setting forth the request to
fix a record date is delivered to the Corporation by delivery to its principal
place of business, or any officer or agent of the Corporation having custody of
the books in which proceedings of meetings of shareholders are recorded.
(ii) Every written request for a special meeting shall bear
the date of signature of each shareholder who signs the request and no such
request shall be effective to request such a meeting unless, within 70 days
after the record date established in accordance with paragraph (b)(i) of this
Section, written requests signed by a sufficient number of record holders as of
such record date to request a special meeting in accordance with Section 2 of
Article I hereof are delivered to the Corporation in the manner prescribed in
paragraph (b)(i) of this Section.
(iii) In the event of the delivery, in the manner provided by
this Section, to the Corporation of the requisite written request or requests
for a special meeting and/or any related revocation or revocations, the
Corporation shall engage
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nationally recognized independent inspectors of elections for the purpose of
promptly performing a ministerial review of the validity of the requests and
revocations. For the purpose of permitting a prompt ministerial review by the
independent inspectors, no request by shareholders for a special meeting shall
be effective until the earlier of (i) five business days following delivery to
the Corporation of requests signed by the holders of record (on the record date
established in paragraph (b)(i) of this Section) of the requisite minimum
number of shares that would be necessary to request such a meeting under
Section 2 of Article I hereof, or (ii) such date as the independent inspectors
certify to the Corporation that the requests delivered to the Corporation in
accordance with this Article represent at least the minimum number of shares
that would be necessary to request such meeting (the earlier of such dates
being herein referred to as the "Determination Date"). Nothing contained in
this paragraph shall in any way be construed to suggest or imply that the Board
of Directors or any shareholder shall not be entitled to contest the validity
of any request or revocation thereof, whether during or after such five
business day period, or to take any other action (including, without
limitation, the commencement, prosecution or defense of any litigation with
respect thereto).
(iv) Unless the independent inspectors shall deliver, on or
before the Determination Date, a certified report to the Corporation stating
that the valid requests for a special meeting submitted pursuant to paragraph
(iii) above represent less than the requisite minimum number of shares that
would be necessary to request a special meeting under Section 2 of Article I
hereof, the Board of Directors shall, within five business days after the
Determination Date, adopt a resolution calling a special meeting of the
shareholders and fixing a record date for such meeting, in accordance with
Section 6(a) of Article I of these Bylaws.
Section 7. Notice of Shareholder Business. At an annual
meeting of the shareholders, only such business shall be conducted as shall
have been brought before the meeting (a) by or at the direction of the Board of
Directors or (b) by any shareholder of the Corporation who complies with the
notice procedures set forth in this Section 7 and only to the extent that such
business is appropriate for shareholder action under the provisions of the
Georgia Business Corporation Code. For business to be properly brought before
an annual meeting by a shareholder, the shareholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than 60 days prior to
the meeting; provided, however, that in the event that less than 60 days'
notice or prior public disclosure of the date of the meeting is given or made
to shareholders, notice by the shareholder to be timely must be received not
later than the close of business on the 10th day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A shareholder's notice to the Secretary shall set forth
as to each matter the shareholder proposes to bring before the annual meeting
(a) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and address, as they appear on the Corporation's books, of the
shareholder proposing
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such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. Notwithstanding anything in the Bylaws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 7. At an annual
meeting, the Chairman shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting in accordance
with the provisions of this Section 7, and if he should so determine, he shall
so declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
Section 8. Notice of Shareholder Nominees. Only persons who
are nominated in accordance with the procedures set forth in this Section 8
shall be eligible for election as Directors. Nominations of persons for
election to the Board of Directors of the Corporation may be made at a meeting
of shareholders (a) by or at the direction of the Board of Directors or (b) by
any shareholder of the Corporation entitled to vote for the election of
Directors at the meeting who complies with the notice procedures set forth in
this Section 8. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice in writing
to the Secretary of the Corporation. To be timely, a shareholder's notice must
be delivered to or mailed and received at the principal executive offices of
the Corporation not less than 60 days prior to the meeting; provided, however,
that in the event that less than 60 days' notice or prior public disclosure of
the date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such shareholder's
notice shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or reelection as a Director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b)
as to the shareholder giving the notice (i) the name and address, as they
appear on the Corporation's books, of such shareholder and (ii) the class and
number of shares of the Corporation which are beneficially owned by such
shareholder. No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth in the
Bylaws. The Chairman shall, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the procedures
prescribed by the Bylaws, and if he should so determine, he shall so declare to
the meeting and the defective nomination shall be disregarded.
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ARTICLE II
DIRECTORS
Section 1. Powers of Directors. The Board of Directors shall
be responsible for the management of the business of the Corporation and,
subject to any restrictions imposed by law, by the Articles of Incorporation,
or by these Bylaws, may exercise all the powers of the Corporation.
Section 2. Number of Directors. The number of directors
constituting the entire Board of Directors shall be not less than one (1) nor
more than fifteen (15), and the exact number shall be fixed from time to time
by the Board of Directors; provided, however, that the number of directors
constituting the entire Board shall be eleven (11) until otherwise changed by
the Board of Directors or by the shareholders at any annual or special meeting.
No decrease in the number of directors shall shorten the term of any director
at the time in office. Directors need not be residents of the State of
Georgia; provided, however, that, except with respect to any directors
designated by the First Boston Parties or MILP (both as defined in that certain
Shareholders/Registration Rights Agreement, dated as of August 9, 1993, among
the Corporation, AM Acquisition, Inc., Avondale Mills, Inc., CS First Boston
Group, Inc., The First Boston Corporation, Mezzanine Investment Limited
Partnership-2, 1985 Merchant Investment Partnership, Merchant LBO, Inc., John
Maypole and G. Stephen Felker (the "Shareholders Agreement")) and elected
directors pursuant to the Shareholders Agreement, each director must either (i)
beneficially own, directly or indirectly, shares of capital stock of the
Corporation, or (ii) have investment or voting power with respect to shares of
capital stock of the Corporation.
Section 3. Meetings of the Directors. The Board of Directors
shall meet each year immediately following the annual meeting of shareholders,
and the Board may by resolution provide for the time and place of other regular
meetings. Special meetings of the Directors may be called by the Chairman of
the Board or by a majority of the Directors.
Section 4. Notice of Meetings. Notice of each meeting of the
Directors shall be given by the Secretary by mailing the same at least ten days
before the meeting or by telephone, telegraph or cablegram or in person at
least two days before the meeting, to each Director, except that no notice need
be given of regular meetings fixed by the resolution of the Board or of the
meeting of the Board held at the place of and immediately following the annual
meeting of the shareholders. Any Director may waive notice, either before or
after the meeting, and shall be deemed to have waived notice if he is present
at the meeting.
Section 5. Required Board Approvals. The Corporation shall
not take any of the following actions without the approval of the Board of
Directors, which approval shall include the affirmative vote in favor of any
such actions by either the director designated in accordance with the
Shareholders Agreement by the First Boston Parties or MILP (provided that if
either of such positions on the Board are vacant, such vacancy or vacancies
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shall be promptly filled in accordance with the Shareholders Agreement and
Section 10 hereof), in writing or at a regular or special meeting called for
that purpose:
(a) amend, alter or repeal its restated articles of
incorporation or bylaws or the articles of incorporation or bylaws of
any of its subsidiaries;
(b) merge, consolidate or engage in any other business
combination or sell, lease, assign or transfer a significant amount of
its or any subsidiary's assets, property or business other than in the
ordinary course of business;
(c) declare a dividend or other distribution on its
outstanding capital stock;
(d) acquire, directly or indirectly, a significant amount
of the assets from, or all of the outstanding capital stock or
ownership interests (whether by merger or other business combination)
of, any Person (as hereinafter defined) other than in the ordinary
course of business;
(e) engage in any capital reorganization or
reclassification of its capital stock or issue or repurchase any
shares of its or any subsidiary's capital stock, other than pursuant
to the terms of the Shareholders Agreement or the Felker Agreement (as
defined in the Shareholders Agreement);
(f) elect a new Chief Executive Officer of the
Corporation or its principal operating subsidiary, other than the
reelection of Mr. G. Stephen Felker as Chief Executive Officer; or
(g) take or permit any of its subsidiaries to take any
other significant action which, by reason of its size or its nature,
is not in the ordinary course of business, other than pursuant to the
terms of the Shareholders Agreement or the Felker Agreement;
provided, however, that the affirmative vote in favor of any such action set
forth in clauses (a) through (g) above by either the director designated in
accordance with the Shareholders Agreement by the First Boston Parties or MILP
shall not be required for any action involving the exercise by the Corporation
of any optional right or action which it has (x) under the Felker Agreement or
(y) under the Shareholders Agreement with respect to any security issued by it
that is held by the First Boston Parties or MILP (both as defined in the
Shareholders Agreement).
This Section 5 shall terminate and be of no further force or
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effect on the earlier of (i) the date on which the First Boston Parties and
MILP (both as defined in the Shareholders Agreement) together cease to own an
aggregate of at least 10% of the outstanding Class A Common Stock of the
Corporation (treating for purposes of such computation outstanding shares of
Class B Common Stock of the Corporation as outstanding shares of Class A Common
Stock) or (ii) the date on which the Corporation (or any shareholder or
shareholders thereof) completes an initial public offering of the Class A
Common Stock of the Corporation. For purposes of this Section 5, "Person"
shall mean any individual, corporation, company, voluntary association,
partnership, joint venture, trust or unincorporated organization, business,
entity or government (or any agency, instrumentality or political subdivision
thereof).
Section 6. Action of Directors Without a Meeting. Any action
required by law to be taken at a meeting of the Board of Directors, or any
action which may be taken at a meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if written consent, setting
forth the action so taken, shall be signed by all the Directors, or all the
members of the committee, as the case may be, and be filed with the minutes of
the proceedings of the Board or the committee. Such consent shall have the
same force and effect as a unanimous vote of the Board or the committee, as the
case may be.
Section 7. Committees. The Board of Directors may, in its
discretion, appoint committees, each consisting of one or more Directors, which
shall have and may exercise such delegated powers as shall be conferred on or
authorized by the resolutions appointing them, except that no such committee
may: (1) approve or propose to shareholders action that the Georgia Business
Corporation Code requires to be approved by shareholders, (2) fill vacancies on
the Board of Directors or any of its committees, (3) amend the Restated and
Amended Articles of Incorporation of the Corporation pursuant to Section
14-2-1002 of the Georgia Business Corporation Code, (4) adopt, amend or repeal
these Bylaws, or (5) approve a plan of merger not requiring shareholder
approval. A majority of any such committee may determine its action, fix the
time and place of its meetings, and determine its rules of procedure. Each
committee shall keep minutes of its proceedings and actions and shall report
regularly to the Board of Directors. The Board of Directors shall have power
at any time to fill vacancies in, change the membership of, or discharge any
such committee.
Section 8. Compensation. The Board of Directors shall have
the authority to determine from time to time the amount of compensation that
shall be paid to its members for attendance at meetings of, or service on, the
Board of Directors or any committee of the Board. The Board of Directors also
shall have the power to reimburse Directors for reasonable expenses of
attendance at Directors' meetings and committee meetings.
Section 9. Removal. Any or all directors may be removed from
office at any time with or without cause.
Section 10. Vacancies. A vacancy occurring in the Board of
Directors by reason of the removal of a Director by the
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shareholders shall be filled by the shareholders, or, if authorized by the
shareholders, by the remaining Directors. Any other vacancy occurring in the
Board of Directors may be filled by the affirmative vote of a majority of the
remaining Directors though less than a quorum of the Board of Directors, or by
the sole remaining Director, as the case may be, or, if the vacancy is not so
filled, or if no director remains, by the shareholders. A Director elected to
fill a vacancy shall serve for the unexpired term of his predecessor in office.
Section 11. Telephone Conference Meetings. Unless the
Restated and Amended Articles of Incorporation otherwise provide, members of
the Board of Directors, or any committee designated by the Board of Directors,
may participate in a meeting of the Board or committee by means of telephone
conference or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 11 shall constitute presence in person at such
meeting.
ARTICLE III
OFFICERS
Section 1. Executive Structure of the Corporation. The
officers of the Corporation shall be elected by the Board of Directors and
shall consist of a Chairman of the Board of Directors and a Secretary and such
other officers or assistant officers, including a President, one or more
Executive Vice Presidents, Senior Vice Presidents, Vice Presidents,
Secretaries, Treasurers, Assistant Secretaries or Assistant Treasurers, or any
other officers that the Board of Directors may establish, as may be elected by
the Board of Directors. Each officer shall hold office for the term for which
such officer has been elected or until such officer's successor is elected and
qualified, or until such officer's earlier resignation, removal from office, or
death. Any two or more offices may be held by the same person; provided,
however, that the offices of Chairman of the Board of Directors and Secretary
shall not be held by the same person.
Section 2. Chairman of the Board. The Chairman of the Board
of Directors shall be the chief executive officer of the Corporation and shall,
under the direction of the Board of Directors, have responsibility for the
general direction of the business, policies and affairs of the Corporation. He
shall preside at all meetings of the shareholders and all meetings of the Board
of Directors and shall have such other duties as the Board of Directors shall
from time to time prescribe.
Section 3. Secretary. The Secretary shall keep the
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minutes of the meetings of the shareholders and the Board of Directors and
shall have custody of and attest the seal of the Corporation.
Section 4. Other Duties and Authorities. Each officer,
employee and agent shall have such other duties and authorities as may be
conferred on them by the Board of Directors or by a more senior officer.
Section 5. Removal. Any officer may be removed at any time
by the Board of Directors. A contract of employment for a definite term shall
not prevent the removal of any officer, but this provision shall not prevent
the making of a contract of employment with any officer and shall have no
effect upon any cause of action that any officer may have as a result of
removal in breach of a contract of employment.
Section 6. Compensation. The salaries of the officers shall
be fixed from time to time by the Board of Directors. No officer shall be
prevented from receiving such salary by reason of the fact that he is also a
Director of the Corporation.
ARTICLE IV
DEPOSITORIES, SIGNATURE AND SEAL
Section 1. Depositories. All funds of the Corporation shall
be deposited in the name of the Corporation in such depository or depositories
as the Board may designate and shall be drawn out on checks, drafts or other
orders signed by such officer, officers, agent or agents as the Board may from
time to time authorize.
Section 2. Contracts. All contracts and other instruments
shall be signed on behalf of the Corporation by the Chairman of the Board, or
by such other officer, officers, agent or agents, as the Chairman of the Board
designates from time to time or as the Board from time to time may by
resolution provide.
Section 3. Seal. The corporate seal of the Corporation shall
be as follows:
The seal may be manually affixed to any document or may be
lithographed or otherwise printed on any document with the same force and
effect as if it had been affixed manually. The signature of the Secretary or
any Assistant Secretary shall attest the seal and may be a facsimile if and to
the extent permitted by law.
ARTICLE V
STOCK TRANSFERS
Section 1. Form and Execution of Certificates. The
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certificates of shares of capital stock of the Corporation shall be in such
form as may be approved by the Board of Directors and shall be signed by the
Chairman of the Board or another officer and by the Secretary or any Assistant
Secretary, provided that any such certificate may be signed by the facsimile
signature of either or both of such officers imprinted thereon if the same is
countersigned by a transfer agent of the Corporation, and provided further that
certificates bearing the facsimile of the signature of such officers imprinted
thereon shall be valid in all respects as if such person or persons were still
in office, even though such officer or officers shall have died or otherwise
ceased to be officers.
Section 2. Transfers of Shares. Shares of stock in the
Corporation shall be transferable only on the books of the Corporation by
proper transfer signed by the holder of record thereof or by a person duly
authorized to sign for such holder of record. The Corporation or its transfer
agent or agents shall be authorized to refuse any transfer unless and until it
is furnished such evidence as it may reasonably require showing that the
requested transfer is proper.
Section 3. Lost, Destroyed or Stolen Certificates. When the
holder of record of a share or shares of stock of the Corporation claims that
the certificate representing said share has been lost, destroyed or wrongfully
taken, the Board shall by resolution provide for the issuance of a certificate
to replace the original if the holder of record so requests before the
Corporation has notice that the certificate has been acquired by a bona fide
purchaser, files with the Corporation a sufficient indemnity bond, and
furnishes evidence of such loss, destruction or wrongful taking satisfactory to
the Corporation, in the reasonable exercise of its discretion. The Board may
authorize such officer or agent as it may designate to determine the
sufficiency of such an indemnity bond and to determine reasonably the
sufficiency of the evidence of loss, destruction or wrongful taking.
Section 4. Transfer Agent and Registrar. The Board may (but
shall not be required to) appoint a transfer agent or agents and a registrar or
registrars to transfers, and may require that all stock certificates bear the
signature of such transfer agent or of such transfer agent and registrar.
ARTICLE VI
INDEMNIFICATION
Section 1. Mandatory Indemnification. The Corporation shall
indemnify to the fullest extent permitted under the Georgia Business
Corporation Code as it presently exists or may hereafter be amended (but, in
the case of any such amendment, only to the
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extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), any individual made a party to a proceeding (as defined in
the Georgia Business Corporation Code) because he is or was a director or
officer against liability (as defined in the Georgia Business Corporation
Code), incurred in the proceeding, if he acted in a manner he believed in good
faith to be in or not opposed to the best interests of the Corporation and, in
the case of any criminal proceeding, he had no reasonable cause to believe his
conduct was unlawful.
Section 2. Permissive Indemnification. The Corporation shall
have the power to indemnify to the fullest extent permitted by the Georgia
Business Corporation Code, any individual made a party to a proceeding (as
defined in the Georgia Business Corporation Code) because he is or was an
employee or agent of the Company against liability (as defined in the Georgia
Business Corporation Code), incurred in the proceeding, if he acted in a manner
he believed in good faith to be in or not opposed to the best interests of the
Corporation and, in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful.
Section 3. Advances for Expenses. The Corporation shall pay
for or reimburse the reasonable expenses incurred by a director or officer who
is a party to a proceeding, and shall have the authority to pay for or
reimburse the reasonable expenses of an employee or agent of the Company who is
a party to a proceeding, in each case in advance of the final disposition of a
proceeding if:
(i) Such person furnishes the Corporation a written
affirmation of his good faith belief that he has met
the standard of conduct set forth in Section 1 or
Section 2 above, as applicable; and
(ii) Such person furnishes the Corporation a written
undertaking, executed personally on his behalf to
repay any advances if it is ultimately determined
that he is not entitled to indemnification.
The written undertaking required by paragraph (ii) above must be an
unlimited general obligation of such person but need not be secured and may be
accepted without reference to financial ability to make repayment.
Section 4. Indemnification Not Exclusive. The right to
indemnification and the payment of expenses incurred in defending a proceeding
in advance of its final disposition conferred in this Article VI shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Restated and Amended Articles of
Incorporation, provision of these Bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
Section 5. Amendment or Repeal. Any repeal or modification
of the foregoing provisions of this Article VI shall not adversely affect any
right or protection hereunder of any person in respect of any act or omission
occurring prior to the
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time of such repeal or modification.
ARTICLE VII
AMENDMENT OF BYLAWS
These Bylaws may be altered, amended, repealed or new Bylaws
adopted by the Board of Directors by the affirmative vote of a majority of all
directors then holding office, but any bylaws adopted by the Board of Directors
may be altered, amended, repealed, or any new bylaws adopted, by the
shareholders at an annual or special meeting of shareholders, when notice of
any such proposed alteration, amendment, repeal or addition shall have been
given in the notice of such meeting. The shareholders may prescribe that any
bylaw or bylaws adopted by them shall not be altered, amended or repealed by
the Board of Directors.
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EXHIBIT 3.4
AVONDALE MILLS, INC.
BY-LAWS
ARTICLE I
MEETING OF STOCKHOLDERS
Section 1. Place of Meeting. Meetings of the shareholders of the
Corporation shall be held at such place either within or without the State of
Alabama as the Board of Directors may determine.
Section 2. Annual and Special Meetings Annual meetings of shareholders
shall be held, at a date, time and place fixed by the Board of Directors and
stated in the notice of meeting, to elect a Board of Directors and to transact
such other business as may properly come before the meeting. Special meetings
of the shareholders may be called by the Chief Executive Officer for any
purpose and shall be called by the Chief Executive Officer or Secretary if
directed by the Board of Directors or requested in writing by the holders of
not less than 10% of the Common Stock of the Corporation. Each such
shareholder request shall state the purpose of the proposed meeting.
Section 3. Notice. Except as otherwise provided by law, at least 10 and
not more than 50 days before each meeting of shareholders, written notice of
the time, date and place of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
given to each shareholder.
Section 4. Quorum. Except as otherwise provided by law or the Articles of
Incorporation or by the Board of Directors in regard to any series of preferred
stock entitled to vote, at any meeting of shareholders, the holders of record,
present in person or by proxy, of a majority of the Corporation's issued and
outstanding shares of Common Stock shall constitute a quorum for the
transaction of business. In the absence of a quorum, any officer entitled to
preside at or to act as secretary of the meeting shall have power to adjourn
the meeting from time to time until a quorum is present.
Section 5. Voting. Except as otherwise provided by law or the Articles
of Incorporation, and unless the Board of Directors has authorized voting
rights to one or move series of the preferred stock, all matters submitted to
a meeting of shareholders shall be decided by vote of the holders of record,
present in person or by proxy, of a majority of the Corporation's issued and
outstanding shares of Common Stock.
<PAGE> 2
2
ARTICLE II
DIRECTORS
Section 1. Number, Election and Removal of Directors. Until the Trigger
Date (as defined in the amended and restated letter agreement dated June 11,
1986 among FBMIP, FBILP, Walton, AM Acquisition, Inc. ("Acquisition"), WM Sub,
Inc, the Corporation, First Boston, Inc. and The First Boston Corporation (the
"Letter Agreement") (FBMIP, FBILP and Walton being hereinafter defined)), the
Board of Directors shall consist of three Directors, one of whom will be
designated by First Boston Mezzanine Investment Partnership-2 ("FBMIP"), one of
whom will be designated by First Boston Investment Limited Partnership No. 4
("FBILP") and one of whom will be designated by Walton Monroe Mills, Inc.
("Walton"). Until the Trigger Date, all actions and decisions to be taken or
made by the Corporation with respect to the Bridge Facilities or the Permanent
Loan (each as defined in the Letter Agreement), and all other actions and
decisions to be taken or made by the Corporation with respect to the
operations of Avondale Mills and its successors ("AM") (other than the conduct
of the normal operations of AM in the ordinary course of business) on the
ownership of common stock of AM, will require the approval of a majority of the
members of the Board of Directors. [Commencing on the Trigger Date and
continuing until the earlier to occur of (i) the date on which FBMIP and FBILP
no longer own at least 10% of Acquisition's outstanding shares of Common Stock
in the aggregate and (ii) a public offering of shares of Class A Common Stock
of Acquisition pursuant to the Securities Act of 1933, as amended (the "1933
Act"), the Board of Directors will consist of seven persons, one of whom will
be designated by FBMIP, one of whom will be designated by FBILP, three of whom
will be designated by Walton and two of whom will be individuals unaffiliated
with FBMIP, FBILP, Walton or Avondale Mills and mutually acceptable to FBMIP,
FBILP and Walton; provided, however, that, until a public offering of shares of
Class A Common Stock of Acquisition pursuant to the 1933 Act has occurred, at
least one member of the Board of Directors of the Corporation shall be
designated by FBMIP so long as it owns any shares of capital stock of
Acquisition.] Thereafter, subject to any right of holders of Preferred Stock
of the Corporation to elect additional Directors, the number of Directors that
shall constitute the Board of Directors shall be not less than one nor more
than fifteen, and within those limits, the number of Directors shall be
determined from time to time by the Board of Directors or by the shareholders.
Vacancies and newly created directorships resulting from any increase in
<PAGE> 3
3
the number of Directors may be filled by the affirmative vote of a majority of
the Directors then in office, although less than a quorum, or by the sole
remaining Director or by the shareholders in accordance with the provisions of
this Section 1. A Director may be removed with or without cause by the
shareholders.
Section 2. Meetings. Regular meetings of the Board of Directors shall be
held at such times and places as may from time to time be fixed by the Board of
Directors or as may be specified in a notice of meeting. Special meetings of
the Board of Directors may be held at any time upon the call of the Chief
Executive Officer and shall be called by the Chief Executive Officer or
Secretary if directed by the Board of Directors. Telegraphic or written notice
of each special meeting of the Board of Directors shall be sent to each
Director not less than two days before such meeting. A meeting of the Board of
Directors may be held without notice immediately after the annual meeting of
the shareholders. Notice need not be given of regular meetings of the Board
of Directors.
Section 3. Quorum. A majority of the total number of Directors shall
constitute a quorum for the transaction of business. If a quorum is not present
at any meeting of the Board of Directors, the Directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until such a quorum is present. Except as otherwise provided by law,
the Articles of Incorporation of the Corporation or these By-Laws, the act of a
majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors.
Section 4. Committees of Directors. The Board of Directors may, by
resolution adopted by the affirmative vote of a majority of the total number of
Directors, designate one or more committees, including without limitation an
Executive Committee, to have and exercise such power and authority as the
Board of Directors shall specify.
ARTICLE III
OFFICERS
The officers of the Corporation shall consist of a Chairman of the Board, a
Chief Executive Officer, a President, a Secretary, a Treasurer and such other
additional officers with such titles as the Board of Directors shall determine,
all of whom shall be chosen by and shall serve at the pleasure of the Board of
Directors. Such officers shall have the usual powers and shall perform
<PAGE> 4
4
all the usual duties incident to their respective offices. All officers shall
be subject to the supervision and direction of the Board of Directors. The
authority, duties or responsibilities of any officer of the Corporation may be
suspended by the Chief Executive Officer with or without cause. Any officer
elected or appointed by the Board of Directors may be removed by the Board of
Directors with or without cause.
ARTICLE IV
INDEMNIFICATION
To the fullest extent permitted by the Alabama Business Corporation Act,
the Corporation shall indemnify (including the advancement of defense expenses
as incurred upon receipt of an undertaking by or on behalf of the indemnified
party to repay such amount if and to the extent that it shall be ultimately
determined that he is not entitled to be indemnified by the Corporation
pursuant to applicable law) any current or former Director or officer of the
Corporation and may, at the discretion of the Board of Directors, indemnify
(including the advancement of defense expenses as incurred upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if
and to the extent that it shall be ultimately determined that he is not
entitled to be indemnified by the Corporation pursuant to applicable law) any
current or former employee or agent of the Corporation against all expenses
and, to the extent permitted by the Alabama Business Corporation Act,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending or completed action,
claim, suit or proceeding brought by or in the right of the Corporation or
otherwise, to which he was or is a party or is threatened to be made a party
by reason of his current or former position with the Corporation or by reason
of the fact that he is or was serving, at the request of the Corporation, as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE V
GENERAL PROVISIONS
Section 1. Notices. Whenever the Constitution of Alabama, any statute,
the Articles of Incorporation of the Corporation or these By-Laws require
notice to be given to any Director or shareholder, such notice may be given in
writing by telegram, telex or telecopy or by hand delivery
<PAGE> 5
5
or by mail, addressed to such Director or shareholder at his address as it
appears on the records of the Corporation, with postage thereon prepaid. Such
notice shall be deemed, to have been given when it is sent by telegram, telex
on telecopy or hand delivered or deposited in the United States mail as the
case may be. A waiver of such notice in writing signed by the person or
persons entitled thereto, whether before of after the time stated in such
notice, shall be equivalent to the giving of such notice. Attendance of a
Director at a meeting shall constitute a waiver of notice of such meeting
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called
or convened.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be fixed
by the Board of Directors.
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
================================================================================
AVONDALE MILLS, INC.,
Issuer
AVONDALE INCORPORATED,
Guarantor
10 1/4% Senior Subordinated Notes Due 2006
--------------------------
INDENTURE
Dated as of April 23, 1996
-------------------------
THE BANK OF NEW YORK,
Trustee
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- -------
<S> <C> <C>
310(a)(1) .............................. 7.10
(a)(2) .............................. 7.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(b) .............................. 7.08; 7.10
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 2.05
(b) .............................. 13.03
(c) .............................. 13.03
313(a) .............................. 7.06
(b)(1) .............................. N.A.
(b)(2) .............................. 7.06
(c) .............................. 13.02
(d) .............................. 7.06
314(a) .............................. 4.02;
4.11; 13.02
(b) .............................. N.A.
(c)(1) .............................. 13.04
(c)(2) .............................. 13.04
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 13.05
(f) .............................. 4.11
315(a) .............................. 7.01
(b) .............................. 7.05; 13.02
(c) .............................. 7.01
(d) .............................. 7.01
(e) .............................. 6.11
316(a)(last sentence) .............................. 13.06
(a)(1)(A) .............................. 6.05
(a)(1)(B) .............................. 6.04
(a)(2) .............................. N.A.
(b) .............................. 6.07
317(a)(1) .............................. 6.08
(a)(2) .............................. 6.09
(b) .............................. 2.04
318(a) .............................. 13.01
</TABLE>
N.A. means Not Applicable.
_____________________
Note: This Cross-Reference Table shall not, for any
purpose, be deemed to be part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1 Page
----
Definitions and Incorporation by Reference
<S> <C> <C>
SECTION 1.01. Definitions ............................ 1
SECTION 1.02. Other Definitions ...................... 24
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act.......................... 24
SECTION 1.04. Rules of Construction .................. 25
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating ........................ 26
SECTION 2.02. Execution and Authentication ........... 26
SECTION 2.03. Registrar and Paying Agent ............. 27
SECTION 2.04. Paying Agent To Hold Money in Trust..... 28
SECTION 2.05. Securityholder Lists ................... 28
SECTION 2.06. Replacement Securities ................. 28
SECTION 2.07. Outstanding Securities ................. 29
SECTION 2.08. Temporary Securities ................... 29
SECTION 2.09. Cancellation ........................... 29
SECTION 2.10. Defaulted Interest ..................... 30
SECTION 2.11. CUSIP Numbers .......................... 30
SECTION 2.12. Transfers .............................. 30
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee ..................... 30
SECTION 3.02. Selection of Securities To Be
Redeemed............................... 31
SECTION 3.03. Notice of Redemption ................... 31
SECTION 3.04. Effect of Notice of Redemption ......... 32
SECTION 3.05. Deposit of Redemption Price ............ 32
SECTION 3.06. Securities Redeemed in Part ............ 32
</TABLE>
<PAGE> 4
2
ARTICLE 4
Covenants
<TABLE>
<S> <C> <C>
SECTION 4.01. Payment of Securities .................. 33
SECTION 4.02. SEC Reports ............................ 33
SECTION 4.03. Limitation on Indebtedness ............. 34
SECTION 4.04. Limitation on Restricted Payments ...... 36
SECTION 4.05. Limitation on Restrictions on
Distributions from
Restricted Subsidiaries .............. 40
SECTION 4.06. Limitation on Sales of Assets and
Subsidiary Stock ..................... 42
SECTION 4.07. Limitation on Affiliate
Transactions ......................... 46
SECTION 4.08. Limitation on the Sale or Issuance
of Capital Stock of Restricted
Subsidiaries ......................... 47
SECTION 4.09. Change of Control ...................... 48
SECTION 4.10. Compliance Certificate ................. 49
SECTION 4.11. Further Instruments and Acts ........... 49
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer
Assets ............................... 50
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default ...................... 51
SECTION 6.02. Acceleration ........................... 54
SECTION 6.03. Other Remedies ......................... 54
SECTION 6.04. Waiver of Past Defaults ................ 55
SECTION 6.05. Control by Majority .................... 55
SECTION 6.06. Limitation on Suits .................... 55
SECTION 6.07. Rights of Holders To Receive Payment ... 56
SECTION 6.08. Collection Suit by Trustee ............. 56
</TABLE>
<PAGE> 5
3
<TABLE>
<S> <C> <C>
SECTION 6.09. Trustee May File Proofs of Claim ....... 56
SECTION 6.10. Priorities ............................. 57
SECTION 6.11. Undertaking for Costs .................. 57
SECTION 6.12. Waiver of Stay or Extension Laws ....... 57
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee ...................... 58
SECTION 7.02. Rights of Trustee ...................... 59
SECTION 7.03. Individual Rights of Trustee ........... 60
SECTION 7.04. Trustee's Disclaimer ................... 60
SECTION 7.05. Notice of Defaults ..................... 61
SECTION 7.06. Reports by Trustee to Holders .......... 61
SECTION 7.07. Compensation and Indemnity ............. 61
SECTION 7.08. Replacement of Trustee ................. 62
SECTION 7.09. Successor Trustee by Merger ............ 63
SECTION 7.10. Eligibility; Disqualification .......... 64
SECTION 7.11. Preferential Collection of Claims
Against Company ...................... 64
SECTION 7.12. Trustee's Application for Instructions
from the Company ..................... 64
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance ........................... 64
SECTION 8.02. Conditions to Defeasance ............... 66
SECTION 8.03. Application of Trust Money ............. 67
SECTION 8.04. Repayment to Company ................... 67
SECTION 8.05. Indemnity for Government
Obligations .......................... 68
SECTION 8.06. Reinstatement .......................... 68
</TABLE>
<PAGE> 6
4
ARTICLE 9
Amendments
<TABLE>
<S> <C> <C>
SECTION 9.01. Without Consent of Holders ............. 68
SECTION 9.02. With Consent of Holders ................ 69
SECTION 9.03. Compliance with Trust Indenture Act .... 70
SECTION 9.04. Revocation and Effect of Consents
and Waivers .......................... 70
SECTION 9.05. Notation on or Exchange of
Securities ........................... 71
SECTION 9.06. Trustee To Sign Amendments ............. 71
SECTION 9.07. Payment for Consent .................... 72
ARTICLE 10
Subordination of the Securities
SECTION 10.01. Agreement To Subordinate ................ 72
SECTION 10.02. Liquidation, Dissolution,
Bankruptcy .......................... 72
SECTION 10.03. Default on Senior Indebtedness
of the Company ...................... 73
SECTION 10.04. Acceleration of Payment of
Securities .......................... 74
SECTION 10.05. When Distribution Must Be Paid
Over ................................ 74
SECTION 10.06. Subrogation ............................. 75
SECTION 10.07. Relative Rights ......................... 75
SECTION 10.08. Subordination May Not Be Impaired
by Company .......................... 75
SECTION 10.09. Rights of Trustee and Paying
Agent ............................... 75
SECTION 10.10. Distribution or Notice to
Representative ...................... 76
SECTION 10.11. Article 10 Not To Prevent Events of
Default or Limit Right To
Accelerate .......................... 76
SECTION 10.12. Trust Moneys Not Subordinated ........... 76
SECTION 10.13. Trustee Entitled To Rely ................ 76
SECTION 10.14. Trustee To Effectuate
Subordination ....................... 77
SECTION 10.15. Trustee Not Fiduciary for Holders
</TABLE>
<PAGE> 7
5
<TABLE>
<S> <C> <C>
of Senior Indebtedness .............. 77
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions .......................... 77
ARTICLE 11
Guaranty
SECTION 11.01. Guaranty............................... 78
SECTION 11.02. Successors and Assigns ................ 80
SECTION 11.03. No Waiver ............................. 81
SECTION 11.04. Modification .......................... 81
ARTICLE 12
Subordination of the Guaranty
SECTION 12.01. Agreement To Subordinate ............... 81
SECTION 12.02. Liquidation, Dissolution,
Bankruptcy ......................... 81
SECTION 12.03. Default on Senior Indebtedness of
the Guarantor ...................... 82
SECTION 12.04. Demand for Payment ..................... 83
SECTION 12.05. When Distribution Must Be Paid Over .... 83
SECTION 12.06. Subrogation ............................ 83
SECTION 12.07. Relative Rights ........................ 83
SECTION 12.08. Subordination May Not Be Impaired
by Guarantor ....................... 84
SECTION 12.09. Rights of Trustee and Paying Agent ..... 84
SECTION 12.10. Distribution or Notice to
Representative ..................... 84
SECTION 12.11. Article 12 Not To Prevent Defaults
Under the Guaranty or Limit Rights
To Demand Payment .................. 84
SECTION 12.12. Trustee Entitled To Rely ............... 85
SECTION 12.13. Trustee To Effectuate Subordination .... 85
SECTION 12.14. Trustee Not Fiduciary for Holders of
Senior Indebtedness of the
Guarantor .......................... 85
SECTION 12.15. Reliance by Holders of Senior
Indebtedness on Subordination
</TABLE>
<PAGE> 8
6
<TABLE>
<S> <C>
Provisions ......................... 86
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls .......... 86
SECTION 13.02. Notices ............................... 86
SECTION 13.03. Communication by Holders with Other
Holders ........................... 87
SECTION 13.04. Certificate and Opinion as to
Conditions Precedent .............. 87
SECTION 13.05. Statements Required in Certificate
or Opinion ........................ 88
SECTION 13.06. When Securities Disregarded ........... 88
SECTION 13.07. Rules by Trustee, Paying Agent and
Registrar ......................... 88
SECTION 13.08. Legal Holidays ........................ 88
SECTION 13.09. Governing Law ......................... 89
SECTION 13.10. No Recourse Against Others ............ 89
SECTION 13.11. Successors ............................ 89
SECTION 13.12. Multiple Originals .................... 89
SECTION 13.13. Table of Contents; Headings ........... 89
Appendix A - Provisions Relating to Initial Securities,
Private Exchange Securities and Exchange
Securities
Exhibit 1
to Appendix A - Form of Initial Security
Exhibit A - Form of Exchange/Private Exchange Security
</TABLE>
<PAGE> 9
INDENTURE dated as of April 23, 1996, among
AVONDALE MILLS, INC., an Alabama corporation (the
"Company"), AVONDALE INCORPORATED, a Georgia
corporation (the "Guarantor") and The Bank of New
York, a New York banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's
10-1/4% Senior Subordinated Notes Due 2006 (the "Initial Securities") and, if
and when issued pursuant to a registered exchange for Initial Securities, the
Company's 10-1/4% Senior Subordinated Notes Due 2006 (the "Exchange
Securities") and if and when issued pursuant to a private exchange for Initial
Securities, the Company's 10-1/4% Senior Subordinated Notes Due 2006 (the
"Private Exchange Securities", together with the Exchange Securities and the
Initial Securities, the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Additional Assets" means (i) any property or assets (other
than Indebtedness and Capital Stock), including, without limitation, land,
machinery, equipment, leasehold interests and improvements, in a Related
Business; (ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the Company
or another Restricted Subsidiary; or (iii) Capital Stock constituting a
minority interest in any Person that at such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clauses
(ii) or (iii) above is primarily engaged in a Related Business.
"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 the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the
<PAGE> 10
2
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.04, 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of Capital Stock representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or of
rights or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary), (ii) all or substantially all the assets of any
division or line of business of the Company or any Restricted Subsidiary or
(iii) any other assets of the Company or any Restricted Subsidiary outside of
the ordinary course of business of the Company or such Restricted Subsidiary.
Notwithstanding the foregoing, the following shall not be deemed an "Asset
Disposition" for purposes of this Indenture: (a) the sale or other transfer or
disposition of Receivables and Related Assets pursuant to a Receivables
Program, (b) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Wholly Owned Subsidiary and (c) for
purposes of Section 4.06 only, a disposition that constitutes a Restricted
Payment permitted by Section 4.04).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of (x) the numbers of years from the date
of determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by (y) the amount of such payment by (ii) the sum of
all such principal or redemption payments.
"Bank Indebtedness" means Indebtedness of the Company Incurred
pursuant to the New Credit Facility.
<PAGE> 11
3
"Banks" has the meaning specified in the New Credit Facility.
"Board of Directors" means, as the context requires, the Board
of Directors of the Guarantor or the Company or any committee thereof duly
authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means an obligation that is
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"Change of Control" means the occurrence of any of the
following events:
(i) prior to the earlier to occur of (A) the first public
offering of any class of common stock of the Guarantor or (B) the
first public offering of any class of common stock of the Company, the
Permitted Holders cease to be the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly,
of a majority of the total voting power of the Voting Stock of the
Company (for purposes of this clause (i) and clause (ii) below, the
Permitted Holders shall be deemed to beneficially own any Voting Stock
of the Company or any other corporation (in any such case, the
"specified corporation") held by the Guarantor or any other
corporation (in any such case, the "parent corporation") so long as
the Permitted Holders beneficially own (as so defined), directly or
indirectly, in the aggregate a majority of the total
<PAGE> 12
4
voting power of the Voting Stock of the parent corporation);
(ii) on or after any such first public offering of common
stock referred to in clause (i) above, any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than one
or more Permitted Holders, is or becomes the beneficial owner (as
defined in clause (i) above, except that for purposes of this clause
(ii) such person shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 40% of the total voting power of
the Voting Stock of the Company; provided, however, that the Permitted
Holders beneficially own (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting
power of the Voting Stock of the Company than such other person and do
not have the right or ability by voting power, contract or otherwise
to elect or designate for election a majority of the Board of
Directors (for the purposes of this clause (ii), such other person
shall be deemed to beneficially own any Voting Stock of a specified
corporation held by a parent corporation, if such other person is the
beneficial owner (as defined in this clause (ii)), directly or
indirectly, of more than 40% of the total voting power of the Voting
Stock of such parent corporation and the Permitted Holders
beneficially own (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the voting power
of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such
parent corporation); or
(iii) (A) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election
by the shareholders of the Company was approved by a vote of 66 2/3%
of the directors of the Company then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
<PAGE> 13
5
reason to constitute a majority of the Board of Directors then in
office and (B) the Permitted Holders cease to be the beneficial owners
(as defined in clause (ii) above), directly or indirectly, of a
majority of the total outstanding Voting Stock of the Guarantor or the
Company or cease to have the ability, by voting power, contract or
otherwise, to elect or designate for election a majority of the Board
of Directors of the Guarantor or the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the indenture securities.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (1) if the Company or any Restricted
Subsidiary has Incurred any Indebtedness since the beginning of such period that
remains outstanding or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period (other than
Indebtedness Incurred or repaid under a revolving credit or similar arrangement
to the extent of the commitment thereunder (or under any predecessor revolving
credit or similar arrangement) in effect on the last day of such period unless
any portion of such Indebtedness is projected, in the reasonable judgment of the
senior management of the Company, to remain outstanding for a period in excess
of twelve months from the date of Incurrence thereof) and the discharge of any
other Indebtedness repaid, repurchased, defeased or otherwise discharged with
the proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such period, (2) if since the beginning of such period the Company
or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA
for such period shall be reduced by an amount
<PAGE> 14
6
equal to the EBITDA (if positive) directly attributable to the assets which are
the subject of such Asset Disposition for such period, or increased by an
amount equal to the EBITDA (if negative), directly attributable thereto for
such period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent
the Company and its continuing Restricted Subsidiaries are no longer liable for
such Indebtedness after such sale), (3) if since the beginning of such period
the Company or any Restricted Subsidiary (by merger or otherwise) shall have
made an Investment in any Restricted Subsidiary (or any person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any acquisition
of assets occurring in connection with a transaction requiring a calculation to
be made hereunder, which constitutes all or substantially all of an operating
unit of a business, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period and (4) if since the beginning of such period
any Person (that subsequently became a Restricted Subsidiary or was merged with
or into the Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (2) or (3)
above if made by the Company or a Restricted Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Asset Disposition, Investment
or acquisition of assets occurred on the first day of such period. For
purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting Officer of
the Company. If any Indebtedness bears a floating rate of interest and is
being given pro
<PAGE> 15
7
forma effect, the interest of such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Agreement applicable
to such Indebtedness if such Interest Rate Agreement has a remaining term in
excess of 12 months).
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries, plus, to the extent not included in such total interest expense,
and to the extent incurred by the Company or its Restricted Subsidiaries, (i)
interest expense attributable to capital leases, (ii) amortization of debt
discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash
interest expenses, (v) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs associated with Hedging Obligations (including amortization of fees),
(vii) Preferred Stock dividends in respect of all Preferred Stock held by
Persons other than the Company or a Wholly Owned Subsidiary, (viii) interest
incurred in connection with Investments in discontinued operations, (ix)
interest accruing on any Indebtedness of any other Person to the extent such
Indebtedness is Guaranteed by the Company or any Restricted Subsidiary, (x) the
cash contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust and (xi) any premiums, fees, discounts, expenses
and losses on sales of Receivables and Related Assets (and any amortization
thereof) payable in connection with the New Credit Facility, the Receivables
Program or the Offering of the Securities, all as determined on a consolidated
basis in conformity with GAAP.
"Consolidated Net Income" means, for any period, the net
income of the Company and its consolidated Subsidiaries; provided, however,
that there shall be excluded from such Consolidated Net Income, without
duplication:
(i) any net income of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the exclusion
contained in clause (iv) below, the Company's equity in the net income
of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
<PAGE> 16
8
distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution paid to a Restricted
Subsidiary, to the limitations contained in clause (iii) below) and
(B) the Company's equity in a net loss of any such Person for such
period shall be included in determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by the
Company or a Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions
by such Restricted Subsidiary, directly or indirectly, to the Company,
except that (A) subject to the exclusion contained in clause (iv)
below, the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution paid to another
Restricted Subsidiary, to the limitation contained in this clause) and
(B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of the Company or its consolidated
Subsidiaries (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the
ordinary course of business and any gain (but not loss) realized upon
the sale or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting
principles.
<PAGE> 17
9
Notwithstanding the foregoing, for the purpose of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under such Section pursuant to clause (a)(3)(E) thereof.
"Consolidated Net Worth" means the total of the amounts shown
on the balance sheet of the Company and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of
the most recent fiscal quarter of the Company ending at least 45 days prior to
the taking of any action for the purpose of which the determination is being
made, as (i) the par or stated value of all outstanding Capital Stock of the
Company plus (ii) paid-in capital or capital surplus relating to such Capital
Stock plus (iii) any retained earnings or earned surplus less (A) any
accumulated deficit and (B) any amounts attributable to Disqualified Stock.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Indebtedness
and all other monetary obligations (including Post-Petition Interest, expenses
and fees) under the New Credit Facility and any other obligation, including
hedging obligations, secured by the security agreements referred to in the New
Credit Facility and (ii) any other Senior Indebtedness of the Company which, at
the date of determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are committed to
lend up to, at least $25,000,000 and is specifically designated by the Company
in the instrument evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, 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 (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness
or Disqualified Stock or
<PAGE> 18
10
(iii) is redeemable at the option of the holder thereof, in whole or in part,
in each case on or prior to the first anniversary of the Stated Maturity of the
Securities; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Securities shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions of Sections 4.06 and 4.09.
"EBITDA" for any period means the sum of Consolidated Net
Income plus Consolidated Interest Expense plus, without duplication, the
following to the extent deducted in calculating such Consolidated Net Income:
(a) all income tax expense of the Company, (b) depreciation expense, (c)
amortization expense, (d) non-cash inventory charges recorded as a result of
the utilization of the last-in, first-out (LIFO) inventory valuation method and
(e) all other non-cash items reducing Consolidated Net Income (other than items
that will require cash payments and for which an accrual or reserve is, or is
required by GAAP to be, made), less all non-cash items increasing Consolidated
Net Income, in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of the Company shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Subsidiary was included in calculating Consolidated Net
Income 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
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including those set
forth (i) in the
<PAGE> 19
11
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, (ii) in statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) in the published rules and regulations of the
SEC governing the inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and pronouncements inn staff
accounting bulletins and similar written statements from the accounting staff
of the SEC. All ratios and computations based on GAAP contained in this
Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation of such Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
The term "guarantor" shall mean any Person Guaranteeing any obligation.
"Guarantor" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Guaranty" means the Guarantee of the Securities by the
Guarantor pursuant to this Indenture.
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate or Currency Protection Agreement.
<PAGE> 20
12
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Subsidiary at the time it becomes a Restricted Subsidiary.
The term "Incurrence" when used as a noun shall have a correlative meaning.
The accretion of principal of a non-interest bearing or other discount security
shall not be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date
of determination (without duplication):
(i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for
the payment of which such Person is responsible or liable (other than,
in the case of the Company and its Restricted Subsidiaries, any
non-negotiable notes of the Company or its Subsidiaries issued to its
insurance carriers in lieu of maintenance of policy reserves in
connection with its workers compensation and liability insurance
programs);
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations
of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable arising in
the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar
credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in
clauses (i) through (iii) above) entered into in the ordinary course
of business of such Person to the extent such letters of credit are
not drawn upon
<PAGE> 21
13
or, if and to the extent drawn upon, such drawing is reimbursed no
later than the tenth Business Day following receipt by such Person of
a demand for reimbursement following payment on the letter of credit
and time drafts relating to any such letters of credit payable within
180 days after the date of Issuance to the extent such time drafts are
issued in the ordinary course of business for the payment of goods or
services);
(v) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary of such Person, any Preferred
Stock (but excluding, in each case, any accrued dividends);
(vi) all obligations of the type referred to in clauses (i)
through (viii) of other Persons and all dividends of other Persons for
the payment of which, in either case, such Person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise,
including by means of any Guarantee;
(vii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the
lesser of the fair market value of such property or assets at such
date of determination or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the amount of liability required by
GAAP to be accrued or reflected on the most recently published balance sheet of
such Person; provided, however, that (A) the amount outstanding at any time of
any Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP and (B) Indebtedness shall not include any liability for Federal, state,
local or other taxes.
<PAGE> 22
14
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Insolvency or Liquidation Proceeding" means (i) any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
relating to the Company or its assets, or (ii) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary or whether or
not involving insolvency or bankruptcy, or (iii) any assignment for the benefit
of creditors or any other marshalling of assets or liabilities of the Company.
"Interest Rate or Currency Protection Agreement" of any Person
means any interest rate protection agreement (including, without limitation,
interest rate swaps, caps, floors, collars, derivative instruments and similar
agreements), and/or other types of interest hedging agreements and any currency
protection agreement (including foreign exchange contracts, currency swap
agreements or other currency hedging arrangements) in support of the Company's
business and not of a speculative nature.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are, in conformity with GAAP, recorded as accounts receivable on
the balance sheet of such Person) or other extension of credit (including by
way of Guarantee or similar arrangement) or capital contribution to (by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase or acquisition
of Capital Stock, Indebtedness or other similar instruments issued by such
Person. For purposes of the definition of "Unrestricted Subsidiary", the
definition of "Restricted Payment" and Section 4.04, (i) "Investment" shall
include the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of the
Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as
a Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if
positive) equal to (x) the Company's "Investment" in such Unrestricted
Subsidiary at the time of such redesignation as a Restricted Subsidiary less
(y) the portion (proportionate
<PAGE> 23
15
to the Company's equity interest in such Unrestricted Subsidiary) of the fair
market value of the net assets of such Unrestricted Subsidiary at the time of
such redesignation as a Restricted Subsidiary; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors.
"Issue Date" means the date on which the Securities are
originally issued.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means payments
in cash or cash equivalents received therefrom (including any cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to such
properties or assets that are the subject of such Asset Disposition or received
in any other noncash form), in each case net of (i) all legal, title and
recording tax expenses, commissions and other fees and expenses incurred
(including fees and expenses of investment bankers), and all Federal, state,
provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, incurred in connection with such Asset Disposition, (ii)
all payments made on any Indebtedness which is secured by a Lien on any assets
subject to such Asset Disposition, in accordance with the terms of any Lien
upon or other security agreement of any kind with respect to such assets, or
which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law be, repaid out of the proceeds from
such Asset Disposition, (iii) all distributions and other payments required to
be made to minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition and (iv) appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such Asset
Disposition, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to
<PAGE> 24
16
environmental matters and liabilities under any indemnification obligations
associated with such Asset Dispositions, all as determined in conformity with
GAAP, and retained by the Company or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means the proceeds of such issuance or sale in the form of cash
or cash equivalents net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and net
of taxes paid or payable as a result thereof.
"New Credit Facility" means credit facilities provided to the
Company pursuant to the Amended and Restated Credit Agreement dated April 29,
1996, among the Company, the lenders thereunder and Wachovia Bank of Georgia,
N.A. and The First National Bank of Chicago, as agents, as the same may from
time to time be amended, renewed, supplemented or otherwise modified.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion from
legal counsel who is acceptable to the Trustee. The counsel may be an employee
of or counsel to the Company.
"Permitted Holders" means G. Stephen Felker and/or any
"Permitted Transferee" (as defined in the Restated and Amended Articles of
Incorporation of the Guarantor as of the Issue Date) of G. Stephen Felker.
"Permitted Investment" means an Investment by the Company or
any Restricted Subsidiary in (i) a Receivables Subsidiary or a Restricted
Subsidiary or a Person that will, upon the making of such Investment, become a
Restricted Subsidiary; provided, however, that the primary business of such
Restricted Subsidiary is a Related Business; (ii) another Person if as a result
of such Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the
<PAGE> 25
17
Company or a Restricted Subsidiary; provided, however, that such Person's
primary business is a Related Business; (iii) Temporary Cash Investments; (iv)
receivables owing to the Company or any Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as the Company or any such
Restricted Subsidiary deems reasonable under the circumstances; (v) payroll,
travel and similar advances to cover matters that are expected at the time of
such advances ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business; (vi) loans or advances to
employees made in the ordinary course of business consistent with past
practices of the Company or such Restricted Subsidiary; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (viii) any Person to the extent
such Investment represents the non-cash portion of the consideration received
for an Asset Disposition as permitted pursuant to Section 4.06; and (ix) a
trust, limited liability company, special purpose entity or other similar
entity in connection with a Receivables Program; provided, however, that (A)
such Investment is made by a Receivables Subsidiary and (B) the only assets
transferred to such trust, limited liability company, special purpose or other
similar entity consist of Receivables and Related Assets of such Receivables
Subsidiary.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Post-Petition Interest" means all interest accrued or
accruing after the commencement of any Insolvency or Liquidation Proceeding
(and interest that would accrue but for the commencement of any Insolvency or
Liquidation Proceeding) in accordance with and at the contract rate (including,
without limitation, any rate applicable upon default) specified in the
agreement or instrument creating, evidencing or governing any Indebtedness,
whether or not, pursuant to applicable law or otherwise, the claim for such
interest is allowed as a claim in such Insolvency or Liquidation Proceeding.
<PAGE> 26
18
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
"Public Equity Offering" means an underwritten primary public
offering of any class of common stock of the Company or the Guarantor pursuant
to an effective registration statement under the Securities Act.
"Public Market" means any time after (i) an underwritten
public equity offering of the Guarantor or the Company has been consummated and
(ii) at least 10% of the total issued and outstanding common stock of the
Guarantor or the Company has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant to Rule 144
under the Securities Act.
"Receivables and Related Assets" means accounts receivable,
instruments, chattel paper, obligations, general intangibles and other similar
assets, including interest in merchandise or goods, the sale or lease of which
give rise to the foregoing, related contractual rights, guarantees, insurance
proceeds, collections, other related assets and proceeds of all the foregoing.
"Receivables Program" means, with respect to any Person, any
accounts receivable securitization program pursuant to which such Person
pledges, sells or otherwise transfers or encumbers its accounts receivable,
including to a trust, limited liability company, special purpose entity or
other similar entity.
"Receivables Subsidiary" means a Wholly Owned Subsidiary (i)
created for the purpose of financing receivables created in the ordinary course
of business of the Company and its Subsidiaries and (ii) the sole assets of
which consist of Receivables and Related Assets of the Company and its
Subsidiaries and related Permitted Investments.
<PAGE> 27
19
"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances
any Indebtedness of the Company or any Restricted Subsidiary existing on the
Issue Date or Incurred in compliance with this Indenture, including
Indebtedness that refinances Refinancing Indebtedness; provided, however, that
(i) such Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or
if Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company, (y) Indebtedness of the
Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary (z) Indebtedness that Refinances Indebtedness of a
Subsidiary that was Incurred and outstanding on or prior to the date such
Subsidiary was acquired by the Company unless such proposed Refinancing
Indebtedness is Incurred by such Subsidiary.
"Related Business" means the businesses of the Company and its
Restricted Subsidiaries on the Issue Date and any business related, ancillary
or complementary to the businesses of the Company and its Restricted
Subsidiaries on the Issue Date.
"Representative" means any trustee, agent or representative
(if any) for an issue of Senior Indebtedness of the Company.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions in respect
of its Capital Stock
<PAGE> 28
20
(including any payment in connection with any merger or consolidation involving
such Person) or similar payment to the direct or indirect holders of its
Capital Stock (other than dividends or distributions payable solely in its
Capital Stock (other than Disqualified Stock)) and dividends or distributions
payable solely to the Company or a Restricted Subsidiary, and other than pro
rata dividends or other distributions made by a Restricted Subsidiary that is
not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company
(other than a Restricted Subsidiary), including the exercise of any option to
exchange any Capital Stock (other than into Capital Stock of the Company that
is not Disqualified Stock), (iii) the purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase, or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each
case due within one year of the date of acquisition) or (iv) the making of any
Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness secured by a
Lien.
"Securities" means the Securities issued under this Indenture.
"Senior Indebtedness" means, with respect to any Person, (i)
Indebtedness referred to in clause (i) of the definition of "Designated Senior
Indebtedness", (ii) Indebtedness of such Person, whether outstanding on the
Issue Date or thereafter Incurred and (iii) accrued and unpaid interest
(including Post-Petition Interest) in respect of (A) indebtedness of such
Person for money
<PAGE> 29
21
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable unless, in the instrument creating or evidencing the same or pursuant to
which the same is outstanding, it is provided that such obligations are
subordinate in right of payment to the Securities or the Guaranty, as the case
may be; provided, however, that Senior Indebtedness shall not include (1) any
obligation of such Person to any Subsidiary, (2) any liability for Federal,
state, local or other taxes owed or owing by such Person, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of such Person (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect to
any other Indebtedness or other obligation of such Person or (5) that portion
of any Indebtedness which at the time of Incurrence is Incurred in violation of
this Indenture.
"Senior Subordinated Indebtedness" means the Securities and
any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Securities in right of payment and
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security or
obligation, the date specified in such security or obligation as the fixed date
on which the final payment of principal of such security or obligation is due
and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency beyond the
control of the issuer unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right
<PAGE> 30
22
of payment to the Securities pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of outstanding shares of Capital Stock or other interests
(including partnership interests) 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 (i) such
Person, (ii) such Person and one or more Subsidiaries of such Person or (iii)
one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i)
any investment in direct obligations of the United States of America or any
agency thereof or obligations guaranteed by the United States of America or any
agency thereof, (ii) investments in time deposit accounts, certificates of
deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America having capital, surplus and
undivided profits aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt that is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money- market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) investments in commercial paper, maturing not more than 90 days after the
date of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America or any foreign country recognized by the United States of America with
a rating at the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard and Poor's Ratings Group, and (v) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state,
<PAGE> 31
23
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
Section 77aaa-77bbbb) as in effect on the date of this Indenture.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President
or any other officer or assistant officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness
of, or holds any Lien on any property of, the Company or any other Subsidiary
of the Company that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that either (A) the Subsidiary to be so designated has total
assets of $1,000 or less or (B) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under Section 4.04. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
<PAGE> 32
24
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all
the Capital Stock of which (other than directors' qualifying shares and shares
held by other Persons to the extent such shares are required by applicable law
to be held by a Person other than the Company or a Restricted Subsidiary) is
owned by the Company or one or more Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction" ................ 4.07
"Bankruptcy Law" ....................... 6.01
"Blockage Notice" ...................... 10.03
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Event of Default" ..................... 6.01
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 13.08
"Offer" ................................ 4.06
"Offer Amount" ......................... 4.06
"Offer Period" ......................... 4.06
"pay the Securities" ................... 10.03
"Paying Agent" ......................... 2.03
"Payment Blockage Period" .............. 10.03
"Purchase Date" ........................ 4.06
"Registrar"............................. 2.03
"Successor Company" .................... 5.01
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory
<PAGE> 33
25
provisions of the TIA which are incorporated by reference in and made a part of
this Indenture. The following TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule
have the meanings assigned to them by such definitions.
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) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in
<PAGE> 34
26
accordance with GAAP and accretion of principal on such security shall
be deemed to be the Incurrence of Indebtedness;
(8) the principal amount of any Preferred Stock shall be (i)
the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with
respect to such Preferred Stock, whichever is greater; and
(9) all references to the date the Securities were originally
issued shall refer to the date the Initial Securities were originally
issued.
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the
Initial Securities, the Private Exchange Securities and the Exchange Securities
are set forth in Appendix A, which is hereby incorporated in and expressly made
part of this Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to Appendix A
which is hereby incorporated in and expressly made a part of this Indenture.
The Exchange Securities, the Private Exchange Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture.
The Securities may have notations, legends or endorsements required by law,
stock exchange rule, agreements to which the Company is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in Exhibit 1 to Appendix
A and Exhibit A are part of the terms of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers
shall sign the Securities for the Company by manual or facsimile signature.
The Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
<PAGE> 35
27
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by
the terms of such appointment, an authenticating agent may authenticate
Securities 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 any Registrar, Paying Agent or
agent for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange.
The Company may have one or more co-registrars and one or more additional
paying agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this
Indenture, which shall incorporate the terms of the TIA. The agreement shall
implement the provisions of this Indenture that relate to such agent. The
Company shall notify the Trustee of the name and address of any such agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such and shall be entitled to appropriate compensation therefor pursuant
to Section 7.07. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer
agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
<PAGE> 36
28
SECTION 2.04. Paying Agent To Hold Money in Trust. On or
prior to each due date of the principal and interest on any Security, the
Company shall deposit with the Paying Agent a sum sufficient to pay such
principal and interest when so becoming due. The Company shall require each
Paying Agent (other than the Trustee) to agree in writing that the Paying Agent
shall hold in trust for the benefit of Securityholders or the Trustee all money
held by the Paying Agent for the payment of principal of or interest on the
Securities and shall notify the Trustee of any default by the Company in making
any such payment. If the Company or a Subsidiary acts as Paying Agent, it
shall segregate the money held by it as Paying Agent and hold it as a separate
trust fund. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee and to account for any funds disbursed by the
Paying Agent. Upon complying with this Section, the Paying Agent shall have no
further liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder 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 Securityholders. If the Trustee
is not the Registrar, the Company shall furnish to the Trustee, in writing at
least five 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
Securityholders.
SECTION 2.06. Replacement Securities. If a mutilated
Security is surrendered to the Registrar or if the Holder of a Security claims
that the Security has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Security if the
requirements of Section 8-405 of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements of the Trustee. If required
by the Trustee or the Company, such Holder shall furnish an indemnity bond
sufficient in the judgment of the Company and the Trustee to protect the
Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from
any loss which any of them may suffer if a Security is replaced. The Company
and the Trustee may charge the Holder for their expenses in replacing a
Security.
<PAGE> 37
29
Every replacement Security is an additional obligation of the
Company.
SECTION 2.07. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.06, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.08. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Company considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities and deliver them in exchange for temporary
Securities.
SECTION 2.09. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and the
Paying Agent shall forward to the Trustee any Securities surrendered to them
for registration of transfer, exchange or payment. The Trustee and no one else
shall cancel and destroy (subject to the record retention requirements of the
Exchange Act) all Securities surrendered for registration of transfer,
exchange, payment or cancellation and deliver a certificate of such destruction
to the Company unless the Company directs the
<PAGE> 38
30
Trustee to deliver canceled Securities to the Company; provided, however, that
the Trustee shall not be required to destroy any Securities. The Company may
not issue new Securities to replace Securities it has redeemed, paid or
delivered to the Trustee for cancellation.
SECTION 2.10. Defaulted Interest. If the Company defaults in
a payment of interest on the Securities, the Company shall pay defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the persons who
are Securityholders on a subsequent special record date. The Company shall fix
or cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.11. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
SECTION 2.12. Transfers, etc. Each Holder of a Security
agrees to indemnify the Company and the Trustee against any liability that may
result from the transfer, exchange or assignment by such Holder of such
Holder's Security in violation of any provision of this Indenture and/or
applicable U.S. Federal or state securities law.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5 of the Securities, it shall notify
the Trustee in writing of the
<PAGE> 39
31
redemption date and the principal amount of Securities to be redeemed.
The Company shall give each notice to the Trustee provided for
in this Section at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If
fewer than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called
for redemption. The Trustee shall notify the Company promptly of the
Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Company shall
mail a notice of redemption by first-class mail to each Holder of Securities to
be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
<PAGE> 40
32
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on
Securities (or portion thereof) called for redemption ceases to accrue
on and after the redemption date; and
(7) 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 Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable
on the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date.
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. On or prior to
the redemption date, the Company shall deposit with the Paying Agent (or, if
the Company or a Subsidiary is the Paying Agent, shall segregate and hold in
trust) money in immediately available funds, sufficient to pay the redemption
price of and accrued interest on all Securities to be redeemed on that date
other than Securities or portions of Securities called for redemption which
have been delivered by the Company to the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of
a Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security
surrendered.
<PAGE> 41
33
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and
in the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee
or the Paying Agent holds in accordance with this Indenture money sufficient to
pay all principal and interest then due and the Trustee or the Paying Agent, as
the case may be, is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. The Company or, as provided in
the proviso below, the Guarantor, shall file with the Trustee and provide
Securityholders, within 15 days after it files them with the SEC, copies of its
annual report and the information, documents and other reports which the
Company or the Guarantor, as the case may be, is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the
Company may not be required to remain subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company or the Guarantor, as
provided in the proviso below, shall continue to file with the SEC and provide
the Trustee and Securityholders with such annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections,
such information, documents and reports to be so filed and provided at the
times specified for the filing of such information, documents and reports under
such Sections; provided, however, that so long as the Guarantor is Guaranteeing
the Securities pursuant to this Indenture, the reports, information and other
documents required to be filed and provided as described hereunder may, at the
Company's option (with written notice to the Trustee), be filed by and be those
of the Guarantor rather than the Company; provided further, however, that in
the event the
<PAGE> 42
33
Guarantor conducts any business or holds any significant assets other than the
Capital Stock of the Company at the time of filing and providing any such
report, information or other document containing financial statements of the
Guarantor, the Guarantor shall include in such report, information or other
document summarized financial information (as defined in Rule 1-02(bb) of
Regulation S-X) with respect to the Company. The Company also shall comply
with the other provisions of TIA Section 314(a). Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officers' Certificates).
SECTION 4.03. Limitation on Indebtedness. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, Incur, directly
or indirectly, any Indebtedness unless, on the date of such Incurrence, the
Consolidated Coverage Ratio exceeds 2.0 to 1.
(b) Notwithstanding the foregoing paragraph (a), the Company
and its Restricted Subsidiaries may Incur any or all of the following
Indebtedness:
(1) Indebtedness Incurred by the Company pursuant to the New
Credit Facility or any other revolving credit arrangement; provided,
however, that, after giving effect to any such Incurrence, the
aggregate principal amount of such Indebtedness then outstanding does
not exceed the greater of $325,000,000 (less the then outstanding
principal amount of Indebtedness arising under any Receivables Program
of the Company or any Restricted Subsidiary, other than Indebtedness
described in clause (2) below) and the sum of (i) 50% of the book
value of the inventory of the Company and its Restricted Subsidiaries
and (ii) 85% of the book value of the accounts receivable of the
Company and its Restricted Subsidiaries (other than accounts
receivable subject to any Receivables Program of the Company or any
Restricted Subsidiary), in each case determined in accordance with
GAAP;
(2) Indebtedness of the Company owed to and held by a Wholly
Owned Subsidiary and Indebtedness of a Wholly Owned Subsidiary owed to
and held by the Company
<PAGE> 43
35
or a Wholly Owned Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock which results in any such
Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of such Indebtedness (other than to the Company or
a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(3) the Securities;
(4) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2) or (3) of this Section
4.03(b);
(5) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to Section 4.03(a) or pursuant to clause (3) or (4)
of this Section 4.03 or this clause (5);
(6) Hedging Obligations consisting of Interest Rate or
Currency Protection Agreements directly related to Indebtedness
permitted to be Incurred by the Company pursuant to this Indenture;
(7) Indebtedness Incurred by a Receivables Subsidiary, other
than Indebtedness described in clause (2) above, in an amount not
exceeding 95% of the aggregate unpaid balance of the Receivables and
Related Assets of such Receivables Subsidiary at the time of such
Incurrence pursuant to a Receivables Program; and
(8) Indebtedness Incurred by the Company in an aggregate
principal amount which, together with all other Indebtedness of the
Company outstanding on the date of such Incurrence (other than
Indebtedness permitted by clauses (1) through (7) of this Section
4.03(b) or Section 4.03(a)), does not exceed $70,000,000.
(c) Notwithstanding the foregoing, the Company shall not
Incur any Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are
used, directly or indirectly, to Refinance any Subordinated Obligations unless
such Indebtedness shall be subordinated to the Securities to at least the same
extent as such Subordinated Obligations.
<PAGE> 44
36
(d) For purposes of determining any particular amount of
Indebtedness under this Section 4.03, (1) Indebtedness Incurred under the New
Credit Facility on or prior to the date of the Indenture shall be treated as
Incurred pursuant to clause (1) of Section 4.03(b) and (2) Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness otherwise
included in the determination of such particular amount shall not be included.
For purposes of determining compliance with this Section 4.03, (i) in the event
that an item of Indebtedness meets the criteria of more than one of the types
of Indebtedness described herein, the Company, in its sole discretion, will
classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in one of the above clauses and (ii) an item of
Indebtedness may be divided and classified in more than one of the types of
Indebtedness described herein.
(e) Notwithstanding Section 4.03(a) or Section 4.03(b), the
Company shall not Incur (i) any Indebtedness if such Indebtedness is
subordinate or junior in ranking in any respect to any Senior Indebtedness,
unless such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness or (ii)
any Secured Indebtedness that is not Senior Indebtedness unless
contemporaneously therewith effective provision is made to secure the
Securities equally and ratably with such Secured Indebtedness for so long as
such Secured Indebtedness is secured by a Lien.
SECTION 4.04. Limitation on Restricted Payments. (a) The
Company shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) the Company or such Restricted Subsidiary is not able to
Incur an additional $1.00 of Indebtedness under Section 4.03(a); or
<PAGE> 45
37
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Issue Date would exceed the sum
of:
(A) 50% of the Consolidated Net Income accrued on a
cumulative basis during the period (treated as one accounting
period) beginning on the first day of the fiscal quarter
beginning immediately following the Issue Date to the end of
the most recent fiscal quarter ending at least 45 days prior
to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit);
(B) the aggregate Net Cash Proceeds received by the
Company from the issue or sale of, or as a capital
contribution in respect of, its Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than
an issuance or sale to a Subsidiary of the Company and other
than an issuance or sale to an employee stock ownership plan
or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees);
(C) the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Capital Stock (other
than Disqualified Stock) subsequent to the Issue Date to any
employee stock ownership plan or to a trust established by the
Company or any of its Restricted Subsidiaries for the benefit
of their employees to the extent that any such Net Cash
Proceeds are equal to an increase in the Consolidated Net
Worth of the Company resulting from principal repayments made
by such employee stock ownership plan or trust with respect to
Indebtedness Incurred by it to finance the purchase of such
Capital Stock;
(D) the amount by which Indebtedness of the Company
is reduced on the Company's balance sheet upon the conversion
or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date of any Indebtedness of the
Company convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount of
any cash, or the fair value of
<PAGE> 46
38
any other property, distributed by the Company upon such
conversion or exchange);
(E) an amount equal to the sum of (i) the net
reduction in Investments in any Person resulting from
dividends, repayments of loans or advances or other transfers
of assets, in each case to the Company or any Restricted
Subsidiary from such Person, and (ii) the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum shall not exceed, in the case
of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by the
Company or any Restricted Subsidiary in such Unrestricted
Subsidiary; and
(F) $10,000,000.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or
Subordinated Obligations of the Company made by exchange for, or out
of the proceeds of the substantially concurrent sale of or capital
contribution in respect of, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of the Company or an employee stock ownership plan or to a
trust established by the Company or any of its Subsidiaries for the
benefit of their employees); provided, however, that (A) such
purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such
sale or capital contribution shall be excluded from the calculation of
amounts under clause (3)(B) of Section 4.04(a);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made
by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of the Company which is permitted to
be Incurred pursuant to Section 4.03; provided, however, that such
purchase, repurchase, redemption,
<PAGE> 47
39
defeasance or other acquisition or retirement for value shall be
excluded in the calculation of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with Section 4.04(a); provided, however, that at the
time of payment of such dividend, no other Default shall have occurred
and be continuing (or result therefrom); provided further, however,
that such dividend shall be included in the calculation of the amount
of Restricted Payments;
(iv) the repurchase of shares of, or options to purchase shares
of, Capital Stock (other than Preferred Stock) of the Guarantor, the
Company or any of its Subsidiaries from employees, former employees,
directors or former directors of the Guarantor, the Company or any of
its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors or their respective estates),
pursuant to the terms of the agreements (including employment
agreements) or plans (or amendments thereto) approved by the Board of
Directors of the Guarantor or the Company, as the case may be, under
which such individuals purchase or sell or are granted the option or
right to purchase or sell such Capital Stock (other than Preferred
Stock); provided, however, that the aggregate amount of such
repurchases shall not exceed $2,000,000 in any calendar year (excluding
any such repurchases funded with the proceeds of any life insurance
policy or policies maintained by the Company or under which the Company
is the beneficiary); provided further, however, that such repurchases
shall be excluded in the calculation of the amount of Restricted
Payments;
(v) dividends paid by the Company to the Guarantor to be used
by the Guarantor to pay Federal, state and local taxes payable by the
Guarantor and directly attributable to (or arise as a result of) the
operations of the Company and its Restricted Subsidiaries; provided,
however, that (A) the amount of such dividends shall not exceed the
amount that the Company and its Restricted Subsidiaries would be
required to pay in respect of such Federal, state and local taxes were
the Company to pay such taxes as a stand-alone taxpayer and (B) such
dividends pursuant to
<PAGE> 48
40
this clause (v) are used by the Guarantor for such purposes within 20
days of the receipt of such dividends by the Guarantor; provided
further, however, that such dividends shall be excluded in the
calculation of the amount of Restricted Payments;
(vi) payments or distributions to shareholders pursuant to
appraisal rights in respect of up to 10% of the Capital Stock of the
Guarantor or the Company required by law in connection with a
consolidation, merger or transfer of assets that complies with Section
5.01; provided, however, that any such payments or distributions shall
be included in the calculation of the amount of Restricted Payments;
(vii) so long as no Default has occurred and is continuing or
would result therefrom, any purchase of any fractional share of Capital
Stock of the Guarantor or the Company resulting from (A) any dividend
or other distribution on outstanding shares of Capital Stock that is
payable in shares of such Capital Stock (including any stock split or
subdivision of the outstanding Capital Stock of the Guarantor or the
Company), (B) any combination of all of the outstanding shares of the
outstanding Capital Stock of the Guarantor or the Company), (C) any
reorganization or consolidation of the Guarantor or the Company in any
merger of the Guarantor or the Company with or into any other Person or
(D) the conversion of any securities of the Guarantor or the Company
into shares of Capital Stock of the Guarantor or the Company; provided,
however, that such purchases shall be included in the calculation of
the amount of Restricted Payments; and
(viii) Investments in an aggregate amount not to exceed
$15,000,000 in any Person engaged primarily in a Related Business on
the date of any such Investment; provided, however, that such
Investments shall be included in the calculation of the amount of
Restricted Payments.
SECTION 4.05. Limitation on Restrictions on Distributions
from Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or restriction on the ability of
any Restricted Subsidiary to (i) pay dividends or make any other distributions
on its Capital Stock to the
<PAGE> 49
41
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(ii) make any loans or advances to the Company or (iii) transfer any of its
property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including, without
limitation, under the New Credit Facility;
(2) any encumbrance or restriction with respect to a
Receivables Subsidiary pursuant to a Receivables Program of such
Receivables Subsidiary; provided that such encumbrances and
restrictions are customarily required by the institutional sponsor or
arranger at the time of entering into such Receivables Program in
similar types of documents relating to the purchase of similar
receivables in connection with the financing thereof;
(3) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior to the
date on which such Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration in, or to provide
all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant
to which such Restricted Subsidiary became a Restricted Subsidiary or
was acquired by the Company) and outstanding on such date;
(4) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (1), (2) or (3) of this Section 4.05
or this clause (4) or contained in any amendment to an agreement
referred to in clause (1), (2) or (3) of this Section 4.05 or this
clause (4); provided, however, that the encumbrances and restrictions
with respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are no less favorable to the
Securityholders than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in such agreements;
<PAGE> 50
42
(5) any such encumbrance or restriction consisting of
customary nonassignment provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the
lease or the property leased thereunder;
(6) in the case of clause (iii) above, restrictions contained
in security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict the
transfer of the property subject to such security agreements or
mortgages; and
(7) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary
Stock. (a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Disposition unless
(i) the Company or such Restricted Subsidiary receives consideration at the
time of such Asset Disposition at least equal to the fair market value
(including as to the value of all non-cash consideration) of the shares and
assets subject to such Asset Disposition (which fair market value shall be
determined in good faith by the Board of Directors for any transaction (or
series of transactions) involving in excess of $500,000 and not involving
solely a sale of equipment or other assets specifically contemplated by the
Company's capital expenditure budget previously approved by the Board of
Directors) and at least 75% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash or cash
equivalents and (ii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) first, to the extent the Company elects (or
is required by the terms of any Senior Indebtedness), to prepay, repay, redeem
or purchase Senior Indebtedness or Indebtedness (other than any Disqualified
Stock) of a Wholly Owned Subsidiary (in each case other than Indebtedness owed
to the Company or an Affiliate of the Company) within one year from the later
of the date of such Asset Disposition or the receipt of such Net Available
Cash; (B) second, to the extent of the balance of such Net
<PAGE> 51
43
Available Cash after application in accordance with clause (A), to the extent
the Company elects, to acquire Additional Assets within one year from the later
of the date of such Asset Disposition or the receipt of such Net Available
Cash; (C) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an Offer to the
holders of the Securities (and to holders of other Senior Subordinated
Indebtedness designated by the Company) to purchase Securities (and such other
Senior Subordinated Indebtedness) pursuant to and subject to the conditions of
Section 4.06(b); and (D) fourth, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A), (B) and (C),
to (x) the acquisition by the Company or any Wholly Owned Subsidiary of
Additional Assets or (y) the prepayment, repayment or purchase of Indebtedness
(other than any Disqualified Stock) of the Company (other than Indebtedness
owed to an Affiliate of the Company) or Indebtedness of any Subsidiary (other
than Indebtedness owed to the Company or an Affiliate of the Company), in each
case within one year from the later of the receipt of such Net Available Cash
and the date the offer described in Section 4.06(b) is consummated; provided,
however that in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (A), (C) or (D) above (other than such
repayment or prepayment of Indebtedness Incurred pursuant to clause (1) of
Section 4.03(b)), the Company or such Restricted Subsidiary shall retire such
Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this Section
4.06, the Company and the Restricted Subsidiaries shall not be required to
apply any Net Available Cash in accordance with this Section 4.06(a) except to
the extent that the aggregate Net Available Cash from all Asset Dispositions in
any period of twelve consecutive months which is not applied in accordance with
this Section 4.06(a) exceeds $10,000,000. Pending application of Net Available
Cash pursuant to this Section 4.06, such Net Available Cash shall be invested
in Permitted Investments.
For the purposes of this Section 4.06, the following are
deemed to be cash or cash equivalents: (x) the assumption of Indebtedness of
the Company or any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition and
<PAGE> 52
44
(y) securities received by the Company or any Restricted Subsidiary from the
transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the
purchase of Securities (and, to the extent designated by the Company, other
Senior Subordinated Indebtedness) pursuant to Section 4.06(a)(ii)(C), the
Company shall be required to purchase Securities tendered pursuant to an offer
by the Company for the Securities (and other Senior Subordinated Indebtedness)
(the "Offer") at a purchase price of 100% of their principal amount (without
premium) plus accrued but unpaid interest (or, in respect of such other Senior
Subordinated Indebtedness, such lesser price, if any, as may be provided for by
the terms of such Senior Subordinated Indebtedness) in accordance with the
procedures (including prorationing in the event of oversubscription) set forth
in Section 4.06(c). If the aggregate purchase price of Securities (and any
other Senior Subordinated Indebtedness) tendered pursuant to the Offer is less
than the Net Available Cash allotted to the purchase thereof, the Company shall
be required to apply the remaining Net Available Cash in accordance with
Section 4.06(a)(ii)(D). Notwithstanding anything to the contrary herein, the
Company shall not be required to make an Offer to purchase Securities (and
other Senior Subordinated Indebtedness) pursuant to this Section 4.06 if the
Net Available Cash available therefor is less than $15,000,000 (which lesser
amount shall be carried forward for purposes of determining whether such an
Offer is required with respect to the Net Available Cash from any subsequent
Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Offer, the Company shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, a written
notice stating that the Holder may elect to have his Securities purchased by
the Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders to make an informed decision (which at a minimum will
include (i) the
<PAGE> 53
45
most recently filed Annual Report on Form 10-K (including audited consolidated
financial statements) of the Company (or, if applicable, the Guarantor), the
most recent subsequently filed Quarterly Report on Form 10-Q and any Current
Report on Form 8-K of the Company (or, if applicable, the Guarantor) filed
subsequent to such Quarterly Report, other than Current Reports describing
Asset Dispositions otherwise described in the offering materials (or
corresponding successor reports), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of such Reports,
and (iii) if material, appropriate pro forma financial information) and all
instructions and materials necessary to tender Securities pursuant to the
Offer, together with the information contained in clause (3).
(2) Not later than the date upon which written notice of an
Offer is delivered to the Trustee as provided below, the Company shall deliver
to the Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.06(a). On such
date, the Company shall also irrevocably deposit with the Trustee or with a
paying agent (or, if the Company is acting as its own paying agent, segregate
and hold in trust) in Temporary Cash Investments, maturing on the last day
prior to the Purchase Date or on the Purchase Date if funds are immediately
available by open of business, an amount equal to the Offer Amount to be held
for payment in accordance with the provisions of this Section. Upon the
expiration of the period for which the Offer remains open (the "Offer Period"),
the Company shall deliver to the Trustee for cancellation the Securities or
portions thereof which have been properly tendered to and are to be accepted by
the Company. The Trustee shall, on the Purchase Date, mail or deliver payment
to each tendering Holder in the amount of the purchase price. In the event
that the aggregate purchase price of the Securities delivered by the Company to
the Trustee is less than the Offer Amount, the Trustee shall deliver the excess
to the Company immediately after the expiration of the Offer Period for
application in accordance with this Section.
(3) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address
<PAGE> 54
46
specified in the notice at least three Business Days prior to the Purchase
Date. Holders shall be entitled to withdraw their election if the Trustee or
the Company receives not later than one Business Day prior to the Purchase
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Security which was delivered
for purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration of the Offer
Period the aggregate principal amount of Securities surrendered by Holders
exceeds the Offer Amount, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders whose Securities
are purchased only in part shall be issued new Securities equal in principal
amount to the unpurchased portion of the Securities surrendered.
(4) At the time the Company delivers Securities to the
Trustee which are to be accepted for purchase, the Company shall also deliver
an Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section. A
Security shall be deemed to have been accepted for purchase at the time the
Trustee, directly or through an agent, mails or delivers payment therefor to
the surrendering Holder.
(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant
to this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.07. Limitation on Affiliate Transactions. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, enter
into or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property, employee compensation arrangements or the rendering
of any service) with any Affiliate of the Company (an "Affiliate Transaction")
unless the terms thereof (i) are no less favorable to the Company
<PAGE> 55
47
or such Restricted Subsidiary than those that could be obtained at the time of
such transaction in arm's-length dealings with a Person who is not such an
Affiliate, (ii) if such Affiliate Transaction involves an amount in excess of
$500,000, (1) are set forth in writing and (2) have been approved by a majority
of the disinterested members of the Board of Directors and (iii) if such
Affiliate Transaction involves an amount in excess of $10,000,000, have been
determined by a nationally recognized investment banking or accounting firm
having experience in such matters to be fair, from a financial point of view,
to the Company and its Restricted Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) 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 or similar employee benefit plans or
arrangements approved by the Board of Directors, (iii) the grant of stock
options or similar rights to employees and directors of the Guarantor or the
Company pursuant to plans approved by the Board of Directors, (iv) loans or
advances to employees in the ordinary course of business in accordance with the
past practices of the Company or its Restricted Subsidiaries, but in any event
not to exceed $2,000,000 in the aggregate outstanding at any one time, (v) the
payment of reasonable fees to directors of the Guarantor or the Company and its
Restricted Subsidiaries who are not employees of the Company or its Restricted
Subsidiaries, (vi) any Affiliate Transaction between the Company and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries and (vii) any Receivables
Program of the Company or a Restricted Subsidiary.
SECTION 4.08. Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries. The Company shall not sell or otherwise
dispose of any shares of Capital Stock of a Restricted Subsidiary, and shall
not permit any Restricted Subsidiary, directly or indirectly, to issue or sell
or otherwise dispose of any shares of its Capital Stock except (i) to the
Company or a Wholly Owned Subsidiary or (ii) if, immediately after giving
effect to such issuance, sale or other disposition, the Company and its
Restricted Subsidiaries would own less than 20% of the Voting Stock of such
Restricted Subsidiary and have no greater economic interest in such Restricted
Subsidiary.
<PAGE> 56
48
SECTION 4.09. Change of Control. (a) Upon a Change of
Control, each Holder shall have the right to require that the Company
repurchase such Holder's Securities at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to
the date of purchase (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), in
accordance with the terms contemplated in Section 4.09(b). In the event that
at the time of such Change of Control the terms of the Bank Indebtedness
restrict or prohibit the repurchase of Securities pursuant to this Section,
then prior to the mailing of the notice to Holders provided for in Section
4.09(b) below but in any event within 30 days following any Change of Control,
the Company shall (i) repay in full all such Bank Indebtedness or offer to
repay in full all such Bank Indebtedness and repay such Bank Indebtedness of
each lender who has accepted such offer or (ii) obtain the requisite consent
under the agreements governing such Bank Indebtedness to permit the repurchase
of the Securities as provided for in Section 4.09(b).
(b) Within 30 days following any Change of Control, the
Company shall mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of Holders of record on the relevant
record date to receive interest on the relevant interest payment
date);
(2) the circumstances and relevant facts regarding such Change
of Control (including information with respect to pro forma historical
income, cash flow and capitalization, after giving effect to such
Change of Control);
(3) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent
with this Section, that a Holder must follow in order to have its
Securities purchased.
<PAGE> 57
49
(c) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders will be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business Day
prior to the purchase date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Security
which was delivered for purchase by the Holder and a statement that such Holder
is withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the
Company under this Section shall be delivered by the Trustee for cancellation,
and the Company shall pay the purchase price plus accrued and unpaid interest,
if any, to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant
to this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.10. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company an Officers' Certificate stating that in the course of the performance
by the signers of their duties as Officers of the Company they would normally
have knowledge of any Default and whether or not the signers know of any
Default that occurred during such period. If they do, the certificate shall
describe the Default, its status and what action the Company is taking or
proposes to take with respect thereto. The Company also shall comply with TIA
Section 314(a)(4).
SECTION 4.11. Further Instruments and Acts. Upon request of
the Trustee, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
<PAGE> 58
50
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. (a)
The Company shall not consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, all or
substantially all its assets to, any Person, unless:
(i) the Company shall be the resulting, surviving or
transferee Person or the resulting, surviving or transferee Person (in
either case, the "Successor Company") shall be a Person organized and
existing under the laws of the United States of America, any State
thereof or the District of Columbia and the Successor Company (if not
the Company) shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form acceptable to
the Trustee, all the obligations of the Company under the Securities
and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction
as having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which
is not less than the Consolidated Net Worth of the Company immediately
prior to such transaction; and
(v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture
(if any) comply with this Indenture.
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The Successor Company shall be the successor to the Company
and shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture, but the predecessor Company in the
case of a conveyance, transfer or lease shall not be released from the
obligation to pay the principal of and interest on the Securities.
Notwithstanding the foregoing clauses (ii), (iii) and (iv),
any Wholly Owned Subsidiary may consolidate with, merge into or transfer all or
part of its properties and assets to the Company.
(b) The Guarantor shall not consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or series of
transactions, all or substantially all of its assets to any Person unless: (i)
the resulting, surviving or transferee Person (if not the Guarantor) shall be a
Person organized and existing under the laws of the jurisdiction under which
the Guarantor was organized or under the laws of the United States of America,
or any State thereof or the District of Columbia, and such Person shall
expressly assume, by an amendment to this Indenture, in a form acceptable to
the Trustee, all the obligations of the Guarantor, if any, under the Guaranty;
(ii) immediately after giving effect to such transaction or transactions on a
pro forma basis (and treating any Indebtedness which becomes an obligation of
the resulting, surviving or transferee Person as a result of such transaction
as having been issued by such Person at the time of such transaction), no
Default shall have occurred and be continuing.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default"
occurs if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article 10, and such default continues
for a period of 30 days;
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52
(2) the Company (i) defaults in the payment of the principal
of any Security when the same becomes due and payable at its Stated
Maturity, upon redemption, upon declaration or otherwise, whether or
not such payment shall be prohibited by Article 10 or (ii) fails to
redeem or purchase Securities when required pursuant to this Indenture
or the Securities, whether or not such redemption or purchase shall be
prohibited by Article 10;
(3) the Company or the Guarantor fails to comply with Section
5.01;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08 or 4.09 (other than a failure to purchase
Securities when required under Section 4.06 or 4.09) and such failure
continues for 30 days after the notice specified below;
(5) the Company or the Guarantor fails to comply with any of
its agreements in the Securities or this Indenture (other than those
referred to in clause (1), (2), (3) or (4) above) and such failure
continues for 60 days after the notice specified below;
(6) Indebtedness of the Company, the Guarantor or any
Significant Subsidiary is not paid within any applicable grace period
after final maturity or is accelerated by the holders thereof because
of a default and the total amount of such Indebtedness unpaid or
accelerated exceeds $10,000,000 or its foreign currency equivalent at
the time;
(7) the Company, the Guarantor or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
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53
or takes any comparable action under any foreign laws relating
to insolvency;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company, the Guarantor
or any Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company, the
Guarantor or any Significant Subsidiary or for any substantial
part of its property; or
(C) orders the winding up or liquidation of the
Company, the Guarantor or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess
of $10,000,000 or its foreign currency equivalent at the time is
entered against the Company, the Guarantor or any Significant
Subsidiary, remains outstanding for a period of 60 days following the
entry of such judgment or decree and is not discharged, waived or the
execution thereof stayed within 10 days after the notice specified
below; or
(10) the Guaranty ceases to be in full force and effect (other
than in accordance with the terms of the Guaranty) or the Guarantor
denies or disaffirms its obligations under the Guaranty.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
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A Default under clauses (4), (5) or (9) is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the Securities notify the Company of the Default and the Company does not cure
such Default within the time specified after receipt of such notice. Such
notice must specify the Default, demand that it be remedied and state that such
notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other
than an Event of Default specified in Section 6.01(7) or (8) with respect to
the Company) occurs and is continuing, the Trustee by written notice to the
Company, or the Holders of at least 25% in principal amount of the Securities
by written notice to the Company and the Trustee, may declare the principal of
and accrued interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company occurs, the principal of and interest on all the Securities shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Securityholders. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
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 of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
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The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder 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. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security or (ii) a Default in
respect of a provision that under Section 9.02 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is
deemed cured, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture
or, subject to Section 7.01, that the Trustee determines is unduly prejudicial
to the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses
caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
<PAGE> 64
56
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, 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.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may 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 and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make 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 it for the
reasonable compensation, expenses, disburse-
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57
ments and advances of the Trustee, its agents and its counsel, and any other
amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money
or property pursuant to this Article 6, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Company to
the extent required by Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
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 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 pursuant to Section 6.07 or a suit
by Holders of more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company
(to the extent it may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter
<PAGE> 66
58
in force, which may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and shall not 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 had
been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) 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 Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts
stated therein).
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section;
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59
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) 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.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) 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.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely
on 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. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on the Officers' Certificate or Opinion of Counsel.
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(c) The Trustee may act through 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 which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection,
and the advice or opinion of counsel with respect to legal matters relating to
this Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) Any request or direction of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution.
(g) 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 pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which 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
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not Trustee. Any Paying Agent, Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
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 Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for
any statement of the Company in the Indenture or in any document issued in
connection with the sale
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of the Securities or in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of May 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time compensation for its services as the
Company and the Trustee shall from time to time agree in writing. 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 upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Trustee's agents and counsel. The
Company shall indemnify the Trustee against any and all loss, liability or
expense (including reasonable attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder. 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
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hereunder. The Company shall defend the claim and the Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not reimburse any expense or indemnify against
any loss, liability or expense incurred by the Trustee through the Trustee's
own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 6.01(7) or (8)
with respect to the Company, the expenses are intended to constitute expenses
of administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in
principal amount of the Securities may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to
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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 Securityholders. The retiring Trustee
shall promptly transfer all property held by it as Trustee to the successor
Trustee, subject to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of
the successor to the Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have.
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SECTION 7.10. Eligibility; Disqualification. The Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The
Trustee shall have a combined capital and surplus of at least $50,000,000 as
set forth in its most recent published annual report of condition. The Trustee
shall comply with TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with 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.
SECTION 7.12. Trustee's Application for Instructions from the
Company. Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the
date on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or
omission of, the Trustee in accordance with a proposal included in such
application on or after the date specified in such application (which date
shall not be less than three Business Days after the date any Officer of the
Company actually receives such application, unless any such Officer shall have
consented in writing to any earlier date) unless prior to taking any such
action (or the effective date in the case of an omission), the Trustee shall
have received written instructions in response to such application specifying
the action to be taken or omitted.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.06) for
cancellation or
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(ii) all outstanding Securities have become due and payable, whether at
maturity or as a result of the mailing of a notice of redemption pursuant to
Article 3 hereof and the Company irrevocably deposits with the Trustee funds
sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon to maturity or such redemption date (other than
Securities replaced pursuant to Section 2.06), and if in either case the
Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Sections 8.01(c), cease to be of further effect.
The Trustee shall acknowledge satisfaction and discharge of this Indenture on
demand of the Company accompanied by an Officers' Certificate and an Opinion of
Counsel and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any
time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08 and 4.09 and the operation of Section
6.01(3) (but only as it applies to Section 5.01(a)(iii) and (iv)), 6.01(4),
6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and
(8), with respect only to Significant Subsidiaries) or contained in Section
5.01(a)(iii) and (iv) ("covenant defeasance option"). The Company may exercise
its legal defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default. If
the Company exercises its covenant defeasance option, payment of the Securities
may not be accelerated because of an Event of Default specified in Sections
6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections
6.01(7) and (8), with respect only to Significant Subsidiaries) or because of
the failure of the Company to comply with Section 5.01(a)(iii) and (iv). If
the Company exercise its legal defeasance option or its covenant defeasance
option, the Guarantor shall be released from all of its obligations under the
Guaranty.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
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(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05
and 8.06 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations for the payment of
principal of and interest on the Securities to maturity or redemption,
as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and
interest when due on all the Securities to maturity or redemption, as
the case may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Sections 6.01(7) or (8) with
respect to the Company occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(5) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the
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applicable Federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the
Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such 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 defeasance had not
occurred;
(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Securityholders 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; and
(8) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the Securities
as contemplated by this Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date
in accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant
to this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Company. The Trustee and the
Paying Agent shall promptly turn over to the Company upon request any excess
money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal or interest that remains unclaimed for two
years,
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and, thereafter, Securityholders entitled to the money must look to the Company
for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
this Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if the
Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Company and
the Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes
of Section 163(f) of the Code or in a manner such that the
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uncertificated Securities are described in Section 163(f)(2)(B) of the
Code;
(4) to make any change in Article 10 that would limit or
terminate the benefits available to any holder of Senior Indebtedness
(or Representatives therefor) under Article 10;
(5) to add guarantees with respect to the Securities or to
secure the Securities;
(6) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company;
(7) to comply with any requirements of the SEC in connection
with qualifying, or maintaining the qualification of, this Indenture
under the TIA; or
(8) to make any change that does not adversely affect the
rights of any Securityholder.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness
(or any group or representative thereof authorized to give a consent) consent
to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.02. With Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities. However, without the consent
of each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
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(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the Stated Maturity of
any Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that stated
in the Security;
(6) make any change in Article 10 that adversely affects the
rights of any Securityholder under Article 10 or Article 12;
(7) make any change in Section 6.04 or 6.07 or the second
sentence of this Section 9.02; or
(8) make any change in any the Guaranty that would adversely
affect the Securityholders.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness
(or any group or representative thereof authorized to give a consent) consent
to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers.
A consent to an amendment or a waiver by a
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Holder of a Security shall bind the Holder and every subsequent Holder of that
Security or portion of the Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent or waiver is not
made on the Security. However, any such Holder or subsequent Holder may revoke
the consent or waiver as to such Holder's Security or portion of the Security
if the Trustee receives the notice of revocation before the date the amendment
or waiver becomes effective. After an amendment or waiver becomes effective,
it shall bind every Securityholder. An amendment or waiver becomes effective
upon the execution of such amendment or waiver by the Trustee.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to give such consent or to revoke any
consent previously given or to take any such action, whether or not such
Persons continue to be Holders after such record date. No such consent shall
be valid or effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder
of the Security to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Security regarding the changed terms and return it
to the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make
the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of
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Counsel stating that such amendment is authorized or permitted by this
Indenture and that such amendment constitutes the legal, valid and binding
obligation of the Company and each Subsidiary Guarantor, if any, subject to
customary exceptions.
SECTION 9.07. Payment for Consent. Neither the Company nor
any Affiliate of the Company shall, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid to all Holders that so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating
to such consent, waiver or agreement.
ARTICLE 10
Subordination of the Securities
SECTION 10.01. Agreement To Subordinate. The Company agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment of all
Senior Indebtedness of the Company and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness. The
Securities shall in all respects rank pari passu with all other Senior
Subordinated Indebtedness of the Company and only Indebtedness of the Company
which is Senior Indebtedness shall rank senior to the Securities in accordance
with the provisions set forth herein. All provisions of this Article 10 shall
be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon
any payment or distribution of the assets of the Company to creditors upon a
total or partial liquidation or a total or partial dissolution of the Company
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property:
(1) holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full of such Senior Indebtedness before
Securityholders shall be
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entitled to receive any payment of principal of or interest on the
Securities; and
(2) until such Senior Indebtedness is paid in full, any
distribution to which Securityholders would be entitled but for this
Article 10 shall be made to holders of such Senior Indebtedness as
their interests may appear, except that Securityholders may receive
shares of stock and any debt securities that are subordinated to such
Senior Indebtedness to at least the same extent as the Securities are
subordinated to Senior Indebtedness of the Company.
SECTION 10.03. Default on Senior Indebtedness of the Company.
The Company may not pay the principal of or interest on the Securities or make
any deposit pursuant to Section 8.01 and may not repurchase, redeem or defease
any Securities (collectively, "pay the Securities") if (i) any Designated
Senior Indebtedness of the Company is not paid when due or (ii) any other
default on such Designated Senior Indebtedness occurs and the maturity of such
Designated Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (x) the default has been cured or waived and any such
acceleration has been rescinded or (y) such Designated Senior Indebtedness has
been paid in full; provided, however, that the Company may pay the Securities
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of such Designated Senior
Indebtedness. During the continuance of any default (other than a default
described in clause (i) or (ii) of the preceding sentence) with respect to any
Designated Senior Indebtedness of the Company pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Company may not pay the Securities for a period
(a "Payment Blockage Period") commencing upon the receipt by the Company and
the Trustee of written notice (a "Blockage Notice") of such default from the
Representative of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
by repayment in full of such Designated Senior Indebtedness or (iii) because
the Representative of the holders of such Designated Senior Indebtedness shall
have
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notified the Trustee that the default giving rise to such Blockage Notice is no
longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section 10.03), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders shall have
accelerated the maturity of such Designated Senior Indebtedness, the Company
may resume payments on the Securities after such Payment Blockage Period. Not
more than one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period; provided, however, that if any Blockage Notice
within such 360-day period is given by or on behalf of any holders of
Designated Senior Indebtedness (other than the Bank Indebtedness), the
Representative of the Bank Indebtedness may give another Blockage Notice within
such period; provided further, however, that in no event may the total number
of days during which any Payment Blockage Period or Periods is in effect exceed
179 days in the aggregate during any 360 consecutive day period. For purposes
of this Section, no default or event of default which existed or was continuing
on the date of the commencement of any Payment Blockage Period with respect to
the Designated Senior Indebtedness initiating such Payment Blockage Period
shall be, or be made, the basis of the commencement of a subsequent Payment
Blockage Period by the Representative of such Designated Senior Indebtedness,
whether or not within a period of 360 consecutive days, unless such default or
event of default shall have been cured or waived for a period of not less than
90 consecutive days.
SECTION 10.04. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness of the Company (or their Representative) of the
acceleration.
SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 10 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness of the Company and
pay it over to them as their interests may appear.
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SECTION 10.06. Subrogation. After all Senior Indebtedness of
the Company is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to such Senior Indebtedness.
A distribution made under this Article 10 to holders of such Senior
Indebtedness which otherwise would have been made to Securityholders is not, as
between the Company and Securityholders, a payment by the Company on such
Senior Indebtedness.
SECTION 10.07. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Indebtedness of the
Company. Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of
holders of Senior Indebtedness of the Company to receive distributions
otherwise payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article 10. The Company, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Senior Indebtedness may give the
notice; provided, however, that, if the holders of an issue of Senior
Indebtedness of the
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Company have a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness of the Company with the same rights it would have if it
were not Trustee. The Registrar and co-registrar and the Paying Agent may do
the same with like rights. The Trustee shall be entitled to all the rights set
forth in this Article 10 with respect to any Senior Indebtedness of the Company
which may at any time be held by it, to the same extent as any other holder of
such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of
any of its rights as such holder. Nothing in this Article 10 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness of the Company, the distribution may be made and the notice given
to their Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article 10 shall not be construed
as preventing the occurrence of a Default. Nothing in this Article 10 shall
have any effect on the right of the Securityholders or the Trustee to
accelerate the maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments from money
or the proceeds of U.S. Government Obligations held in trust under Article 8 by
the Trustee for the payment of principal of and interest on the Securities
shall not be subordinated to the prior payment of any Senior Indebtedness or
subject to the restrictions set forth in this Article 10, and none of the
Securityholders shall be obligated to pay over any such amount to the Company
or any holder of Senior Indebtedness of the Company or any other creditor of
the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to
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in Section 10.02 are pending, (ii) upon a certificate of the liquidating
trustee or agent or other Person making such payment or distribution to the
Trustee or to the Securityholders or (iii) upon the Representative for the
holders of Senior Indebtedness of the Company for the purpose of ascertaining
the Persons entitled to participate in such payment or distribution, the
holders of such 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. In the
event that the Trustee determines, in good faith, that evidence is required
with respect to the right of any Person as a holder of Senior Indebtedness of
the Company to participate in any payment or distribution pursuant to this
Article 10, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 10, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Senior Indebtedness of the Company as provided in this Article 10
and appoints the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. 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
it shall mistakenly pay over or distribute to Securityholders or the Company or
any other Person, money or assets to which any holders of Senior Indebtedness
of the Company shall be entitled by virtue of this Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each
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Securityholder by accepting a Security acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness of the Company,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Securities, to acquire and continue to hold, or to continue to
hold, such Senior Indebtedness and such holder of such Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness.
ARTICLE 11
Guaranty
SECTION 11.01. Guaranty. The Guarantor hereby
unconditionally and irrevocably guarantees to each Holder and to the Trustee
and its successors and assigns (a) the full and punctual payment of principal
and interest on the Securities when due, whether at maturity, by acceleration,
by redemption or otherwise, and all other monetary obligations of the Company
under this Indenture and the Securities and (b) the full and punctual
performance within applicable grace periods of all other obligations of the
Company under this Indenture and the Securities (all the foregoing being
hereinafter collectively called the "Obligations"). The Guarantor further
agrees that the Obligations may be extended or renewed, in whole or in part,
without notice or further assent from the Guarantor and that the Guarantor will
remain bound under this Article 11 notwithstanding any extension or renewal of
any Obligation.
The Guarantor waives presentation to, demand of, payment from
and protest to the Company of any of the Obligations and also waives notice of
protest for nonpayment. The Guarantor waives notice of any default under the
Securities or the Obligations. The obligations of the Guarantor hereunder
shall not be affected by (a) the failure of any Holder or the Trustee to assert
any claim or demand or to enforce any right or remedy against the Company or
any other Person under this Indenture, the Securities or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Securities or any other agreement;
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(d) the release of any security held by any Holder or the Trustee for the
Obligations or any of them; (e) the failure of any Holder or Trustee to
exercise any right or remedy against any other guarantor of the Obligations; or
(f) any change in the ownership of the Guarantor.
The Guarantor further agrees that its Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and
not a guarantee of collection) and waives any right to require that any resort
be had by any Holder or the Trustee to any security held for payment of the
Obligations.
The Guaranty is, to the extent and in the manner set forth in
Article 12, subordinated and subject in right of payment to the prior payment
in full of the principal of and premium, if any, and interest on all Senior
Indebtedness of the Guarantor and is made subject to such provisions of this
Indenture.
Except as expressly set forth in Section 8.01(b), the
obligations of the Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Obligations
or otherwise. Without limiting the generality of the foregoing, the
obligations of the Guarantor herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Securities
or any other agreement, by any waiver or modification of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
the Guarantor or would otherwise operate as a discharge of the Guarantor as a
matter of law or equity.
The Guarantor further agrees that its Guarantee herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal or interest on any Obligation is
rescinded or must otherwise be restored by any Holder or the
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Trustee upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against the
Guarantor by virtue hereof, upon the failure of the Company to pay the
principal or interest on any Obligation when and as the same shall become due,
whether at maturity, by acceleration, by redemption or otherwise, or to perform
or comply with any other Obligation, the Guarantor hereby promises to and will,
upon receipt of written demand by the Trustee, forthwith pay, or cause to be
paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i)
the unpaid amount of such Obligations, (ii) accrued and unpaid interest on such
Obligations (but only to the extent not prohibited by law) and (iii) all other
monetary Obligations of the Company to the Holders and the Trustee.
The Guarantor agrees that it shall not be entitled to any
right of subrogation in respect of any Obligations guaranteed hereby until
payment in full of all Obligations and all obligations to which the Obligations
are subordinated as provided in Article 12. The Guarantor further agrees that,
as between it, 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 the Guarantor's Guarantee herein,
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 Guarantor for the purposes of this Section.
The Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.
SECTION 11.02. Successors and Assigns. This Article 11 shall
be binding upon the Guarantor and its successors and assigns and shall enure to
the benefit of the successors and assigns of the Trustee and the Holders and,
in the event of any transfer or assignment of rights by any Holder or the
Trustee, the rights and privileges conferred upon that party in this Indenture
and in the Securities
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shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 11.03. No Waiver. Neither a failure nor a delay on
the part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 11 shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of
any right, power or privilege. The rights, remedies and benefits of the
Trustee and the Holders herein expressly specified are cumulative and not
exclusive of any other rights, remedies or benefits which either may have under
this Article 11 at law, in equity, by statute or otherwise.
SECTION 11.04. Modification. No modification, amendment or
waiver of any provision of this Article 11, nor the consent to any departure by
the Guarantor therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Trustee, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice to or demand on the Guarantor in any case shall entitle the Guarantor
to any other or further notice or demand in the same, similar or other
circumstances.
ARTICLE 12
Subordination of the Guaranty
SECTION 12.01. Agreement To Subordinate. The Guarantor
agrees, and each Securityholder by accepting a Security agrees, that the
Obligations of the Guarantor are subordinated in right of payment, to the
extent and in the manner provided in this Article 12, to the prior payment of
all Senior Indebtedness of the Guarantor and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness. The
Obligations of the Guarantor shall in all respects rank pari passu with all
other Senior Subordinated Indebtedness of the Guarantor and only Senior
Indebtedness of the Guarantor shall rank senior to the Obligations of the
Guarantor in accordance with the provisions set forth herein.
<PAGE> 90
82
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon
any payment or distribution of the assets of the Guarantor to creditors upon a
total or partial liquidation or a total or partial dissolution of the Guarantor
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Guarantor or its property:
(1) holders of Senior Indebtedness of the Guarantor shall be
entitled to receive payment in full of such Senior Indebtedness in
cash or cash equivalents before Securityholders shall be entitled to
receive any payment pursuant to any Obligations of the Guarantor; and
(2) until the Senior Indebtedness of the Guarantor is paid in
full in cash or cash equivalents, any distribution to which
Securityholders would be entitled but for this Article 12 shall be
made to holders of such Senior Indebtedness as their interests may
appear, except that Securityholders may receive shares of stock and
any debt securities of the Guarantor that are subordinated to Senior
Indebtedness, and to any debt securities received by holders of Senior
Indebtedness, of the Guarantor to at least the same extent as the
Obligations of the Guarantor are subordinated to Senior Indebtedness
of the Guarantor.
SECTION 12.03. Default on Senior Indebtedness of the
Guarantor. The Guarantor may not make any payment pursuant to any of its
Obligations or repurchase, redeem or otherwise retire or defease any Securities
or other Obligations (collectively, "pay its Guaranty") if (i) any Designated
Senior Indebtedness of the Company is not paid when due or (ii) any other
default on Designated Senior Indebtedness of the Company occurs and the
maturity of such Designated Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, (x) the default has been cured or waived
and any such acceleration has been rescinded or (y) such Designated Senior
Indebtedness has been paid in full; provided, however, that the Guarantor may
pay its Guaranty without regard to the foregoing if the Guarantor and the
Trustee receive written notice approving such payment from the Representative
of such Designated Senior Indebtedness. The Guarantor may not pay its Guaranty
during the continuance of any Payment Blockage Period after receipt by the
Company and the Trustee of a Payment Notice under Section 10.03.
Notwithstanding the provisions
<PAGE> 91
83
described in the immediately preceding sentence (but subject to the provisions
contained in the first sentence of this Section), unless the holders of
Designated Senior Indebtedness giving such Payment Notice or the Representative
of such holders shall have accelerated the maturity of such Designated Senior
Indebtedness, the Guarantor may resume payments pursuant to its Obligations
after such Payment Blockage Period.
SECTION 12.04. Demand for Payment. If a demand for payment
is made on the Guarantor pursuant to Article 11, the Trustee shall promptly
notify the holders of the Designated Senior Indebtedness (or their
Representatives) of such demand.
SECTION 12.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 12 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of the relevant Senior Indebtedness and pay
it over to them or their Representative as their interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of
the Guarantor is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to Senior Indebtedness. A
distribution made under this Article 12 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is not, as between the
Guarantor and Securityholders, a payment by the Guarantor on such Senior
Indebtedness.
SECTION 12.07. Relative Rights. This Article 12 defines the
relative rights of Securityholders and holders of Senior Indebtedness of the
Guarantor. Nothing in this Indenture shall:
(1) impair, as between the Guarantor and Securityholders, the
obligation of the Guarantor, which is absolute and unconditional, to
pay its Obligations to the extent set forth in Article 11; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a default by the Guarantor under its
Obligations, subject to the rights of holders of Senior Indebtedness
of the Guarantor to
<PAGE> 92
84
receive distributions otherwise payable to Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by
Guarantor. No right of any holder of Senior Indebtedness of the Guarantor to
enforce the subordination of the Obligations of the Guarantor shall be
impaired by any act or failure to act by the Guarantor or by its failure to
comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 12.03, the Trustee or Paying Agent may continue to make
payments on the Guaranty and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives written notice satisfactory to it that payments
may not be made under this Article 12. The Company, the Guarantor, the
Registrar or co-registrar, the Paying Agent, a Representative or a holder of
Senior Indebtedness of the Guarantor may give the notice; provided, however,
that, if an issue of Senior Indebtedness of the Guarantor has a Representative,
only the Representative may give the notice.
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.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 12 with respect to any Senior Indebtedness of the Guarantor which may
at any time be held by it, to the same extent as any other holder of Senior
Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 12 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 12.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness of the Guarantor, the distribution may be made and the notice
given to their Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Defaults Under the
Guaranty or Limit Right To Demand Payment. The failure to make a payment
pursuant to the Guaranty by reason of any provision in this Article 12 shall
not be construed
<PAGE> 93
85
as preventing the occurrence of a default under the Guaranty. Nothing in this
Article 12 shall have any effect on the right of the Securityholders or the
Trustee to make a demand for payment on the Guarantor pursuant to Article 11.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
12.02 are pending, (ii) upon a certificate of the liquidating trustee or agent
or other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representative for the holders of Senior
Indebtedness of the Guarantor for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of such
Senior Indebtedness and other indebtedness of the Guarantor, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article 12. In the event that the
Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Senior Indebtedness of the Guarantor to
participate in any payment or distribution pursuant to this Article 12, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness of the
Guarantor held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 12, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Senior Indebtedness of the Guarantor as provided in this Article 12
and appoints the Trustee as attorney-in-fact for any and all such purposes.
<PAGE> 94
86
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of the Guarantor. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of the Guarantor and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the Company or any other Person, money or assets to which
any holders of such Senior Indebtedness shall be entitled by virtue of this
Article 12 or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Indebtedness of the Guarantor, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Security, to acquire
and continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If any
provision of this Indenture limits, qualifies or conflicts with another
provision which is required to be included in this Indenture by the TIA, the
required provision shall control.
SECTION 13.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company or the Guarantor:
Avondale Mills, Inc.
506 South Broad Street
Monroe, Georgia 30655
Attention: Chief Financial Officer
<PAGE> 95
87
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee
Administration
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears
on the registration books of the Registrar and shall be sufficiently given if
so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to
take or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in
<PAGE> 96
88
the opinion of such counsel, all such conditions precedent have been
complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) 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;
(3) a statement that, in the opinion of such individual, he 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 complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at
the time shall be considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institu-
<PAGE> 97
89
tions are not required to be open in the State of New York. If a payment date
is a Legal Holiday, payment shall be made on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
If a regular record date is a Legal Holiday, the record date shall not be
affected.
SECTION 13.09. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
SECTION 13.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be
part of the consideration for the issue of the Securities.
SECTION 13.11. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple 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. One signed copy is enough
to prove this Indenture.
<PAGE> 98
90
SECTION 13.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
AVONDALE MILLS, INC.,
by
------------------------
Name:
Title:
AVONDALE INCORPORATED,
as Guarantor,
by
------------------------
Name:
Title:
THE BANK OF NEW YORK,
by
------------------------
Name:
Title:
<PAGE> 99
6
Appendix A - Provisions Relating to Initial Securities,
Private Exchange Securities and Exchange
Securities
Exhibit 1
to Appendix A - Form of Initial Security
Exhibit A - Form of Exchange/Private Exchange Security
The registrants agree to furnish a copy of the Appendix and Exhibits
listed above to the Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 4.2
AVONDALE MILLS, INC.
$125,000,000
10 1/4% Senior Subordinated Notes Due 2006
REGISTRATION RIGHTS AGREEMENT
April 23, 1996
CS First Boston Corporation
Park Avenue Plaza
New York, New York 10055
Ladies and Gentlemen:
Avondale Mills, Inc., an Alabama corporation ("Avondale"),
proposes to issue and sell to CS First Boston Corporation (the "Initial
Purchaser" or "CSFBC"), upon the terms set forth in a purchase agreement of
even date herewith (the "Purchase Agreement"), $125,000,000 principal amount of
its 10 1/4% Senior Subordinated Notes Due 2006 (the "Notes") to be
unconditionally guaranteed on a senior subordinated basis by Avondale
Incorporated, a Georgia corporation (the "Guarantor", and together with
Avondale, the "Company"). The Notes will be issued pursuant to an Indenture,
dated as of April 29, 1996 (the "Indenture"), among Avondale, the Guarantor and
The Bank of New York, as trustee (the "Trustee"). As an inducement to the
Initial Purchaser, the Company agrees with the Initial Purchaser, for the
benefit of the holders of the Notes (including, without limitation, the Initial
Purchasers), the Exchange Notes (as defined below) and the Private Exchange
Notes (as defined below) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its
cost, prepare and, not later than 45 days after (or if such 45th day is not a
business day, the first business day thereafter) the Issue Date (as defined in
the Indenture) of the Notes, file with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to a proposed offer (the "Registered
Exchange Offer") to the Holders of Transfer Restricted Notes
<PAGE> 2
2
(as defined in Section 6 hereof), who are not prohibited by any law or policy
of the Commission from participating in the Registered Exchange Offer, to issue
and deliver to such Holders, in exchange for the Notes, a like aggregate
principal amount of debt securities (the "Exchange Notes") of Avondale issued
under the Indenture and identical in all material respects to the Notes (except
for the transfer restrictions relating to the Notes) that would be registered
under the Securities Act. The Company shall use its reasonable efforts to
cause such Exchange Offer Registration Statement to become effective under the
Securities Act within 150 days (or if such 150th day is not a business day, the
first business day thereafter) after the Issue Date of the Notes and shall keep
the Exchange Offer Registration Statement effective for not fewer than 20
business days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Holders (such
period being called the "Exchange Offer Registration Period").
If the Company effects the Registered Exchange Offer, the
Company will be entitled to close the Registered Exchange Offer 20 business
days after the commencement thereof provided that the Company has accepted all
the Notes theretofore validly tendered in accordance with the terms of the
Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange
Offer Registration Statement, the Company shall promptly commence the
Registered Exchange Offer, it being the objective of such Registered Exchange
Offer to enable each Holder of Transfer Restricted Notes (as defined in Section
6 hereof) electing to exchange the Notes for Exchange Notes (assuming that such
Holder is not an affiliate of the Company within the meaning of the Securities
Act, acquires the Exchange Notes in the ordinary course of such Holder's
business and has no arrangements with any person to participate in the
distribution of the Exchange Notes and is not prohibited by any law or policy
of the Commission from participating in the Registered Exchange Offer) to trade
such Exchange Notes from and after their receipt without any limitations or
restrictions under the Securities Act and without material restrictions under
the securities laws of the several states of the United States. In connection
with such Registered Exchange Offer, the Company shall take such further
action, including, without limitation, appropriate filings under state
securities laws,
<PAGE> 3
3
as may be necessary to realize the foregoing objective subject to the proviso
of Section 3(h).
The Company acknowledges that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act,
in the absence of an applicable exemption therefrom, (i) each Holder that is a
broker-dealer electing to exchange Notes, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing
the information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Notes received by
such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) the
Initial Purchaser, if it elects to sell Exchange Notes acquired in exchange for
Notes constituting any portion of an unsold allotment, is required to deliver a
prospectus containing the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in connection with such
sale.
The Company shall use its reasonable efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Notes; provided, however, that (i)
in the case where such prospectus and any amendment or supplement thereto must
be delivered by an Exchanging Dealer or the Initial Purchaser, such period
shall be the lesser of 180 days and the date on which all Exchanging Dealers
and the Initial Purchaser have sold all Exchange Notes held by them (unless
such period is extended pursuant to Section 3(j) below) and (ii) the Company
shall make such prospectus and any amendment or supplement thereto, available
to any broker-dealer for use in connection with any resale of any Exchange
Notes for a period not less than 90 days after the consummation of the
Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, the
Initial Purchaser holds Notes acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Notes
<PAGE> 4
4
pursuant to the Registered Exchange Offer, shall issue and deliver to the
Initial Purchaser upon the written request of the Initial Purchaser, in
exchange (the "Private Exchange") for the Notes held by the Initial Purchaser,
a like principal amount of debt securities of Avondale issued under the
Indenture and identical in all material respects (including the existence of
restrictions on transfer under the Securities Act and the securities laws of
the several states of the United States) to the Notes (the "Private Exchange
Notes"). The Notes, the Exchange Notes and the Private Exchange Notes are
herein collectively called the "Securities".
In connection with the Registered Exchange Offer, the Company
shall:
(a) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than
20 business days (or longer, if required by applicable law) after the
date notice thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City
of New York, which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business
day on which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all
applicable laws.
As soon as practicable after the close of the Registered
Exchange Offer or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all the Notes validly tendered and
not withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
<PAGE> 5
5
(ii) deliver to the Trustee for cancellation all the Notes so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly
to each Holder of the Notes, Exchange Notes or Private Exchange Notes,
as the case may be, equal in principal amount to the Notes of such
Holder so accepted for exchange.
Each Holder participating in the Registered Exchange Offer
shall be required to represent to the Company that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Notes received
by such Holder will be acquired in the ordinary course of business, (ii) such
Holder will have no arrangements or understandings with any person to
participate in the distribution of the Notes or the Exchange Notes within the
meaning of the Securities Act, (iii) such Holder is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company or if it is an
affiliate, such Holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (iv) if
such Holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of the Exchange Notes and (v) if such
Holder is a broker-dealer, that it will receive Exchange Notes for its own
account in exchange for Notes that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto
complies as to form in all material respects with the Securities Act and the
rules and regulations thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (iii) any prospectus forming part of any Exchange Offer
Registration Statement, and any supplement to such prospectus, does not, as of
its date, include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the
<PAGE> 6
6
light of the circumstances under which they were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law
or in applicable interpretations thereof by the staff of the Commission, the
Company is not permitted to effect a Registered Exchange Offer as contemplated
by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated
within 180 days of the date of this Agreement, (iii) the Initial Purchaser so
requests with respect to the Notes (or any Private Exchange Notes) not eligible
to be exchanged for Exchange Notes in the Registered Exchange Offer and held by
it following consummation of the Registered Exchange Offer or (iv) any Holder
(other than an Exchanging Dealer) is not eligible to participate in the
Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Notes on the date of the
exchange, the Company shall take the following actions:
(a) The Company shall, at its cost, as promptly as
practicable (but in no event more than 30 days after so required or
requested pursuant to this Section 2) file with the Commission and
thereafter shall use its reasonable efforts to cause to be declared
effective a registration statement (the "Shelf Registration Statement"
and, together with the Exchange Offer Registration Statement, a
"Registration Statement") on an appropriate form under the Securities
Act relating to the offer and sale of the Transfer Restricted Notes
(as defined below) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in the Shelf
Registration Statement and Rule 415 under the Securities Act
(hereinafter, the "Shelf Registration"); provided, however, that no
Holder (other than an Initial Purchaser) shall be entitled to have the
Securities held by it covered by such Shelf Registration Statement
unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.
(b) The Company shall use its reasonable efforts to keep the
Shelf Registration Statement continuously effective in order to permit
the prospectus included therein to be lawfully delivered by the
Holders of the relevant Securities, until the earlier of (i) the time
when the Securities covered by the Shelf Registration
<PAGE> 7
7
Statement can be sold pursuant to Rule 144 without any limitations
under clauses (c), (e), (f) or (h) thereof, (ii) three years from the
Issue Date (or for such longer period if extended pursuant to Section
3(j) below) and (iii) the date on which all of the Securities covered
by the Shelf Registration Statement have been sold pursuant thereto.
Subject to Section 6(b), the Company shall be deemed not to have used
its reasonable efforts to keep the Shelf Registration Statement
effective during the requisite period if it voluntarily takes any
action that would result in Holders of Securities covered thereby not
being able to offer and sell such Securities during that period,
unless such action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Company shall cause the Shelf Registration Statement
and the related prospectus and any amendment or supplement thereto, as
of the effective date of the Shelf Registration Statement, amendment
or supplement, (i) to comply as to form in all material respects with
the applicable requirements of the Securities Act and the rules and
regulations of the Commission and (ii) not to contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3. Registration Procedures. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable,
any Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Company shall (i) furnish to the Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein and, in the event that the
Initial Purchaser (with respect to any portion of an unsold allotment
from the original offering) is participating in the Registered
Exchange Offer or the Shelf Registration Statement, shall use its
reasonable efforts to reflect in each such document, when so filed
with the Commission, such comments as the Initial
<PAGE> 8
8
Purchaser reasonably may propose; (ii) include the information set
forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution"
section of the prospectus forming a part of the Exchange Offer
Registration Statement and include the information set forth in Annex
D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; (iii) if requested by the Initial
Purchaser, include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the Exchange Offer Registration
Statement; (iv) include within the prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of
Distribution", reasonably acceptable to the Initial Purchaser, which
shall contain a summary statement of the positions taken or policies
made by the staff of the Commission with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of Exchange Notes received by such
broker-dealer in the Registered Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the Commission or such positions or
policies, in the reasonable judgment of the Initial Purchaser based
upon advice of counsel (which may be in-house counsel), represent the
prevailing views of the staff of the Commission; and (v) in the case
of a Shelf Registration Statement, include the names of the Holders,
who propose to sell Securities pursuant to the Shelf Registration
Statement, as selling securityholders.
(b) The Company shall give written notice to the Initial
Purchaser, the Holders of the Securities and any Participating
Broker-Dealer from whom the Company has received prior written notice
that it will be a Participating Broker-Dealer in the Registered
Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall
be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
<PAGE> 9
9
(i) when the Registration Statement or any
amendment thereto has been filed with the Commission and when
the Registration Statement or any post-effective amendment
thereto has become effective;
(ii) of any request by the Commission for
amendments or supplements to the Registration Statement or the
prospectus included therein or for additional information;
(iii) of the issuance by the Commission of
any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings
for that purpose;
(iv) of the receipt by the Company or its
legal counsel of any notification with respect to the
suspension of the qualification of the Securities for sale in
any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that
requires the Company to make changes in the Registration
Statement or the prospectus in order that the Registration
Statement or the prospectus do not contain an untrue statement
of a material fact nor omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading.
(c) The Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time, of any order suspending
the effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities
included within the coverage of the Shelf Registration, without
charge, at least one copy of the Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).
(e) The Company shall deliver to each Exchanging Dealer and
the Initial Purchaser, and to any other
<PAGE> 10
10
Holder who so requests, without charge, at least one copy of the
Exchange Offer Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the
Initial Purchaser or any such Holder requests, all exhibits thereto
(including those incorporated by reference).
(f) The Company shall deliver to each Holder of Securities
included within the coverage of the Shelf Registration, without
charge, as many copies of the prospectus (including each preliminary
prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably request.
The Company consents, subject to the provisions of this Agreement, to
the use of the prospectus or any amendment or supplement thereto by
each of the selling Holders of the Securities in connection with the
offering and sale of the Securities covered by the prospectus, or any
amendment or supplement thereto, included in the Shelf Registration
Statement.
(g) The Company shall deliver to the Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other
persons required to deliver a prospectus following the Registered
Exchange Offer, without charge, as many copies of the final prospectus
included in the Exchange Offer Registration Statement and any
amendment or supplement thereto as such persons may reasonably
request. The Company consents, subject to the provisions of this
Agreement, to the use of the prospectus or any amendment or supplement
thereto by the Initial Purchaser, if necessary, any Participating
Broker-Dealer and such other persons required to deliver a prospectus
following the Registered Exchange Offer in connection with the
offering and sale of the Exchange Notes covered by the prospectus, or
any amendment or supplement thereto, included in such Exchange Offer
Registration Statement.
(h) Prior to any public offering of the Securities, pursuant
to any Registration Statement, the Company shall register or qualify
or cooperate with the Holders of the Securities included therein and
their respective counsel in connection with the registration or
qualification of the Securities for offer and sale under the
securities or "blue sky" laws of such states
<PAGE> 11
11
of the United States as any Holder of the Securities reasonably
requests in writing and do any and all other acts or things reasonably
necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities covered by such Registration
Statement; provided, however, that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it
is not then so qualified or (ii) take any action which would subject
it to general service of process or to taxation in any jurisdiction
where it is not then so subject.
(i) The Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of
certificates representing the Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders may request
a reasonable period of time prior to sales of the Securities pursuant
to such Registration Statement.
(j) Upon the occurrence of any event contemplated by
paragraphs (ii) or (v) of Section 3(b) above during the period for
which the Company is required to maintain an effective Registration
Statement, the Company shall promptly prepare and file a
post-effective amendment to the Registration Statement or a supplement
to the related prospectus and any other required document so that, as
thereafter delivered to Holders of the Notes or purchasers of
Securities, the prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the
Company notifies the Initial Purchaser, the Holders of the Securities
and any known Participating Broker-Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use
of the prospectus until the requisite changes to the prospectus have
been made or any stop order has been lifted, as the case may be, then
the Initial Purchaser, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and
the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration
Statement provided for in Section 1
<PAGE> 12
12
above shall each be extended (i) by the number of days from and
including the date of the giving of such notice to and including the
date when the Initial Purchaser, the Holders of the Securities and any
known Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j) or (ii) if
earlier, until the date when none of the Securities represent Transfer
Restricted Notes.
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for
the Notes, the Exchange Notes or the Private Exchange Notes, as the
case may be, and provide the applicable trustee with printed
certificates for the Notes, the Exchange Notes or the Private Exchange
Notes, as the case may be, in a form eligible for deposit with The
Depository Trust Company.
(l) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make
generally available to its security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act) an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90
days, if such period is a fiscal year) beginning with the first month
of the Company's first fiscal quarter commencing after the effective
date of the Registration Statement, which statement shall cover such
12-month period.
(m) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner
and containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall
appoint a new trustee thereunder pursuant to the applicable provisions
of the Indenture.
(n) The Company may require each Holder of Securities to be
sold pursuant to the Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
the Securities as the Company may from time to time
<PAGE> 13
13
reasonably require for inclusion in the Shelf Registration Statement,
and the Company may exclude from such registration the Securities of
any Holder that unreasonably fails to furnish such information within
a reasonable time after receiving such request.
(o) The Company shall enter into such customary agreements
(including if requested an underwriting agreement in customary form)
and take all such other action, if any, as any Holder of the
Securities shall reasonably request in order to facilitate the
disposition of the Securities pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall
(i) make reasonably available for inspection by the Holders of the
Securities, any underwriter participating in any disposition pursuant
to the Shelf Registration Statement and any attorney, accountant or
other agent retained by the Holders of the Securities or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders of
the Securities or any such underwriter, attorney, accountant or agent
in connection with the Shelf Registration Statement, in each case, as
shall be reasonably necessary, in the judgment of the Holder or any
such underwriter, attorney, accountant or agent referred to in this
paragraph, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that the
foregoing inspection and information gathering shall be coordinated
on behalf of yourself by you and on behalf of the other parties, by
one counsel designated by and on behalf of such other parties as
described in Section 4 hereof.
(q) In the case of any Shelf Registration, the Company, if
requested by any Holder of Securities covered thereby, shall cause (i)
its counsel to deliver an opinion and updates thereof relating to the
Securities in customary form (with customary carve-outs and
qualifications) addressed to such Holders and the managing
underwriters, if any, thereof and dated, in the case of the initial
opinion, the effective date of
<PAGE> 14
14
such Shelf Registration Statement (it being agreed that the matters to
be covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and its subsidiaries;
the qualification of the Company and its subsidiaries to transact
business as foreign corporations; the due authorization, execution and
delivery of the relevant agreement of the type referred to in Section
3(o) hereof; the due authorization, execution, authentication and
issuance, and the validity and enforceability, of the applicable
Securities; the absence of material legal or governmental proceedings
involving the Company; the absence of governmental approvals required
to be obtained in connection with the Shelf Registration Statement,
the offering and sale of the applicable Securities, or any agreement
of the type referred to in Section 3(o) hereof; the compliance as to
form of such Shelf Registration Statement and any documents
incorporated by reference therein and of the Indenture with the
requirements of the Securities Act and the Trust Indenture Act,
respectively; and, as of the date of the opinion and as of the
effective date of the Shelf Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from
such Shelf Registration Statement and the prospectus included therein,
as then amended or supplemented, and from any documents incorporated
by reference therein of an untrue statement of a material fact or the
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (in
the case of any such documents, in the light of the circumstances
existing at the time that such documents were filed with the
Commission under the Exchange Act); (ii) its officers to execute and
deliver all customary documents and certificates and updates thereof
requested by any underwriters of the applicable Securities and (iii)
its independent public accountants to provide to the selling Holders
of the applicable Securities and any underwriter therefor a comfort
letter in customary form and covering matters of the type customarily
covered in comfort letters in connection with primary underwritten
offerings, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
(r) In the case of the Registered Exchange Offer, if
requested by the Initial Purchaser or any known
<PAGE> 15
15
Participating Broker-Dealer, the Company shall cause (i) its counsel
to deliver to the Initial Purchaser or such Participating
Broker-Dealer a signed opinion in the form set forth in Section 6(e)
of the Purchase Agreement with such changes as are customary in
connection with the preparation of a Registration Statement and (ii)
its independent public accountants to deliver to the Initial Purchaser
or such Participating Broker-Dealer a comfort letter, in customary
form, meeting the requirements as to the substance thereof as set
forth in Section 6(a) of the Purchase Agreement, with appropriate date
changes.
(s) If a Registered Exchange Offer or a Private Exchange is
to be consummated, upon delivery of the Notes by Holders to the
Company (or to such other Person as directed by the Company) in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Company shall mark, or caused to be marked, on the
Notes so exchanged that such Notes are being cancelled in exchange for
the Exchange Notes or the Private Exchange Notes, as the case may be;
in no event shall the Notes be marked as paid or otherwise satisfied.
(t) The Company will use its best efforts to (i) if the Notes
have been rated prior to the initial sale of such Notes, confirm that
such ratings will apply to the Securities covered by a Registration
Statement or (b) if the Notes were not previously rated, cause the
Securities covered by a Registration Statement to be rated with the
appropriate rating agencies, if so requested by Holders of a majority
in aggregate principal amount of Securities covered by such
Registration Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a
member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and
the By-Laws of the National Association of Securities Dealers, Inc.
("NASD")) thereof, whether as a Holder of such Securities or as an
underwriter, a placement or sales agent or a broker or dealer in
respect thereof, or otherwise, the Company shall assist such
broker-dealer in complying with the
<PAGE> 16
16
requirements of such Rules and By-Laws, including, without limitation,
by (A) if such Rules or By-Laws, including Schedule E thereto, shall
so require, engaging a "qualified independent underwriter" (as defined
in such Schedule) to participate in the preparation of the
Registration Statement relating to such Securities, to exercise usual
standards of due diligence in respect thereto and, if any portion of
the offering contemplated by such Registration Statement is an
underwritten offering or is made through a placement or sales agent,
to recommend the yield of such Securities, (B) indemnifying any such
qualified independent underwriter to the extent of the indemnification
of underwriters provided in Section 5 hereof and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules of Fair
Practice of the NASD.
(v) The Company shall use its reasonable efforts to take all
other steps necessary to effect the registration of the Securities
covered by a Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees
and expenses incurred in connection with the performance of its obligations
under Sections 1 through 3 hereof (including the reasonable fees and expenses
of counsel for the Initial Purchaser, incurred in connection with the
Registered Exchange Offer), whether or not the Registered Exchange Offer or a
Shelf Registration is filed or becomes effective, and, in the event of a Shelf
Registration, shall bear or reimburse the Holders of the Securities covered
thereby for the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority in principal amount of the Securities
covered thereby to act as counsel for the Holders of the Securities in
connection therewith; provided, however, that, in the event of a Shelf
Registration, the Company shall not be required to bear the fees and expenses
of more than one counsel acting on behalf of the Initial Purchaser and the
Holders.
5. Indemnification. (a) The Company agrees to indemnify and
hold harmless each Holder of the Securities, any Participating Broker-Dealer
and each person, if any, who controls such Holder or such Participating
Broker-Dealer within the meaning of the Securities Act or the Exchange Act
<PAGE> 17
17
(each Holder, any Participating Broker-Dealer and such controlling persons are
referred to collectively as the "Indemnified Parties") from and against any
losses, claims, damages or liabilities, joint or several, or any actions in
respect thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Securities) to
which each Indemnified Party may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in a Registration Statement or
prospectus included therein or in any amendment or supplement thereto, or arise
out of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse, as incurred, the Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) the Company
shall not be liable in any such case to the extent that such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in a Registration
Statement or prospectus included therein or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein and (ii) with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary prospectus
relating to a Shelf Registration Statement, the indemnity agreement contained
in this subsection (a) shall not inure to the benefit of any Holder or
Participating Broker-Dealer from whom the person asserting any such losses,
claims, damages or liabilities purchased the Securities concerned, to the
extent that a prospectus relating to such Securities was required to be
delivered by such Holder or Participating Broker-Dealer under the Securities
Act in connection with such purchase and any such loss, claim, damage or
liability of such Holder or participating Broker-Dealer results from the fact
that there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Securities to such person, a copy of the final
prospectus if the Company had previously furnished copies thereof to such
Holder or
<PAGE> 18
18
Participating Broker-Dealer and such final prospectus corrected such untrue
statement or omission or alleged untrue statement or omission; provided
further, however, that this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such Indemnified Party. The
Company shall also indemnify underwriters, selling brokers, dealer-managers and
similar securities industry professionals participating in the distribution (as
described in the Registration Statement) their officers and directors and each
person who controls such persons within the meaning of the Securities Act or
the Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly,
will indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act from and against any losses, claims, damages or liabilities or any actions
in respect thereof, to which the Company or any such controlling person may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement or prospectus included therein or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company for any legal
or other expenses reasonably incurred by the Company or any such controlling
person in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have to the Company
or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of
<PAGE> 19
19
any action or proceeding (including a governmental investigation), such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 5, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party 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) or (b) above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (which counsel shall not, except with
the consent of the indemnified party (which consent shall not be unreasonably
withheld), be counsel to the indemnifying party, and which counsel, together
with one local counsel in each jurisdiction, shall act on behalf of all the
indemnified parties with respect to such action), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof the indemnifying party will not be liable to such indemnified
party under this Section 5 for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the exchange of the Notes,
pursuant to the
<PAGE> 20
20
Registered Exchange Offer, or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party or parties on the
one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties 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 Company on the one
hand or such Holder or such other indemnified person, as the case may be, on
the other, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include, subject to the limitations on legal and other expenses set
forth in Sections 5(a) and 5(b), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any action or claim which is the subject of this subsection (d).
Notwithstanding any other provision of this Section 5(d), the Holders of the
Securities shall not be required to contribute any amount in excess of the
amount by which the net proceeds received by such Holders from the sale of the
Securities pursuant to a Registration Statement exceeds the amount of damages
which such Holders have 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
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this paragraph
(d), each person, if any, who controls such indemnified party within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as such indemnified party and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act shall
have the same rights to contribution as the Company.
(e) The agreements contained in this Section 5 shall survive
the sale of the Securities pursuant to a
<PAGE> 21
21
Registration Statement and shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement or any investigation made by
or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a)
Additional interest (the "Additional Interest") with respect to the Securities
shall be assessed as follows if any of the following events occur (each such
event in clauses (i) through (iii) below a "Registration Default"):
(i) If by June 13, 1996, neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been
filed with the Commission;
(ii) If by October 28, 1996, neither the Registered
Exchange Offer is consummated nor, if required in lieu thereof, the
Shelf Registration Statement is declared effective by the Commission;
or
(iii) If after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective,
(A) such Registration Statement thereafter ceases to be effective
prior to completion of the Exchange Offer or the sale of all of the
Transfer Restricted Notes registered pursuant to the Shelf
Registration Statement, as the case may be; or (B) such Registration
Statement or the related prospectus ceases to be usable (except as
permitted in paragraph (b) of this Section 6) in connection with
resales of Transfer Restricted Notes during the periods specified
herein because either (1) any event occurs as a result of which the
related prospectus forming part of such Registration Statement would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or
(2) it shall be necessary to amend such Registration Statement or
supplement the related prospectus, to comply with the Securities Act
or the Exchange Act or the respective rules thereunder.
Additional Interest shall accrue on the Notes over and above the interest set
forth in the title of the Notes from and including the date on which any such
Registration Default shall occur to but excluding the date on which all such
<PAGE> 22
22
Registration Defaults have been cured, at a rate of 0.50% per annum.
(b) A Registration Default referred to in Section
6(a)(iii)(B) shall be deemed not to have occurred and be continuing in relation
to a Shelf Registration Statement or the related prospectus if (i) such
Registration Default has occurred solely as a result of (x) the filing of a
post-effective amendment to such Shelf Registration Statement to incorporate
annual audited or, if required by the rules and regulations under the
Securities Act, quarterly unaudited, financial information with respect to the
Company where such post-effective amendment is not yet effective and needs to
be declared effective to permit Holders to use the related prospectus or (y)
other material events or developments with respect to the Company that would
need to be described in such Shelf Registration Statement or the related
prospectus and (ii) in the case of clause (y), the Company is proceeding
promptly and in good faith to amend or supplement such Shelf Registration
Statement and related prospectus to describe such events or, in the case of
material developments that the Company determines in good faith must remain
confidential for business reasons, the Company is proceeding promptly and in
good faith to take such steps as are necessary so that such developments need
no longer remain confidential; provided, however, that in any case if such
Registration Default occurs for a continuous period in excess of 45 days,
Additional Interest shall be payable in accordance with the above paragraph
from the day such registration default occurs until the date on which such
Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause
(a)(i), (a)(ii) or (a)(iii) of Section 6 above will be payable in cash on the
regular interest payment dates with respect to the Notes. The amount of
Additional Interest will be determined by multiplying the applicable Additional
Interest rate by the principal amount of the Notes, multiplied by a fraction,
the numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Notes" means each Security until (i)
the date on which such Transfer Restricted Note has been exchanged by a person
other than a
<PAGE> 23
23
broker-dealer for a freely transferrable Exchange Note in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the
Registered Exchange Offer of a Transfer Restricted Note for an Exchange Note,
the date on which such Exchange Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Transfer Restricted Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Transfer Restricted Note
is distributed to the public pursuant to Rule 144 under the Securities Act or
is saleable pursuant to Rule 144(k) under the Securities Act.
7. Rules 144 and 144A. The Company shall use its
reasonable efforts to file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, it will, upon the request of any
Holder of Transfer Restricted Notes, make publicly available other information
so long as necessary to permit sales of their securities pursuant to Rules 144
and 144A. The Company covenants that it will take such further action as any
Holder of Transfer Restricted Notes may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Notes without registration under the Securities Act within the limitation of
the exemptions provided by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)). The Company will provide a copy of this Agreement to
prospective purchasers of Notes identified to the Company by the Initial
Purchaser upon request. Upon the request of any Holder of Transfer Restricted
Notes, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to register
any of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer
Restricted Notes covered by any Shelf Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering ("Managing Underwriters") will be
selected by the Holders of a majority in aggregate principal amount of such
Transfer Restricted Notes to be included in such offering (subject to the
approval (which approval shall not be unreasonably withheld) of the Company.
<PAGE> 24
24
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Notes on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, except by the Company
and the written consent of the Holders of a majority in principal amount of the
Securities affected by such amendment, modification, supplement, waiver or
consents.
(b) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery,
first-class mail, facsimile transmission, or air courier which guarantees
overnight delivery:
(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Company in accordance with the
provisions of this Section 9(b), which address initially is, with
respect to each Holder, the address of such Holder to which
confirmation of the sale of the Notes to such Holder was first sent by
the Initial Purchaser, with a copy in like manner to you as follows:
CS First Boston Corporation
Park Avenue Plaza
New York, NY 10055
Fax No.: (212) 318-0532
Attention: Transactions Advisory Group
<PAGE> 25
25
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax No.: (212) 474-3700
Attention: Kris F. Heinzelman
(2) if to the Initial Purchaser, at the addresses specified
in Section 9(b)(1);
(3) if to the Company, at its address as follows:
Avondale Mills, Inc.
506 South Broad Street
Monroe, Georgia 30655
Fax No: (770) 267-2543
Attention: Jack R. Altherr, Jr.
with a copy to:
King & Spalding
120 West 45th Street
New York, New York 10036
Fax No: (212) 556-2222
Attention: Mary A. Bernard
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged by recipient's facsimile machine operator, if sent
by facsimile transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of
the date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its securities that is inconsistent with
the rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns.
<PAGE> 26
26
(e) 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.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If 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.
(i) Securities Held by the Company. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
is required hereunder, Securities held by the Company or its affiliates (other
than subsequent Holders of Securities if such subsequent Holders are deemed to
be affiliates solely by reason of their holdings of such Securities) shall not
be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
<PAGE> 27
27
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to Avondale a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement among the Initial Purchaser, Avondale and the Guarantor in accordance
with its terms.
Very truly yours,
AVONDALE MILLS, INC.
By:
----------------------
Name:
Title:
AVONDALE INCORPORATED
By:
----------------------
Name:
Title:
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CS FIRST BOSTON CORPORATION
By:
-----------------------------
Name:
Title:
<PAGE> 28
ANNEX A
Each broker-dealer that receives Exchange 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 Exchange 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. 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 Exchange 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, for a period of 180
days after the Expiration Date (as defined herein), it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution".
<PAGE> 29
ANNEX B
Each broker-dealer that receives Exchange Notes for its own
account in exchange for Notes, where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution".
<PAGE> 30
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange 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 Exchange 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 Exchange Notes received in
exchange for Existing Notes where such Existing Notes were acquired as a result
of market- making activities or other trading activities. The Company has
agreed that, for a period of 180 days 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 ,
199 , all dealers effecting transactions in the Exchange Notes may be required
to deliver a prospectus. */
The Company will not receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange 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 Exchange 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 or the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange 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 Exchange Notes may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
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.
_______________________
*/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE> 31
2
For a period of 180 days 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 Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE> 32
ANNEX D
____
/____/ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND
10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
--------------------------------------------
Address:
------------------------------------------
------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
<PAGE> 1
EXHIBIT 4.3
$225,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
April 29, 1996
among
AVONDALE MILLS, INC.
The Banks Listed Herein
and
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent
and
THE FIRST NATIONAL BANK OF CHICAGO
as Documentation Agent
<PAGE> 2
TABLE OF CONTENTS
CREDIT AGREEMENT
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.03. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.04. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.05. Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II
THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.02. Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.03. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.04. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.05. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.06. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.07. Optional Termination or Reduction of
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.08. Mandatory Reduction and Termination of
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.09. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.10. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.11. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.12. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE III
CONDITIONS TO BORROWINGS . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 3.01. Conditions to First Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 3.02. Conditions to All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.05. No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.07. Compliance with Laws; Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.08. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.09. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.10. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.11. Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.12. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.13. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.14. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.15. Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.16. Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.17. Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE V
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
SECTION 5.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.02. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.03. Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.04. Senior Debt to Cash Flow Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.05. Senior Debt to Capitalization Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.06. Total Debt to Cash Flow Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.07. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.08. Strategy Regarding Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.09. Loans or Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.10. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.11. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.12. Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.13. Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.14. Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.15. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.16. Compliance with Laws; Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.18. Change in Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.19. Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.20. Environmental Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.21. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.22. Environmental Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.23. Additional Consolidated Senior Debt; Debt of
Receivables Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.24. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.25. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C>
SECTION 5.26. Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VI
DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE VII
THE AGENT AND THE DOCUMENTATION AGENT . . . . . . . . . . . . . . . . . . 66
SECTION 7.01. Appointment; Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.02. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.03. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.04. Rights of Agent and the Documentation Agent as
a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.06 CONSEQUENTIAL DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.07. Payee of Note Treated as Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.08. Nonreliance on Agent and Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.09. Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.10. Resignation or Removal of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION . . . . . . . . . . . . . . . . . . 70
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.04. Base Rate Loans or Other Fixed Rate Loans
Substituted for Affected Fixed Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 8.05. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
</TABLE>
(iv)
<PAGE> 6
<TABLE>
<S> <C>
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.03. Expenses; Documentary Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 9.04. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 9.05 Setoff; Sharing of Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 9.06. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.07. No Margin Stock Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 9.08. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 9.09. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.10. Representation by Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.11. Obligations Several . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.12. Georgia Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.14. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.15. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.17. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.18. Release of Receivables Program Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
EXHIBIT A-1 Form of Revolver Loan Note
EXHIBIT A-2 Form of Swing Loan Note
EXHIBIT B-1 Form of Opinion of Georgia Counsel for the Borrower and the Parent
EXHIBIT B-2 Form of Opinion of Alabama Counsel for the Borrower
</TABLE>
(v)
<PAGE> 7
<TABLE>
<S> <C>
EXHIBIT B-3 Form of Local Counsel Opinion as to Mortgage
EXHIBIT C Form of Opinion of Special Counsel for the Agent
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Closing Certificate
EXHIBIT H Form of Mortgage
EXHIBIT I Form of Amended and Restated Parent Guaranty
EXHIBIT J Form of Amended and Restated Security Agreement
EXHIBIT K Form of Amended and Restated SunTrust
Intercreditor Agreement
EXHIBIT L Form of Amended and Restated Stock Pledge
Agreement
EXHIBIT M Form of Receivables Intercreditor Agreement
EXHIBIT N Form of Borrower Pledge Agreement
Schedule 4.04 Intangible Assets in Existence Prior to the Closing Date
Schedule 4.05 Litigation
Schedule 4.08 Subsidiaries
Schedule 4.14 Environmental Matters
Schedule 5.11 Existing Liens
Schedule 5.17 Description of Insurance
Schedule 5.25 Plants
</TABLE>
(vi)
<PAGE> 8
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 29,
1996 among AVONDALE MILLS, INC., the BANKS listed on the signature pages
hereof, WACHOVIA BANK OF GEORGIA, N.A., as Agent and THE FIRST NATIONAL BANK OF
CHICAGO, as Documentation Agent.
The Borrower has requested additional financing not available
under the Original Credit Agreement in order, among other things, to acquire
the Graniteville Assets, and the Banks are willing to provide such financing
pursuant to the terms and conditions set forth in this Agreement, which is an
amendment and restatement of, and which replaces, the Original Credit
Agreement.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this
Section 1.01 shall, for all purposes of this Agreement and any amendment hereto
(except as herein otherwise expressly provided or unless the context otherwise
requires), have the meanings set forth herein:
"Accounts Receivable Collateral" has the meaning set forth in
the Security Agreement.
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.05(c).
"Adjusted Working Capital" means the sum of (i) accounts
receivable, plus (ii) inventory, plus (iii) prepaid expenses, less (iv)
accounts payable, and less (v) accrued expenses.
"Affiliate" of any Person means (i) any Person that directly,
or indirectly through one or more intermediaries, controls such Person (a
"Controlling Person"), (ii) any other Person which is controlled by or is under
common control with such Person, or (iii) any other Person of which such Person
owns, directly or indirectly, 20% or more of the common stock or equivalent
equity interests. As used herein, the term "control" means possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person,
<PAGE> 9
whether through the ownership of voting securities, by contract or otherwise.
"Agent" means Wachovia Bank of Georgia, N.A., a national
banking association organized under the laws of the United States of America,
in its capacity as administrative and syndication agent for the Banks
hereunder, and its successors and permitted assigns in such capacity.
"Agents' Letter Agreements" means those certain letter
agreements, each dated as of March 11, 1996, (i) between the Borrower, the
Agent and the Documentation Agent, (ii) between the Borrower and the Agent and
(iii) between the Borrower and the Documentation Agent, respectively, relating
to certain fees from time to time payable by the Borrower to the Agent and the
Documentation Agent, respectively, together with all amendments and
modifications to any of them.
"Aggregate Commitment" means the sum of all the Commitments.
"Aggregate Unused Commitment" means the sum of all the Unused
Commitments.
"Agreement" means this Amended and Restated Credit Agreement
(which amends, restates and replaces the Original Credit Agreement), together
with all amendments and supplements hereto.
"Anniversary Date" means the last day of each 12 month period,
commencing on the Closing Date.
"Applicable Margin" has the meaning set forth in Section
2.05(a).
"Assignee" has the meaning set forth in Section 9.08(c).
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 9.08(c) in the form attached hereto as
Exhibit D.
"Authority" has the meaning set forth in Section 8.02.
"Bank" means each bank listed on the signature pages hereof as
having a Commitment, and its successors and assigns.
"Base Rate" means for any Base Rate Loan for any day, the rate
per annum equal to the higher as of such day of (i) the Prime Rate, and (ii)
one-half of one percent above the Federal Funds Rate. For purposes of
determining the Base Rate for any
2
<PAGE> 10
day, changes in the Prime Rate shall be effective on the date of each such
change.
"Base Rate Loan" means a Loan which bears or is to bear
interest at a rate based upon the Base Rate.
"Bill and Hold" means an arrangement in which the Borrower or
its Subsidiary, at the request of one of its customers contained in a written
purchase order and/or similar writing, invoices the customer for goods but
retains possession of such goods for a period of time; provided, that all of
the following requirements are satisfied:
(a) title to, and the risk of loss of, the goods is
transferred to the customer, and the Borrower's or Subsidiary's
inventory records are marked to indicate that title has passed;
(b) the Borrower's or Subsidiary's records are adequate to
enable the Borrower or Subsidiary or a third-party to identify the
goods subject to such arrangement as separate from the Borrower's or
Subsidiary's own inventory at any time; and
(c) the related invoice is payable on the normal due date for
similar Receivables of the Borrower or Subsidiary that do not arise
from a Bill and Hold arrangement.
"Borrower" means Avondale Mills, Inc., an Alabama corporation,
and its successors and its permitted assigns.
"Borrower Pledge Agreement" means a Stock Pledge Agreement, in
substantially the form of Exhibit N, to be executed by the Borrower in favor of
the Agent, for the benefit of the Banks, pledging all of the Receivables
Subsidiary Pledged Stock to secure the payment of all of the Obligations,
pursuant to the provisions of Section 9.18.
"Borrowing" means a borrowing hereunder consisting of Revolver
Loans or Swing Loans. A Borrowing is a "Domestic Borrowing" if such Loans are
Domestic Loans or a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar
Loans. A Domestic Borrowing is a "Set Rate Borrowing" if such Domestic Loans
are Set Rate Loans or a "Base Rate Borrowing" if such Domestic Loans are Base
Rate Loans.
"Capital Expenditures" means for any period the sum of all
capital expenditures incurred during such period by the Parent and its
Consolidated Subsidiaries, as determined in accordance with GAAP, but in any
event including expenditures for assets acquired under Capitalized Leases.
3
<PAGE> 11
"Capital Stock" means any nonredeemable capital stock of the
Parent or any Consolidated Subsidiary (to the extent issued to a Person other
than the Parent), whether common or preferred.
"Capitalized Lease" means any lease which is required to be
capitalized on a consolidated balance sheet of the lessee and its subsidiaries
in accordance with GAAP.
"Capitalized Rentals" of any Person means as of the date of
any determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person in accordance with GAAP.
"Cash Flow" means Consolidated Net Income, plus (i) Net
Interest Expense (including interest on the Subordinated Debt), plus (ii)
income taxes, plus (iii) depreciation, plus (iv) amortization, and (v) plus or
minus, as the case may be, LIFO Adjustments.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. and its
implementing regulations and amendments.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Inventory System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section
8.02.
"Closing Certificate" has the meaning set forth in Section
3.01(j).
"Closing Date" means April 29, 1996.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor Federal tax code.
"Collateral" means (i) the personal property in which the
Agent is granted a security interest pursuant to the Security Agreement, (ii)
the Plants conveyed to the Agent pursuant to the Operative Mortgages, and (iii)
the Pledged Stock pledged to the Agent pursuant to the Pledge Agreement;
provided, however, that from and after the release of the Receivables Program
Assets pursuant to Section 9.18, all references to Collateral shall exclude the
Receivables Program Assets, but shall include the Receivables Subsidiary
Pledged Stock and the Purchase Money Note.
4
<PAGE> 12
"Commitment" means, with respect to each Bank, the amount set
forth opposite the name of such Bank on the signature pages hereof, as such
amount may be reduced from time to time pursuant to Sections 2.07 and 2.08.
"Compliance Certificate" has the meaning set forth in Section
5.01(c).
"Consolidated Adjusted Tangible Net Worth" means, at any time,
Stockholders' Equity, less the sum of the value, as set forth or reflected on
the most recent consolidated balance sheet of the Parent and its Consolidated
Subsidiaries, prepared in accordance with GAAP, of any of the following, but
only to the extent created, incurred or arising on or after the Closing Date
(except as specified in clause (A) below):
(A) Any surplus resulting from any write-up of
assets subsequent to August 25, 1995, other than in connection with the
acquisition of the Graniteville Assets;
(B) All assets which would be treated as
intangible assets for balance sheet presentation purposes under GAAP, including
without limitation goodwill (whether representing the excess of cost over book
value of assets acquired, or otherwise), trademarks, tradenames, copyrights,
patents and technologies, and unamortized debt discount and expense, other than
capitalized transaction costs incurred in connection with the acquisition of
the Graniteville Assets; and
(C) To the extent not included in (B) of this
definition, any amount at which shares of Capital Stock of the Parent appear as
an asset on the balance sheet of the Parent and its Consolidated Subsidiaries.
"Consolidated Cash Flow" means for any period, the Cash Flow
of the Parent and its Consolidated Subsidiaries, determined on a consolidated
basis in accordance with GAAP, and calculated for the Fiscal Quarter just ended
and the immediately preceding 3 Fiscal Quarters. For purposes of the
foregoing, Consolidated Cash Flow shall be computed by giving effect on a pro
forma basis to the acquisition of the Graniteville Assets for the Fiscal
Quarter in which the Graniteville Assets are acquired and for the immediately
preceding 3 Fiscal Quarters, such Cash Flow for (i) the third preceding Fiscal
Quarter being $8,746,000, (ii) the second preceding Fiscal Quarter being
$9,014,000, and the immediately preceding Fiscal Quarter being $8,761,000.
"Consolidated Funded Debt" means, on any date of measurement,
the Funded Debt of the Parent and its Consolidated Subsidiaries, determined on
a consolidated basis in accordance with GAAP.
5
<PAGE> 13
"Consolidated Net Income" means, for any period, the Net
Income of the Parent and its Consolidated Subsidiaries determined on a
consolidated basis, but excluding (i) extraordinary items and (ii) any equity
interests of the Parent or any Subsidiary in the unremitted earnings of any
Person that is not a Subsidiary. For purposes of clause (i), extraordinary
items shall include termination and severance payments to employees, and costs
and expenses incurred or accrued in connection with the closing of facilities,
relating to or as a result of the acquisition of the Graniteville Assets, but,
as to cash items, only to the extent of such cash items which are paid or
incurred prior to the end of the first Fiscal Quarter of the 1997 Fiscal Year
and in an aggregate amount not exceeding $5,000,000.
"Consolidated Senior Debt" means Consolidated Total Debt,
excluding, however, the Subordinated Debt.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which, in accordance with GAAP, would be
consolidated with those of the Parent in its consolidated financial statements
as of such date.
"Consolidated Total Capitalization" shall mean as of the date
of any determination thereof, the sum of (a) Consolidated Adjusted Tangible Net
Worth and (b) Consolidated Total Debt.
"Consolidated Total Debt" means at any date the Debt of the
Parent and its Consolidated Subsidiaries, determined on a consolidated basis as
of such date.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Parent, are treated as a single
employer under Section 414 of the Code.
"Current Maturities of Long Term Debt" means all payments in
respect of Long Term Debt (other than the Working Capital Obligations) that are
required to be made within one year from the date of determination, whether or
not the obligation to make such payments would constitute a current liability
of the obligor under GAAP.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in
6
<PAGE> 14
the ordinary course of business, (iv) all obligations of such Person as lessee
under Capitalized Leases, (v) all obligations of such Person to reimburse any
bank or other Person in respect of amounts payable under a banker's
acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event
such Person is a corporation), (vii) all obligations of such Person to
reimburse any bank or other Person in respect of amounts paid or to be paid
under a letter of credit or similar instrument, (viii) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person, (ix) all Debt of others Guaranteed by such Person and
(x) all principal amounts outstanding and owed to parties other than the
Borrower or any Subsidiary under the items described in clause (a) of the
definition of Receivables Program Obligations.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day,
the sum of (i) 2% plus (ii) the interest rate (including the Applicable Margin)
then in effect for such Loan; provided, however, that for any Fixed Rate Loan
the rate under this clause (ii) shall not be less than the rate for Base Rate
Loans after the end of the Interest Period applicable thereto.
"Dividends" means any dividend or other distribution paid in
respect of any Capital Stock and Redeemable Preferred Stock (other than
dividends paid or payable in the form of additional Capital Stock or Redeemable
Preferred Stock).
"Documentation Agent" means The First National Bank of
Chicago, a national banking association organized under the laws of the United
States of America, in its capacity as documentation agent, and its successors
and permitted assigns in such capacity.
"Dollars" or "$" means dollars in lawful currency of the
United States of America.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in Georgia are authorized by law
to close.
"Domestic Loans" means Set Rate Loans or Base Rate Loans or
both, as the context shall require.
"Employee Restricted Stock" means the 231,811 shares of Class
A common stock of the Parent held by certain officers of the Parent and/or the
Borrower and subject to the terms of
7
<PAGE> 15
certain stock transfer and repurchase agreements with such officers.
"Environmental Authority" means any foreign, federal, state,
local or regional government that exercises any form of jurisdiction or
authority under any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits,
orders, approvals, notices, registrations or other legal prerequisites for
conducting the business of the Borrower or any Subsidiary required by any
Environmental Requirement.
"Environmental Judgments and Orders" means all judgments,
decrees or orders arising from or reasonably related to any Environmental
Requirements, whether or not entered upon consent, or written agreements with
an Environmental Authority or other entity arising from or reasonably related
to any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Liabilities" means any liabilities, whether
accrued, contingent or otherwise, arising from or reasonably related to any
Environmental Requirements.
"Environmental Notices" means written notice from any
Environmental Authority or by any other person or entity, of possible or
alleged noncompliance with or liability under any Environmental Requirement,
including without limitation any complaints, citations, written demands or
requests from any Environmental Authority or from any other person or entity
for correction of any violation of any Environmental Requirement or any
investigations concerning any violation of any Environmental Requirement.
"Environmental Proceedings" means any judicial or
administrative proceedings arising from or reasonably related to any
Environmental Requirement.
"Environmental Releases" means releases as defined in CERCLA
or under any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement
relating to health, safety or the environment and applicable to the Parent, any
Subsidiary or the Properties, including but not limited to any such requirement
under CERCLA or similar state legislation and all federal, state and local
laws, ordinances, regulations, orders, writs and decrees.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor law.
8
<PAGE> 16
Any reference to any provision of ERISA shall also be deemed to be a reference
to any successor provision or provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on
which dealings in Dollar deposits are carried out in the London interbank
market.
"Euro-Dollar Loan" means a Loan to be made as a Euro-Dollar
Loan pursuant to the applicable Notice of Borrowing.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.05(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Excluded Receivables Assets" has the meaning set forth in the
Receivables Intercreditor Agreement.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if the day for which
such rate is to be determined is not a Domestic Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Domestic Business Day as so published on the next succeeding Domestic Business
Day, and (ii) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Agent on such day on
such transactions, as determined by the Agent.
"First Chicago" means The First National Bank of Chicago, a
national banking association, and its successors.
"Fiscal Quarter" means any fiscal quarter of the Parent.
"Fiscal Year" means any fiscal year of the Parent. Any
reference to Fiscal Year together with a specific year (e.g. "1996 Fiscal
Year") refers to the Fiscal Year ending on the last Friday of August in such
specific year.
"Fixed Charge Coverage Ratio" means, on a consolidated basis
for the Parent and its Consolidated Subsidiaries, the ratio of (i) Consolidated
Cash Flow, less Dividends paid, for the Fiscal Quarter just ended and the
immediately preceding 3 Fiscal Quarters, to (ii) the sum of Net Interest
Expense for the Fiscal
9
<PAGE> 17
Quarter just ended and the immediately preceding 3 Fiscal Quarters and Current
Maturities of Long Term Debt, calculated at the end of the Fiscal Quarter just
ended; provided, however, that to the extent 4 Fiscal Quarters have not ended
after the Closing Date, the calculation of Net Interest Expense shall include
only Fiscal Quarters ending after the Closing Date (and for the Fiscal Quarter
in which the Closing Date occurs, only that portion thereof on and after the
Closing Date), on an annualized basis.
"Fixed Rate Borrowing" means a Set Rate Borrowing or a
Euro-Dollar Borrowing, or both, as the context shall require.
"Fixed Rate Loans" means Set Rate Loans or Euro-Dollar Loans,
or both, as the context shall require.
"Funded Debt" of any Person shall mean all Debt of such Person
of the types described in clauses (i) through (vi), inclusive, and clause (x)
of the definition of Debt, regardless of the maturity thereof.
"GAAP" means generally accepted accounting principles applied
on a basis consistent with those which, in accordance with Section 1.02, are to
be used in making the calculations for purposes of determining compliance with
the terms of this Agreement.
"Graniteville Assets" means the assets to be acquired by the
Borrower from Graniteville Company pursuant to the Graniteville Asset Purchase
Agreement, which include all of the "Assets", but exclude all of the "Excluded
Assets", as those terms are defined therein.
"Graniteville Asset Purchase Agreement" means the Asset
Purchase Agreement dated March 31, 1996, as amended or supplemented from time
to time prior to the Closing Date, by and among the Borrower, as Purchaser, the
Parent, Graniteville Company, a South Carolina corporation, as Seller, and
Triarc Companies, Inc., a Delaware corporation.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to provide collateral security, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the
10
<PAGE> 18
obligee of such Debt or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part), provided
that the term Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid
or hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. Section 6901 et seq. and its implementing regulations and
amendments, or in any comparable state or local law or regulation, (b)
"hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or
in any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including, crude oil or any fraction thereof,
or (d) pesticides, as defined in the Federal Insecticide, Fungicide, and
Rodenticide Act of 1975, or in any comparable state or local law or regulation,
as each such Act, statute or regulation may be amended from time to time.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the first, second, third or sixth month
thereafter, as the Borrower may elect in the applicable Notice of Borrowing;
provided that:
(a) any Interest Period (subject to paragraph (c) below)
which would otherwise end on a day which is not a Euro-Dollar Business
Day shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the appropriate
subsequent calendar month) shall, subject to paragraph (c) below, end
on the last Euro-Dollar Business Day of the appropriate subsequent
calendar month; and
(c) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
(2) with respect to each Set Rate Borrowing, any period mutually agreeable to
the Borrower and all of the Banks which ends on or prior to the Termination
Date.
"Interest Rate Protection Agreement" means an interest rate
hedging or protection agreement entered into by and between
11
<PAGE> 19
the Borrower and either (i) a financial institution other than a Bank, which is
reasonably acceptable to the Agent, or (ii) a Bank, together with all exhibits,
schedules, extensions, renewals, amendments, substitutions and replacements
thereto and thereof, as contemplated in Section 5.08.
"Investment" means any investment in any Person, whether by
means of purchase or acquisition of obligations, securities or a substantial
part of the assets of such Person, capital contribution to such Person, loan or
advance to such Person, making of a time deposit with such Person, Guarantee or
assumption of any obligation of such Person or otherwise.
"Knowledge" means, with reference to any Person, the knowledge
of such Person after due inquiry.
"Lending Office" means, as to each Bank, its office located at
its address set forth on the signature pages hereof (or identified on the
signature pages hereof as its Lending Office or such other office as such Bank
may hereafter designate as its Lending Office) by notice to the Borrower and
the Agent.
"Lien" means, with respect to any asset, any mortgage, deed to
secure debt, deed of trust, lien, pledge, charge, security interest, security
title, preferential arrangement which has the practical effect of constituting
a security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For
the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"LIFO Adjustments" means adjustments to cost of goods sold
attributable to adjusting the carrying value of inventory under the last-in,
first-out method of accounting.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Swing
Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Swing Loans, or
any or all of them, as the context shall require.
"Loan Documents" means this Agreement, the Notes, the Security
Agreement, the Mortgages, any other document evidencing, relating to or
securing the Loans (including, without limitation, the Borrower Pledge
Agreement, when executed and delivered pursuant to Section 9.18), and any other
document or instrument
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delivered from time to time in connection with this Agreement, the Notes or the
Loans, as such documents and instruments may be amended or supplemented from
time to time.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.05(c).
"Long Term Debt" means at any date any Consolidated Total Debt
which matures (or the maturity of which may at the option of the Parent or any
Consolidated Subsidiary be extended such that it matures) more than one year
after such date.
"Margin Stock" means "margin stock" as defined in Regulations G, T, U or X.
"Material Adverse Effect" means, with respect to any event,
act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or not
related, a material adverse change in, or a material adverse effect upon, any
of (a) the financial condition, operations or properties of the Parent and its
Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the
Agent or the Banks under the Principal Documents or the Parent Documents, or
the ability of the Borrower to perform its obligations under the Principal
Documents to which it is a party or the Parent to perform its obligations under
the Parent Documents, as applicable, or (c) the legality, validity or
enforceability of the Parent Documents or any Principal Document.
"Material Subsidiary" means any Subsidiary which has, on the
date of determination, assets with a book value of $500,000 or more or which
has gross revenues in any year of $1,000,000 or more.
"Mortgage" means any one, or more, or all, as the context
shall require, of the Master Mortgage, Deed of Trust, Leasehold Deed of Trust,
Deed to Secure Debt, Leasehold Deed to Secure Debt, Uniform Commercial Code
Security Agreement and Assignment of Leases, Rents and Profits of the Borrower
substantially in the form of Exhibit H, conveying a first priority (except for
the SunTrust Collateral Plants, which shall be second priority) security title
to and Lien on the Plant or Plants described therein (or, with respect to the
Bon Air and Walton Plants, in the Borrower's leasehold interests therein and
option to acquire fee title thereto) to the Agent, for the benefit of the
Banks, subject only to the Permitted Encumbrances applicable thereto, as
security for payment of the Obligations, together with all amendments and
supplements thereto.
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"MPPAA" means the Multiemployer Pension Plan Amendments Act of
1980, amending Title IV of ERISA.
"Multiemployer Plan" shall have the meaning set forth in
Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean, in each case as set forth in a
statement in reasonable detail delivered to the Agent, with respect to the
disposition of assets (including pursuant to the Receivables Securitization
Program) by the Parent or any of its Subsidiaries (other than the Receivables
Subsidiary), the excess, if any, of (i) the cash received in connection with
such disposition over (ii) the sum of (A) the principal amount of any Debt
(other than the Obligations) which is secured by such asset and which is
required to be repaid in connection with the disposition thereof, plus (B) the
reasonable out-of-pocket expenses incurred by the Parent or such Subsidiary, as
the case may be, in connection with such disposition, plus (C) provision for
taxes, including income taxes, attributable to the disposition of such asset.
"Net Income" means, as applied to any Person for any period,
the aggregate amount of net income of such Person, after taxes, for such
period, as determined in accordance with GAAP.
"Net Interest Expense" means, for any period, interest expense
(including capitalized interest, to the extent capitalized interest exceeds
$50,000 in any Fiscal Year, including interest, yield, discount or similar
amounts paid under the Receivables Securitization Program) in respect of Debt,
less interest income.
"Notes" means the Revolver Loan Notes or the Swing Loan Note,
or any one, or more, or all of them, as the context shall require, together
with all amendments, consolidations, modifications, renewals, and supplements
thereto.
"Notice of Borrowing" has the meaning set forth in Section
2.02.
"Obligations" means all indebtedness, liabilities and
obligations of the Borrower (i) to the Agent and the Banks incurred or arising
from time to time under this Agreement and each of the Principal Documents,
including principal, interest, fees, costs and indemnification amounts, and any
extensions or renewals thereof in whole or in part, (ii) to any Bank or
Affiliate thereof under any Interest Rate Protection Agreement with any such
Bank, limited, however, as to this clause (ii), to a maximum aggregate
principal amount of $10,000,000 (prorated among all Interest Rate Protection
Agreements, if there are more
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<PAGE> 22
than one, based on the actual (as distinguished from notional) liability
thereunder) and
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<PAGE> 23
(iii) as to Wachovia, arising out of (including reimbursement obligations) any
commercial or standby letter of credit issued by it for the account of the
Borrower, limited, however, as to this clause (iii), to a maximum aggregate
amount outstanding at any time of $2,000,000.
"Operative Mortgages" means each Mortgage which the Agent has
filed for record in the appropriate filing office pursuant to the provisions of
Section 5.25.
"Original Credit Agreement" means the Credit Agreement dated
March 29, 1994, as amended prior to the Closing Date, by and among the
Borrower, Wachovia (as Agent and Bank), NBD Bank, N.A., First Alabama Bank,
First Union National Bank of Georgia, The First National Bank of Chicago and
NationsBank of North Carolina, N.A.
"Parent" means Avondale Incorporated, a Georgia corporation,
and its successors and permitted assigns.
"Parent Documents" means the Parent Guaranty and the Pledge
Agreement, or either of them, as the context shall require.
"Parent Guaranty" means the Amended and Restated Guaranty
Agreement dated as of even date herewith, substantially in the form of Exhibit
I, executed by the Parent in favor of the Agent, for the benefit of the Banks,
unconditionally Guaranteeing the payment of all of the Obligations.
"Participant" has the meaning set forth in Section 9.08(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Performance Pricing Determination Date" has the meaning set
forth in Section 2.05(a).
"Permitted Encumbrances" means, (i) as to the Collateral
described in the Security Agreement, the encumbrances expressly permitted by
the Security Agreement, and (ii) as to each Plant, the encumbrances expressly
permitted by the Mortgage with respect to such Plant.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an unincorporated association, a trust or any
other entity or organization, including, but not limited to, a government or
political subdivision or an agency or instrumentality thereof.
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<PAGE> 24
"Plan" means at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by a
member of the Controlled Group for employees of any member of the Controlled
Group or (ii) maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an obligation
to make contributions or has within the preceding 5 plan years made
contributions.
"Plants" means any one, or more, or all, as the context shall
require, of the Plants described in Schedule 5.25, as it may be supplemented
from time to time pursuant to Section 5.25, including as to each such Plant the
Property on which it is located and the buildings, fixtures and other
improvements located thereon.
"Pledge Agreement" means the Amended and Restated Stock Pledge
Agreement dated as of even date herewith, substantially in the form of Exhibit
L, executed by the Parent in favor of the Agent, for the benefit of the Banks,
pledging the Pledged Stock to secure the payment of all of the Obligations.
"Pledged Stock" means the capital stock in the Borrower owned
by the Parent and described in and pledged pursuant to the Pledge Agreement.
"Prime Rate" refers to that interest rate so denominated and
set by Wachovia from time to time as an interest rate basis for borrowings.
The Prime Rate is but one of several interest rate bases used by Wachovia.
Wachovia lends at interest rates above and below the Prime Rate.
"Principal Documents" means this Agreement, the Notes, and,
the Security Agreement and the Operative Mortgages, and, when executed and
delivered pursuant to Section 9.18, the Borrower Pledge Agreement.
"Properties" means all real property owned, leased or
otherwise used or occupied by the Borrower or any Subsidiary, wherever located.
"Purchase Money Note" means a promissory note evidencing the
obligation of the Receivables Subsidiary to pay to the Borrower or any of its
Subsidiaries the purchase price for Receivables in connection with the
Receivables Securitization Program, which note shall be repaid from cash
available to the Receivables Subsidiary, other than cash required to be held as
reserves pursuant to Receivables Documents, amounts paid in respect of
interest, principal and other amounts owing under
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Receivables Documents and amounts paid in connection with the purchase of
additional Receivables.
"Real Property Documentation" shall mean the instruments,
documents and agreements executed and/or delivered by Borrower to the Agent (if
applicable) pursuant to Section 5.25 in connection with each Operative Mortgage
in order to convey to the Agent (or a trustee for the benefit of the Agent with
respect to property in North Carolina) for the benefit of the Banks a first
priority (except for the SunTrust Collateral Plants, which shall be second
priority) security interest in, lien on and security title (subject to
Permitted Encumbrances) to the right, title and interest of Borrower in the
Plant or Plants described therein, and other rights ancillary thereto, all in
form and substance reasonably satisfactory to the Agent, after consultation
with the Borrower. The Real Property Documentation may include, without
limitation, the following as to each Plant and the Property on which it is
located:
(i) an owner's/lessee's affidavit for each parcel
or tract of such Property;
(ii) mortgagee title insurance binders and
policies for each tract or parcel of such
Property;
(iii) such consents, acknowledgments, intercreditor or
attornment and subordination agreements as the Agent
may require from any Third Parties with respect to
any portion of such Property;
(iv) a current survey of each parcel or tract of
such Property;
(v) a certificate as to the insurance required by
the related Mortgage, to the extent not
furnished pursuant to Section 5.17;
(vi) a report of a licensed engineer detailing an
environmental inspection of such Property;
(vii) an indemnification agreement regarding hazardous
materials for such Property;
(viii) an appraisal of such Property, prepared by an
appraiser satisfactory to the Agent and engaged by
and on behalf of the Agent and the Banks; and
(ix) any revenue ruling or similar assurance from
the department or revenue or taxation
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requested by the Agent with respect to any
stamp, intangible or other taxes payable in connection
with the filing for record of any of the Mortgages.
"Receivables" means all rights of the Borrower or its
Subsidiary to payment, whether constituting an account, chattel paper,
instrument, general intangible or otherwise, arising from the sale of goods or
services (including rights under Bill and Hold arrangements) by the Borrower or
its Subsidiary (and including the right to payment of any interest or finance
charges and other obligations with respect thereto).
"Receivables Documents" means (x) a receivables purchase
agreement, pooling and servicing agreement, credit agreement, agreements to
acquire undivided interests or other agreement to transfer, or create a
security interest in, Receivables Program Assets, in each case as amended,
modified, supplemented or restated and in effect from time to time entered into
by the Borrower and/or its Subsidiaries (including the Receivables Subsidiary),
and (y) each other instrument, agreement and other document entered into by the
Borrower or its Subsidiaries (including the Receivables Subsidiary) relating to
the transactions contemplated by the items referred to in clause (x) above, in
each case as amended, modified, supplemented or restated and in effect from
time to time.
"Receivables Intercreditor Agreement" means the Intercreditor
Agreement, substantially in the form of Exhibit M, between the Agent and the
trustee under the Receivables Securitization Program.
"Receivables Program Assets" means (a) all Receivables which
are described as being transferred by the Borrower or its Subsidiaries
(including the Receivables Subsidiary) pursuant to the Receivables Documents;
provided, however, that the term "Receivables" shall not include any Excluded
Receivables Assets, (b) all Receivables Related Assets, and (c) all collections
(including recoveries) and other proceeds of the assets described in the
foregoing clauses (a) and (b).
"Receivables Program Obligations" means (a) notes, trust
certificates, undivided interests, partnership interests or other interests
representing the right to be paid a specified principal amount from the
Receivables Program Assets, and (b) related obligations of the Borrower and/or
its Subsidiaries (including, without limitation, rights in respect of interest
or yield, breach of warranty claims and expense reimbursement and indemnity
provisions) and other Standard Securitization Undertakings.
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"Receivables Related Assets" means (i) any rights arising
under the documentation governing or relating to Receivables (including rights
in respect of liens securing such Receivables and other credit support in
respect of such Receivables), (ii) any proceeds of such Receivables and any
lockboxes or accounts in which such proceeds are deposited, (iii) spread
accounts and other similar accounts (and any amount on deposit therein)
established in connection with the Receivables Securitization Program, (iv) any
warranty, indemnity, dilution and other intercompany claim arising out of
Receivables Documents and (v) all other property included in the definition of
"Specified Assets" contained in the Receivables Intercreditor Agreement;
provided, however, that the term "Receivables Related Assets" shall not include
any Excluded Receivables Assets.
"Receivables Securitization Program" means any transaction or
series of transactions that may be entered into by the Borrower and its
Subsidiaries pursuant to which the Borrower and/or its Subsidiaries may sell,
convey or otherwise transfer to the Receivables Subsidiary and (in the case of
a transfer by the Receivables Subsidiary) any other Person, or may grant a
security interest in, any Receivables Program Assets (whether now existing or
arising in the future); provided that:
(a) no portion of the indebtedness or any other
obligations (contingent or otherwise) of a Receivables Subsidiary or Special
Purpose Vehicle (i) is guaranteed by the Borrower or its Subsidiaries (other
than the Receivables Subsidiary and excluding guarantees of obligations
pursuant to Standard Securitization Undertakings), (ii) is recourse to or
obligates the Borrower or its Subsidiaries (other than the Receivables
Subsidiary) for payment other than pursuant to Standard Securitization
Undertakings or (iii) subjects any property or asset of the Borrower or its
Subsidiaries (other than the Receivables Subsidiary), directly or indirectly,
contingently or otherwise, to the satisfaction of obligations incurred in such
transactions, other than pursuant to Standard Securitization Undertakings,
(b) the Borrower and its Subsidiaries (other than
the Receivables Subsidiary) do not have any obligation to maintain or preserve
the financial condition of a Receivables Subsidiary or a Special Purpose
Vehicle or cause such entity to achieve certain levels of operating results;
(c) the proceeds of the initial transfer or grant
of a security interest thereunder are not less than $100,000,000, and
(d) the scheduled maturity of any Receivables
Program Obligations of the type described in clause (a) of the
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definition of "Receivables Program Obligations" is no earlier than May 1, 2001.
"Receivables Subsidiary" means a special purpose corporation
that is a Wholly Owned Subsidiary of the Borrower, created for the sole purpose
of, and whose only business shall be, acquisition of the Receivables Program
Assets pursuant to the Receivables Securitization Program and those activities
incidental to the Receivables Securitization Program.
"Receivables Subsidiary Pledged Stock" means the capital stock
in the Receivables Subsidiary owned by the Borrower and described in and
pledged pursuant to the Borrower Pledge Agreement, when it is executed and
delivered pursuant to Section 9.18.
"Redeemable Preferred Stock" of any Person means any preferred
stock issued by such Person which is either (i) mandatorily redeemable (by
sinking fund or similar payments or otherwise) or (ii) redeemable at the option
of the holder thereof.
"Refunding Loan" means a new Loan made on the day on which an
outstanding Loan is maturing or a Base Rate Borrowing is being converted to a
Fixed Rate Borrowing, if and to the extent that the proceeds thereof are used
entirely for the purpose of paying such maturing Loan or Loan being converted,
excluding any difference between the amount of such maturing Loan or Loan being
converted and any greater amount being borrowed on such day and actually either
being made available to the Borrower pursuant to Section 2.02(c) or remitted to
the Agent as provided in Section 2.11, in each case as contemplated in Section
2.02(d).
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation G" means Regulation G of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time
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to time, together with all official rulings and interpretations issued
thereunder.
"Regulation X" means Regulation X of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Reported Net Income" means, for any period, the Net Income of
the Parent and its Consolidated Subsidiaries determined on a consolidated
basis.
"Required Banks" means at any time Banks having at least 66
2/3% of the aggregate amount of the Commitments or, if the Commitments are no
longer in effect, Banks holding at least 66 2/3% of the aggregate outstanding
principal amount of the Revolver Loan Notes.
"Restricted Payment" means (i) any Dividends paid by the
Parent and (ii) any payment on account of the purchase, redemption, retirement
or acquisition of (a) any Capital Stock (except shares acquired upon the
conversion thereof into other shares of Capital Stock) or (b) any option,
warrant or other right to acquire shares of Capital Stock, other than (i) up to
$5,000,000 in payments with respect to the Employee Restricted Stock and (ii)
any payments made in respect of shares of Capital Stock of the Parent owned by
G. Stephen Felker pursuant to an existing repurchase arrangement, to the extent
such payments are made from the proceeds of insurance on his life.
"Restricted Payment Carryover Amount" means, for any Fiscal
Year, on a cumulative basis, the difference (if any) between (a) the maximum
aggregate amount which could have been made as permitted Restricted Payments
under clause (ii) of Section 5.07 for all prior Fiscal Years if Restricted
Payments in such amount had been made during such Fiscal Years, and (b) any
lesser aggregate amount included in determining permitted Restricted Payments
actually made in accordance with Section 5.07 for all prior Fiscal Years.
"Revolver Collateral Plants" means all Plants other than the
SunTrust Collateral Plants.
"Revolver Loan" means a Loan made at the same time by the
Banks pursuant to Article II, which may be a Base Rate Loan, a Euro-Dollar Loan
or a Set Rate Loan, subject to the provisions of Article II.
"Revolver Loan Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A-1, evidencing the obligation of the
Borrower to repay the Revolver Loans,
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together with all amendments, consolidations, modifications, renewals, and
supplements thereto.
"Rolling Stock" means all tractors, trailers and other motor
vehicles of the Debtor, title to which is registered under the Alabama
Certificate of Title and Antitheft Act (Ala. Code 32-8-1, et seq.), which term
does not include any motor vehicles listed on Exhibit B to the Security
Agreement.
"Security Agreement" means the Amended and Restated Security
Agreement dated as of even date herewith, substantially in the form of Exhibit
J, granting to the Agent, for the benefit of the Banks, a first priority
(except as to the equipment located at the SunTrust Collateral Plants, which
shall be second priority) security interest in the personal property described
therein, subject only to the Permitted Encumbrances, together with all
amendments and supplements thereto.
"Senior Debt to Capitalization Ratio" means the ratio of
Consolidated Senior Debt to Consolidated Total Capitalization, calculated at
the end of each Fiscal Quarter.
"Senior Debt to Cash Flow Ratio" means the ratio of
Consolidated Senior Debt to Consolidated Cash Flow, calculated at the end of
each Fiscal Quarter.
"Set Rate" means a fixed rate per annum, for a specified
principal amount of the Revolver Loans and for a specified Interest Period, set
and established from time to time by the Borrower and the Banks pursuant to
Section 2.01(a)(ii).
"Set Rate Loan" means a Loan to be made as a Set Rate Loan
pursuant to Section 2.01(a)(ii).
"Set Rate Request" has the meaning set forth in Section
2.01(a)(ii).
"Special Purpose Vehicle" means a trust, partnership or other
special purpose Person established by the Borrower to implement the Receivables
Securitization Program.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Borrower or its
Subsidiaries (other than the Receivables Subsidiary) that are reasonably
customary in accounts receivable securitization transactions, as determined in
good faith by the Agent.
"Stockholders' Equity" means, at any time, the shareholders'
equity of the Parent and its Consolidated Subsidiaries, as set forth or
reflected on the most recent
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consolidated balance sheet of the Parent and its Consolidated Subsidiaries
prepared in accordance with GAAP, but excluding any Redeemable Preferred Stock
of the Parent or any of its Consolidated Subsidiaries. Shareholders' equity
generally would include, but not be limited to (i) the par or stated value of
all outstanding Capital Stock, (ii) capital surplus, (iii) retained earnings,
and (iv) various deductions such as (A) purchases of treasury stock, (B)
valuation allowances, (C) receivables due from an employee stock ownership
plan, (D) employee stock ownership plan debt guarantees, and (E) translation
adjustments for foreign currency transactions.
"Subordinated Debt" means (i) the 10.25% Subordinated Notes
and (ii) any other Debt, the payment of which has been expressly subordinated
to payment of the Obligations pursuant and subject to documents containing
terms and conditions reasonably satisfactory to the Agent and which has a
maturity no earlier than May 31, 2001.
"Subsidiary" means any corporation or other entity (other than
a Special Purpose Vehicle) of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by the Parent.
"SunTrust Collateral Plants" means the Plants so designated on
Schedule 5.25.
"SunTrust Intercreditor Agreement" means the Amended and
Restated Intercreditor Agreement dated as of even date herewith, substantially
in the form of Exhibit K, between SunTrust Bank, Atlanta (formerly Trust
Company Bank), the Agent and the Borrower, together with any amendments and
supplements thereto.
"Swing Loan" means a Loan made by Wachovia pursuant to Section
2.01(b), which must be a Base Rate Loan.
"Swing Loan Note" means the promissory note of the Borrower,
substantially in the form of Exhibit A-2, evidencing the obligation of the
Borrower to repay the Swing Loans, together with all amendments,
consolidations, modifications, renewals, and supplements thereto.
"10.25% Subordinated Notes" means the Senior Subordinated
Notes due 2006, issued by the Borrower on the Closing Date, as amended,
modified, renewed or supplemented from time to time, subject to the provisions
of Section 5.26.
"Termination Date" means April 28, 2001.
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"Third Parties" means all mortgagees, lessees, sublessees,
tenants, licensees and other users of the Properties, excluding those users of
the Properties in the ordinary course of the Borrower's business and on a
temporary basis.
"Total Debt to Cash Flow Ratio" means the ratio of
Consolidated Total Debt to Consolidated Cash Flow, calculated at the end of
each Fiscal Quarter.
"Transferor Certificate" means, (i) with respect to the
Receivables Securitization Program to be closed on the Closing Date, the
"Transferor Certificate" described in Section 4.1 of the Avondale Receivables
Master Trust Pooling and Servicing Agreement of even date herewith among the
Receivables Subsidiary, the Borrower and Manufacturers and Traders Trust
Company, as trustee, and (ii) as to any other Receivables Securitization
Program, any similar instrument evidencing the interest of the Receivables
Subsidiary in respect of the Receivables transferred in the Receivables
Securitization Program.
"Transferee" has the meaning set forth in Section 9.08(d).
"Unused Commitment" means at any date, with respect to any
Bank, an amount equal to its Commitment less the aggregate outstanding
principal amount of its Loans, other than, with respect to Wachovia, the Swing
Loan.
"Wachovia" means Wachovia Bank of Georgia, N.A., a national
banking association, and its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of the
shares of capital stock or other ownership interests of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
the Parent.
"Working Capital Obligations" means the aggregate principal
amount of Revolver Loans and Swing Loans outstanding at any time.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made,
and all financial statements required to be delivered hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent (except for
changes concurred in by the Parent's independent public accountants or
otherwise required by a change in GAAP) with the most recent audited
consolidated financial statements of the Parent and its Consolidated
Subsidiaries delivered to the Banks unless with respect to any such change
concurred in by the
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Parent's independent public accountants or required by GAAP, in determining
compliance with any of the provisions of this Agreement or any of the other
Loan Documents: (i) the Borrower shall have objected to determining such
compliance on such basis at the time of delivery of such financial statements,
or (ii) the Required Banks shall so object in writing within 30 days after the
delivery of such financial statements, in either of which events such
calculations shall be made on a basis consistent with those used in the
preparation of the latest financial statements as to which such objection shall
not have been made (which, if objection is made in respect of the first
financial statements delivered under Section 5.01 hereof, shall mean the
financial statements referred to in Section 4.04).
SECTION 1.03. References. Unless otherwise indicated,
references in this Agreement to "Articles", "Exhibits", "Schedules", "Sections"
and other subdivisions are references to articles, exhibits, schedules,
sections and other subdivisions hereof.
SECTION 1.04. Use of Defined Terms. All terms defined in this
Agreement shall have the same defined meanings when used in any of the other
Loan Documents, unless otherwise defined therein or unless the context shall
require otherwise.
SECTION 1.05. Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the
plural shall include the singular. Titles of Articles and Sections in this
Agreement are for convenience only, and neither limit nor amplify the
provisions of this Agreement.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) Revolver Loans. Each
Bank severally agrees, on the terms and conditions set forth herein, to make
Revolver Loans to the Borrower from time to time before the Termination Date;
provided that, immediately after each such Revolver Loan is made, (i) the
aggregate outstanding principal amount of Revolver Loans made by such Bank
shall not exceed the amount of its Commitment, and (ii) the Working Capital
Obligations shall not exceed the Aggregate Commitment.
(i) Base Rate Loans and Euro-Dollar Loans. Revolver Loans may
be Base Rate Loans or Euro-Dollar Loans. Each Revolver Loan Borrowing
under this Section 2.01(a)(i) shall be in an aggregate principal
amount of $5,000,000 or any
26
<PAGE> 34
larger multiple of $500,000 (except that any such Borrowing may be in
the amount of the Aggregate Unused Commitments) and shall be made from
the several Banks ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrower may borrow
under this Section 2.01(a)(i), repay or, to the extent permitted by
Section 2.09, prepay Revolver Loans and reborrow under this Section
2.01(a)(i) at any time before the Termination Date.
(ii) Set Rate Loans. Revolver Loans may be Set Rate Loans, if
the Agent shall have determined that such Set Rate Loan, including the
principal amount thereof, the Interest Period and the Set Rate
applicable thereto, has been expressly agreed to by the Borrower and
each of the Banks (such agreement may be obtained by telephone,
confirmed promptly to the Agent in writing) pursuant to the following
procedures. If the Borrower desires a Set Rate Loan, (aa) the
Borrower shall provide the Agent with notice of a request (a "Set Rate
Request") for a quote for a Set Rate Borrowing prior to 11:00 a.m.
(Atlanta, Georgia time) at least 1 Domestic Business Day prior to the
date (which shall be a Domestic Business Day) of the proposed Set Rate
Borrowing, which Set Rate Request shall include the principal amount
and proposed Interest Period of the relevant Set Rate Borrowing, (bb)
the Agent shall exercise commercially reasonable efforts to provide
notice (a "Set Rate Notice") to the Banks, prior to 2:30 p.m.
(Atlanta, Georgia time) on the date that the Agent receives such
notice of the Set Rate Request, (cc) prior to 10:00 a.m. (Atlanta,
Georgia time) on the following Domestic Business Day, each of the
Banks shall apprise the Agent of its respective rate quote (a "Set
Rate Quote") via facsimile transmission, (dd) the Agent shall review
each of the Set Rate Quotes and shall determine the highest rate
contained in the Set Rate Quotes (including, without limitation, any
Set Rate Quote provided by Wachovia acting in its capacity as a Bank)
which shall be the applicable Set Rate for the relevant Set Rate
Request, (ee) the Agent shall exercise commercially reasonable efforts
to notify the Borrower of the applicable Set Rate prior to 11:00 a.m.
(Atlanta, Georgia time) on the date of such determination of the Set
Rate, (ff) the Borrower shall immediately inform the Agent of its
decision as to whether to request a Set Rate Borrowing at such Set
Rate (which may be done by telephone and promptly confirmed in
writing), (gg) if the Borrower does desire a Set Rate Borrowing at
such Set Rate, then the Agent shall notify the Banks thereof (via
facsimile transmission) by 12:00 p.m. (Atlanta, Georgia time) on the
date of such decision, including their respective ratable shares
(based upon their respective Commitments) of such Set Rate Borrowing.
On the date of any relevant Set Rate
27
<PAGE> 35
Borrowing, the Banks shall make their ratable shares of such Set Rate
Borrowing, with interest accruing thereon at the Set Rate, available
to the Agent in accordance with the procedures set forth herein. Each
such selection shall be irrevocable and must be made by the time
specified above by telephonic notice (confirmed promptly by written
notice) to the Agent, which notice shall specify the Set Rate and the
Interest Period selected (which Interest Period shall be the same as
that set forth in the Set Rate Request), and the portion of the
Revolver Loans with respect to which such selection is made (which
shall be the same as that set forth in the Set Rate Request).
(b) Swing Loans. In addition to the foregoing, Wachovia shall from
time to time, upon the request of the Borrower, if the applicable conditions
precedent in Article III have been satisfied, make Swing Loans to the Borrower
in an aggregate principal amount at any time outstanding not exceeding
$5,000,000; provided that, immediately after such Swing Loan is made, the
Working Capital Obligations shall not exceed the Aggregate Commitment. Each
Swing Loan Borrowing under this Section 2.01(b) shall be in an aggregate
principal amount of $100,000 or any larger multiple of $25,000. Within the
foregoing limits, the Borrower may borrow under this Section 2.01(b), prepay
and reborrow under this Section 2.01(b) at any time before the Termination
Date. Swing Loans shall be included in the calculation of "Working Capital
Obligations" hereunder, but shall not be considered a utilization of the
Commitment of Wachovia or any other Bank hereunder. All Swing Loans shall be
made as Base Rate Loans. At any time, upon the request of Wachovia, each Bank
other than Wachovia shall, on the third Domestic Business Day after such
request is made, purchase a participating interest in Swing Loans in an amount
equal to its ratable share (based upon its respective Commitment) of such Swing
Loans. On such third Domestic Business Day, each Bank will immediately
transfer to Wachovia, in immediately available funds, the amount of its
participation. Whenever, at any time after Wachovia has received from any such
Bank its participating interest in a Swing Loan, the Agent receives any payment
on account thereof, the Agent will distribute to such Bank its participating
interest in such amount (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Bank's participating
interest was outstanding and funded); provided, however, that in the event that
such payment received by the Agent is required to be returned, such Bank will
return to the Agent any portion thereof previously distributed by the Agent to
it. Each Bank's obligation to purchase such participating interests shall be
absolute and unconditional and shall not be affected by any circumstance,
including, without limitation: (i) any set-off, counterclaim, recoupment,
defense or other right which such Bank or any other Person may have against
Wachovia requesting such
28
<PAGE> 36
purchase or any other Person for any reason whatsoever; (ii) the occurrence or
continuance of a Default or an Event of Default or the termination of the
Commitments; (iii) any adverse change in the condition (financial or otherwise)
of the Borrower, the Parent or any other Person; (iv) any breach of this
Agreement by the Borrower or any other Bank; or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
SECTION 2.02. Method of Borrowing. This Section 2.02 shall
apply to all Borrowings other than Set Rate Borrowings, as to which only
Section 2.02(c), together with the provisions of Section 2.01(a)(ii), shall
apply. (a) The Borrower shall give the Agent notice (a "Notice of Borrowing"),
which shall be substantially in the form of Exhibit E, prior to 11:00 a.m.
(Atlanta, Georgia time) on the Domestic Business Day of a Base Rate Borrowing
and at least 3 Euro-Dollar Business Days before each Euro-Dollar Borrowing,
specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether such Borrowing is to be a Swing Loan Borrowing
or a Revolver Loan Borrowing, and if the latter, whether it is to be a
Base Rate Borrowing or a Euro-Dollar Borrowing, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period; provided, that if an Anniversary
Date is scheduled to occur during the Interest Period so selected, and
as a result thereof (but for this proviso) the Borrower shall become
obligated to prepay or repay all or any portion of the Loans on such
Anniversary Date pursuant to Section 2.08(b), then a portion of such
Euro-Dollar Borrowing which is equal to the amount of the Loans that
would otherwise be so prepaid or repaid on any such Anniversary Date
either (A) shall have applicable thereto an Interest Period or
Interest Periods, as selected by the Borrower, ending on or before the
Anniversary Date on which Loans corresponding in amount to such
portion would otherwise be prepaid or repaid, or (B) shall instead be
made as a Base Rate Borrowing.
(b) Upon receipt of a Notice of Borrowing, the Agent
shall promptly notify each Bank of the contents thereof and of such Bank's
ratable share of such Borrowing (unless it is a Swing
29
<PAGE> 37
Loan Borrowing) and such Notice of Borrowing shall not thereafter be revocable
by the Borrower.
(c) Not later than 11:00 a.m. (2:00 p.m. in the case of a Base
Rate or Set Rate Borrowing) (Atlanta, Georgia time) on the date of each
Revolver Loan Borrowing, each Bank shall (except as provided in paragraph (d)
of this Section) make available its ratable share of such Revolver Loan
Borrowing, in Federal or other funds immediately available in Atlanta, Georgia,
to the Agent at its address referred to in Section 9.01. Unless the Agent
determines that any applicable condition specified in Article III has not been
satisfied, the Agent will make the funds so received from the Banks available
to the Borrower at the Agent's aforesaid address. Unless the Agent receives
notice from a Bank, at the Agent's address referred to in or specified pursuant
to Section 9.01, no later than 4:00 p.m. (local time at such address) on the
Domestic Business Day before the date of a Revolver Loan Borrowing stating that
such Bank will not make a Loan in connection with such Revolver Loan Borrowing,
the Agent shall be entitled to assume that such Bank will make a Loan in
connection with such Revolver Loan Borrowing and, in reliance on such
assumption, the Agent may (but shall not be obligated to) make available such
Bank's ratable share of such Revolver Loan Borrowing to the Borrower for the
account of such Bank. If the Agent makes such Bank's ratable share available
to the Borrower and such Bank does not in fact make its ratable share of such
Revolver Loan Borrowing available on such date, the Agent shall be entitled to
recover such Bank's ratable share from such Bank or the Borrower (and for such
purpose shall be entitled to charge such amount to any account of the Borrower
maintained with the Agent), together with interest thereon for each day during
the period from the date of such Revolver Loan Borrowing until such sum shall
be paid in full at a rate per annum equal to the rate at which the Agent
determines that it obtained (or could have obtained) overnight Federal funds to
cover such amount for each such day during such period, provided that any such
payment by the Borrower of such Bank's ratable share and interest thereon shall
be without prejudice to any rights that the Borrower may have against such
Bank. If the Agent does not exercise its option to advance funds for the
account of such Bank, it shall forthwith notify the Borrower of such decision.
Unless the Agent determines that any applicable condition specified in Article
III has not been satisfied, Wachovia will make available to the Borrower at
Wachovia's Lending Office the amount of any such Borrowing which is a Swing
Loan Borrowing.
(d) If any Bank makes a new Loan hereunder on a day on which
the Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment as a
Refunding Loan and only an amount equal to the difference (if any) between the
amount being
30
<PAGE> 38
borrowed and the amount of such Refunding Loan shall be made available by such
Bank to the Agent as provided in paragraph (c) of this Section, or remitted by
the Borrower to the Agent as provided in Section 2.11, as the case may be.
(e) Notwithstanding anything to the contrary contained in
this Agreement, no Fixed Rate Borrowing may be made if there shall have
occurred a Default or an Event of Default, which Default or Event of Default
shall not have been cured or waived.
(f) In the event that a Notice of Borrowing fails to specify
whether the Loans comprising such Borrowing are to be Base Rate Loans or
Euro-Dollar Loans, such Loans shall be made as Base Rate Loans. If the
Borrower is otherwise entitled under this Agreement to repay any Loans maturing
at the end of an Interest Period applicable thereto with the proceeds of a new
Borrowing, and the Borrower fails to repay such Loans using its own moneys and
fails to give a Notice of Borrowing in connection with such new Borrowing, a
new Borrowing shall be deemed to be made on the date such Loans mature in an
amount equal to the principal amount of the Loans so maturing, and the Loans
comprising such new Borrowing shall be Base Rate Loans.
(g) Notwithstanding anything to the contrary contained herein,
there shall not be more than 10 Fixed Rate Loans outstanding at any given time.
SECTION 2.03. Notes. (a) The Revolver Loans of each Bank
shall be evidenced by a single Revolver Loan Note payable to the order of such
Bank for the account of its Lending Office in an amount equal to the original
principal amount of such Bank's Commitment. The Swing Loans shall be evidenced
by a single Swing Loan Note payable to the order of Wachovia in the original
principal amount of $5,000,000.
(b) Upon receipt of each Bank's Revolver Loan Note pursuant to
Section 3.01, the Agent shall deliver such Note to such Bank. Each Bank (or
Wachovia, with respect to the Swing Loan Note) shall record, and prior to any
transfer of its Note shall endorse on the schedule forming a part thereof
appropriate notations to evidence the date, amount and maturity of each Loan
made by it, the date and amount of each payment of principal made by the
Borrower with respect thereto and, with respect to a Revolver Loan, whether
such Loan is a Base Rate Loan, Set Rate Loan or Euro-Dollar Loan, and such
schedule shall constitute rebuttable presumptive evidence of the principal
amount owing and unpaid on such Bank's (or Wachovia's) Note; provided that the
failure of any Bank (or Wachovia) to make any such recordation or endorsement
shall not affect the obligation of the Borrower hereunder or under the Notes or
the ability of any Bank (or Wachovia) to assign its Notes. Each Bank (and
Wachovia) is
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<PAGE> 39
hereby irrevocably authorized by the Borrower so to endorse its Notes and to
attach to and make a part of any Note a continuation of any such schedule as
and when required.
SECTION 2.04. Maturity of Loans. (a) Each Loan included in
any Fixed Rate Borrowing shall mature, and the principal amount thereof shall
be due and payable, on the last day of the Interest Period applicable to such
Borrowing.
(b) Notwithstanding the foregoing, the outstanding principal
amount of the Loans, if any, together with all accrued but unpaid interest
thereon, if any, shall be due and payable on the Termination Date.
SECTION 2.05. Interest Rates. (a) "Applicable Margin" means:
(i) for any Base Rate Loan, 0.00%; and (ii) for any Euro-Dollar Loan, (A) until
the first Performance Pricing Determination Date, 1.75%, and (B) thereafter,
with respect to each Performance Pricing Determination Date, the percentage
determined as of the end of the Fiscal Quarter or Fiscal Year just ended by
reference to the percentage shown in the following schedule, depending on the
Total Debt to Cash Flow Ratio as of the end of such Fiscal Quarter or Fiscal
Year, as determined pursuant hereto.
32
<PAGE> 40
<TABLE>
<CAPTION>
====================================================================================
Total Debt to Cash Flow Ratio
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(greater than < 5.00 to <4.00 to <3.25
or equal to) 1.0, but 1.0 but to 1.0 < 2.50
5.00 to (greater than (greater than but to 1.0
1.0 or equal to) or equal to) (greater than
4.00 to 3.25 to or equal to)
1.0 1.0 2.50 to
1.0
------------------------------------------------------------------------------------
1.75% 1.50% 1.25% 1.00% 0.75%
====================================================================================
</TABLE>
In determining interest for purposes of this Section 2.05 and fees pursuant to
Section 2.06(a), the Borrower and the Banks shall refer to the Borrower's most
recent consolidated quarterly and annual (as the case may be) financial
statements delivered pursuant to Section 5.01(a) or (b), as the case may be.
If such financial statements require a change in interest pursuant to this
Section 2.05 or fees pursuant to Section 2.06(a), the Borrower shall deliver to
the Agent, along with such financial statements, a notice to that effect, which
notice shall set forth in reasonable detail the calculations establishing the
required change. The date which is 10 Domestic Business Days after receipt by
the Agent of such financial statements and notice, commencing with the
financial statements for the third Fiscal Quarter of the 1996 Fiscal Year, is
the "Performance Pricing Determination Date." Any such required change in
interest and fees shall become effective on such Performance Pricing
Determination Date, and shall be in effect until the next Performance Pricing
Determination Date, provided, however, that: (i) for Euro-Dollar Loans, changes
in interest shall only be effective for Interest Periods commencing on or after
the Performance Pricing Determination Date; and (ii) no interest or fees shall
be decreased pursuant to this Section 2.05 or Section 2.06(a) if, on the
Performance Pricing Determination Date, (A) an Event of Default is in
existence, or (B) a Default is in existence which on such date is not an Event
of Default but which becomes an Event of Default; provided, however, that if an
Event of Default exists on the Performance Pricing Determination Date, or a
Default exists and subsequently becomes an Event of Default, any such decrease
shall take effect upon the cure of any such Event of Default.
(b) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date
33
<PAGE> 41
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day plus the Applicable Margin. Such interest shall be payable
on the first day of each calendar month, commencing June 1, 1996. Any overdue
principal of and, to the extent permitted by applicable law, overdue interest
on any Base Rate Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the Default Rate.
(c) Each Euro-Dollar Loan and Set Rate Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to (i) as to Euro-Dollar Loans,
the sum of the Applicable Margin plus the applicable Adjusted London Interbank
Offered Rate for such Interest Period, and (ii) as to Set Rate Loans, the Set
Rate applicable thereto. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than 3
months, at intervals of 3 months after the first day thereof. Any overdue
principal of and, to the extent permitted by law, overdue interest on any
Euro-Dollar Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the Default Rate.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any
Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan, the
rate per annum determined on the basis of the offered rate for deposits in
Dollars of amounts equal or comparable to the principal amount of such
Euro-Dollar Loan offered for a term comparable to such Interest Period, which
rates appear on the Telerate Screen Page 3750 as of 11:00 a.m., London time, 2
Euro-Dollar Business Days prior to the first day of such Interest Period,
provided that if no such offered rates appear on such page, the "London
Interbank Offered Rate" for such Interest Period will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of rates
quoted by not less than 2 major banks in New York City, selected by the Agent,
at approximately 10:00 a.m., New York City time, 2 Euro-Dollar Business Days
prior to the first day of such Interest Period, for deposits in Dollars offered
to leading European banks for a period comparable to such Interest Period in an
amount comparable to the principal amount of such Euro-Dollar Loan.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal
34
<PAGE> 42
Reserve System (or any successor) for determining the maximum reserve
requirement for a member bank of the Federal Reserve System in respect of
"Eurocurrency liabilities" (or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on Euro-Dollar
Loans is determined or any category of extensions of credit or other assets
which includes loans by a non-United States office of any Bank to United States
residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(d) The Agent shall determine each interest rate applicable to
the Loans hereunder. The Agent shall give prompt notice to the Borrower and
the Banks by telecopier of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(e) After the occurrence and during the continuance of an
Event of Default, the principal amount of the Loans (and, to the extent
permitted by applicable law, all accrued and past due interest thereon) may, at
the election of the Required Banks, bear interest at the Default Rate,
effective from and after the date such Event of Default occurred.
SECTION 2.06. Fees. (a) The Borrower shall pay to the Agent
for the ratable account of each Bank, a commitment fee, which shall accrue from
and including the Closing Date to but excluding the Termination Date and shall
be payable on each April 1, July 1, October 1 and January 1 and on the
Termination Date, commencing July 1, 1996, for the quarterly period ending
immediately prior to such date (except that the payment on July 1, 1996 shall
be for the period from the Closing Date through June 30, 1996). The commitment
fee shall be calculated on the average daily principal amount of such Bank's
Unused Commitment during such period at the rate per annum (expressed below as
a decimal) of (A) until the first Performance Pricing Determination Date,
0.375%, and (B) thereafter, with respect to each Performance Pricing
Determination Date, the percentage determined as of the end of the Fiscal
Quarter or Fiscal Year just ended by reference to the percentage shown in the
following schedule, depending on the Total Debt to Cash Flow Ratio as of the
end of such Fiscal Quarter or Fiscal Year, as determined pursuant hereto.
35
<PAGE> 43
<TABLE>
<CAPTION>
====================================================================================
Total Debt to Cash Flow Ratio
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(greater than < 5.00 to <4.00 to <3.25
or equal to) 1.0, but 1.0 but to 1.0 < 2.50
5.00 to (greater than (greater than but to 1.0
1.0 or equal to) or equal to) (greater than
4.00 to 3.25 to or equal to)
1.0 1.0 2.50 to
1.0
------------------------------------------------------------------------------------
1.75% 1.50% 1.25% 1.00% 0.75%
====================================================================================
</TABLE>
(b) The Borrower shall pay to the Agent and the
Documentation Agent, respectively, for the account and sole benefit of the
Agent and the Documentation Agent, respectively, such fees and other amounts at
such times as set forth in the Agents' Letter Agreements.
SECTION 2.07. Optional Termination or Reduction of
Commitments. The Borrower may, upon at least 3 Domestic Business Days' notice
to the Agent, terminate at any time, or proportionately reduce the Unused
Commitments from time to time by an aggregate amount of at least $5,000,000 or
any larger multiple of $1,000,000. If the Commitments are terminated in their
entirety, all accrued fees (as provided under Section 2.06) shall be due and
payable on the effective date of such termination.
SECTION 2.08. Mandatory Reduction and Termination of
Commitments. (a) The Commitments shall terminate on the Termination Date and
any Loans then outstanding (together with accrued interest thereon) shall be
due and payable on such date.
(b) The Aggregate Commitment shall be reduced by an
amount equal to:
(i) 100% of the Net Cash Proceeds (rounded to the
nearest $500,000) in excess of $5,000,000 of any individual
sale of assets, and in excess of $10,000,000 in the aggregate
for all sales of assets during any Fiscal Year, by the Parent
or any of the Subsidiaries, but excluding (A) sales of
inventory in the ordinary course of business, (B) sales of
equipment in the ordinary course of business, if and to the
extent of Net Cash Proceeds used within a reasonable time to
purchase equipment in replacement thereof, (C) the sale of the
property located in Bay County, Florida and known as Camp
Helen and (D) sales of Receivables pursuant to a Receivables
Securitization Program (which shall be subject to clause (ii)
below); and
36
<PAGE> 44
(ii) 100% of the Net Cash Proceeds (rounded to the
nearest $500,000) of the initial sale of Receivables to the
Receivables Subsidiary pursuant to any Receivables
Securitization Program implemented after (but not on or
before) the Closing Date, as in existence on the date of
implementation thereof, provided, that (1) with respect to any
increase (including, but not limited to a new series) in an
existing Receivables Securitization Program or any Receivables
Securitization Program which is additional to an existing
Receivables Securitization Program (each an "Incremental
Program"), the foregoing shall apply only to the extent of the
amount of the Net Cash Proceeds from the initial sale under
the Incremental Program, and (2) with respect to any
Receivables Securitization Program which is a replacement (a
"Replacement Program") for another Receivables Securitization
Program (a "Replaced Program"), the foregoing shall apply only
to the extent of the amount, if any, by which the Net Cash
Proceeds from the initial sale under the Replacement Program
exceeds the Net Cash Proceeds from the initial sale under the
Replaced Program.
(c) Each reduction pursuant to Section 2.08(b) shall be
applied to reduce the Commitments of the several Banks ratably. No optional
reduction of the Aggregate Commitment pursuant to Section 2.07 shall reduce the
amount of any subsequent mandatory reduction pursuant to Section 2.08(b).
SECTION 2.09. Optional Prepayments. (a) The Borrower may,
upon at least 1 Domestic Business Days' notice to the Agent, prepay any Base
Rate Borrowing in whole at any time, or from time to time in part in amounts
aggregating at least $5,000,000 and any larger multiple of $500,000 (or
$100,000 and any larger multiple of $25,000 as to Swing Loans), by paying the
principal amount to be prepaid. Each such optional prepayment shall be applied
to prepay ratably the Base Rate Loans of the several Banks (or of Wachovia, in
the case of Swing Loans) included in such Base Rate Borrowing.
(b) Except as provided in Section 8.02, the Borrower may
not prepay all or any portion of the principal amount of any Fixed Rate Loan
prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to
this Section 2.09, the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share of such prepayment and such notice
shall not thereafter be revocable by the Borrower.
37
<PAGE> 45
SECTION 2.10. Mandatory Prepayments. On each date on which
the Commitments are reduced pursuant to Section 2.07 or Section 2.08, the
Borrower shall repay or prepay such principal amount of the outstanding Loans,
if any (together with interest accrued thereon), as may be necessary so that
after such payment the Working Capital Obligations do not exceed the Aggregate
Commitment as then reduced. All such prepayments shall be applied first to the
Revolver Loan Notes and then to the Swing Loan Note.
SECTION 2.11. General Provisions as to Payments. (a) The
Borrower shall make each payment of principal of, and interest on, the Loans
and of fees hereunder, not later than 11:00 a.m. (Atlanta, Georgia time) on the
date when due, in Federal or other funds immediately available in Atlanta,
Georgia, to the Agent at its address referred to in Section 9.01. The Agent
will promptly distribute to Wachovia each such payment received by the Agent on
account of the Swing Loans, and to each Bank its ratable share of each such
payment received by the Agent for the account of the Banks.
(b) Whenever any payment of principal of, or interest on,
the Domestic Loans or of fees hereunder shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day.
(c) All payments of principal, interest, fees and other
amounts to be made by the Borrower pursuant to this Agreement with respect to
any Loan or fee relating thereto shall be paid without deduction for, and free
from, any taxes, imposts, levies, deductions, or withholdings now or hereafter
imposed by any governmental authority or by any taxing authority thereof or
therein, excluding in the case of each Bank (1) any taxes imposed by the United
States or any political subdivision thereof on the effectively connected net
income of any Bank or any Bank's Lending Office or any franchise taxes imposed
by such jurisdiction, (2) taxes imposed on the net income of, or franchise
taxes imposed upon, any Bank by the jurisdiction under the laws of which such
Bank is organized or by any political subdivision thereof, (3) taxes imposed on
the net income of such Bank's Lending Office, and franchise taxes imposed on
it, by the jurisdiction of such Bank's Lending Office, or any political
subdivision thereof, (4) any taxes imposed on any Bank by Section 884(a) of the
Internal Revenue Code of 1986, as amended (and any
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successor statute to Section 884(a)), and (5) any United States withholding tax
payable with respect to any payments to such Bank under the laws (including,
without limitation, any treaty, ruling, judicial or administrative
determination or regulation) in effect on the "Initial Date" (as hereinafter
defined) or as a result of the Bank having voluntarily changed the jurisdiction
of its Lending Office from a jurisdiction in which payments made to such Bank
are exempt from United States withholding tax to a jurisdiction in which such
payments are not so exempt, but not excluding any United States withholding tax
payable or increased as a result of any change in any law, treaty, ruling,
judicial or administrative determination or regulation, or interpretation
thereof occurring after the Initial Date (all such non- excluded taxes, levies,
imposts, deductions, and withholdings hereinafter referred to as "Taxes"). For
purposes hereof, the term "Initial Date" shall mean, in the case of each Bank
party hereto on the date hereof, the Closing Date, and in the case of each
other Bank, the effective date of the Assignment and Acceptance pursuant to
which it became a Bank hereunder.
In the event that the Borrower is required by applicable law
to make any such withholding or deduction of Taxes with respect to any Loan or
fee or other amount, the Borrower shall pay such deduction or withholding to
the applicable taxing authority, shall promptly furnish to any Bank in respect
of which such deduction or withholding to the applicable taxing authority,
shall promptly furnish to any Bank in respect of which such deduction or
withholding is made all receipts and other documents evidencing such payment,
and shall pay to such Bank additional amounts as may be necessary in order that
the amount received by such Bank after the required withholding or other
payment shall equal the amount such Bank would have received had no such
withholding or other payment been made. If no withholding or deduction of
Taxes are payable in respect to any Loan or fee relating thereto, the Borrower
shall furnish any Bank, at such Bank's written request, a certificate from each
applicable taxing authority or an opinion of counsel reasonably acceptable to
such Bank, in either case stating that such payments are exempt from or not
subject to withholding or deduction of Taxes. If the Borrower fails to provide
such original or certified copy of a receipt evidencing payment of Taxes or
certificate(s) or opinion of counsel described in the preceding sentence, the
Borrower hereby agrees to compensate such Bank for, and indemnify it with
respect to, the tax consequences of the Borrower's failure to provide evidence
of tax payments or tax exemption; provided, however, that the Borrower shall
not be obligated to indemnify any party for penalties, additions to tax,
interest or expenses associated with the payment of Taxes if the Bank's
liability for such Taxes has arisen as a result of the fault of such Bank; and
provided, further, that the Borrower shall not be obligated to indemnify any
Bank for Taxes, penalties, additions to tax,
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interest or expenses incurred as a result of such Bank having voluntarily
changed its Lending Office from a jurisdiction in which payments made to such
Bank are exempt from United States withholding tax to a jurisdiction in which
such payments are not so exempt. Such compensation or indemnification payment
shall be made within 30 days from the date such Bank makes written request
therefor. Any such request shall be made within 90 days after the date on
which such payment of Taxes was made. Each such request shall be accompanied
by a copy of the statement from the taxing authority demanding payment by such
Bank of such Taxes or by a certificate from such Bank which certificate shall
set forth in reasonable detail the basis for any additional amount payable to
such party under this Section 2.11 (together with reasonable evidence of
payment of such Taxes).
Any Bank entitled to claim any additional amounts payable
pursuant to this Section 2.11 shall use its best efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Lending Office if the making of such change would avoid the
need for, or reduce the amount of, any such additional amounts which may
thereafter accrue and the making of such a change would not, in the reasonable
judgment of such Bank, be otherwise materially disadvantageous to such Bank.
Each Bank agrees, as soon as practicable after receipt by it
of a request by the Borrower to do so, to file all appropriate forms and take
other appropriate action to obtain a certificate or other appropriate document
from the appropriate governmental authority in the jurisdiction imposing the
relevant taxes, establishing that it is entitled to receive payments of
principal and interest under this Agreement and the Notes without deduction and
free from withholding of any Taxes imposed by such jurisdiction; provided,
that, if it is unable, for any reason, to establish such exemption, or to file
such forms and, in any event, during such period of time as such request for
exemption is pending, the Borrower shall nonetheless remain obligated under the
terms of the immediately preceding paragraph.
In the event any Bank receives a refund of any Taxes paid by
the Borrower pursuant to this Section 2.11, it will pay to the Borrower the
amount of such refund promptly upon receipt thereof; provided, however, if at
any time thereafter it is required to return such refund, the Borrower shall
promptly repay to it the amount of such refund.
Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower and the
Banks contained in this Section 2.11 shall be applicable with respect to any
Assignee, and any calculations required by such provisions (i) shall be
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made based upon the circumstances of such Assignee, and (ii) constitute a
continuing agreement and shall survive the termination of this Agreement and
the payment in full or cancellation of the Notes.
SECTION 2.12. Computation of Interest and Fees. Interest on
Domestic Loans based on the Base Rate shall be computed on the basis of a year
of 360 days and paid for the actual number of days elapsed (including the first
day but excluding the last day). Interest on Domestic Loans based on the Set
Rate and interest on Euro-Dollar Loans shall be computed on the basis of a year
of 360 days and paid for the actual number of days elapsed, calculated as to
each Interest Period from and including the first day thereof to but excluding
the last day thereof. Commitment fees and any other fees payable hereunder
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to First Borrowing. The obligation
of each Bank to make a Loan on the occasion of the first Borrowing is subject
to the satisfaction of the conditions set forth in Section 3.02 and receipt by
the Agent of the following (in sufficient number of counterparts of this
Agreement for delivery of a counterpart to each Bank and retention of one
counterpart by the Agent):
(a) from each of the parties hereto of either (i) a duly
executed counterpart of this Agreement signed by such party or (ii) a
facsimile transmission of a duly executed signature page of this
Agreement (with the original thereof to be sent by overnight courier
to the counsel for the Agent);
(b) a duly executed Revolver Loan Note for the account of
each Bank, and a duly executed Swing Loan Note for the account of
Wachovia, in each case complying with the provisions of Section 2.03;
(c) a duly executed Parent Guaranty, a duly executed Pledge
Agreement, a duly executed Security Agreement, duly executed Mortgages
(in such number of counterparts as the Agent may request), and duly
executed UCC-1 financing statements pertaining to the Security
Agreement and the Mortgages and UCC-2 Notices pertaining to the real
property located in Georgia;
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(d) a duly executed SunTrust Intercreditor Agreement, and
instruments, in appropriate recordable form, duly executed by SunTrust
Bank, Atlanta;
(e) such releases and termination statements as the Agent may
request from The CIT Group/Commercial Services, Inc., Wachovia Bank of
South Carolina, N.A. and First Union National Bank of Georgia as to
the Graniteville Assets and payment in full of all amounts payable to
such lenders and termination of the loan and security documents with
them;
(f) lien and title searches satisfactory to the Agent (i)
pertaining to the Collateral described in the Security Agreement
(including, without limitation, the personal property portions of the
Graniteville Assets), indicating that, upon execution and delivery of
this Agreement and the Security Agreement, the filing of releases and
termination statements referred to in paragraph (e) above and of the
UCC-1 financing statements pertaining to such Collateral in the
appropriate filing offices, and the satisfaction of all other
conditions in this Section 3.01, the Agent will have a first priority
(except as to the equipment located at the SunTrust Collateral Plants,
which shall be second priority) security interest in such Collateral,
except for the Permitted Encumbrances and (ii) pertaining to the real
property portions of the Graniteville Assets, showing that there are
no encumbrances on such property other than Permitted Encumbrances;
(g) receipt by the Borrower of not less than $39,000,000 in
cash proceeds from the issuance of additional Capital Stock of the
Parent;
(h) an opinion letter (i) of King & Spalding, counsel for the
Borrower and the Parent, dated as of the Closing Date,
substantially in the form of Exhibit B-1 and covering such additional
matters relating to the transactions contemplated hereby as the Agent
may reasonably request, (ii) of Bradley Arant Rose & White, Alabama,
Alabama counsel to the Borrower, substantially in the form of Exhibit
B-2, and (iii) of local counsel to the Agent in the States of Alabama,
North Carolina and South Carolina dated as of the Closing Date,
substantially in the form of Exhibit B-3 regarding the Mortgage as to
any Plant located in the state in which such counsel is located;
(i) an opinion of Jones, Day, Reavis & Pogue, special
counsel for the Agent, dated as of the Closing Date, substantially in
the form of Exhibit C and covering such additional matters relating
to the transactions contemplated hereby as the Agent may reasonably
request;
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(j) a certificate (the "Closing Certificate")
substantially in the form of Exhibit G), dated as of the Closing Date,
signed by a principal financial officer of the Borrower, to the effect
that (i) no Default has occurred and is continuing on the date of the
first Borrowing and (ii) the representations and warranties of the
Borrower contained in Article IV are true on and as of the date of the
first Borrowing hereunder;
(k) all documents which the Agent may reasonably request
relating to the existence of the Borrower and the Parent,
respectively, the corporate authority for and the validity of this
Agreement and the other Loan Documents and the Parent Documents, and
any other matters relevant hereto, all in form and substance
satisfactory to the Agent, including, without limitation, a
certificate of incumbency of the Borrower and the Parent,
respectively, signed by the Secretary or an Assistant Secretary of the
Borrower and the Parent, respectively, certifying as to the names,
true signatures and incumbency of the officer or officers of the
Borrower or the Parent, as applicable, authorized to execute and
deliver the Loan Documents or the Parent Documents, and certified
copies of the following items as to each of the Borrower and the
Parent: (i) its Certificate of Incorporation, (ii) its Bylaws, (iii)
a certificate of the Secretary of State of the State of Alabama (as to
the Borrower) and Georgia (as to the Parent) as to its good standing
as an Alabama or Georgia corporation, respectively, together with a
certificate of good standing or valid existence from the Secretaries
of State of the States of North Carolina, South Carolina and Georgia
as to the good standing of the Borrower as a foreign corporation
qualified to do business in such States and (iv) the action taken by
its Board of Directors authorizing the execution, delivery and
performance of this Agreement and the other Loan Documents, or the
Parent Documents, as applicable;
(l) a Notice of Borrowing;
(m) receipt of the fees of the Agent and the Documentation
Agent pursuant to Section 2.06(b);
(n) receipt of a certified copy of the executed
Graniteville Asset Purchase Agreement, including any amendments or
supplements prior to the Closing Date with such different or
additional material terms or conditions as may be reasonably
satisfactory to the Agent;
(o) closing of the purchase of the Graniteville Assets
pursuant to the Graniteville Asset Purchase Agreement and the Agent's
reasonable satisfaction with all material
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aspects of such purchase and the Graniteville Assets acquired and
liabilities assumed in connection therewith;
(p) receipt of opinion letters (or reliance letters with
respect thereto) from counsel for Graniteville Company pertaining to
the closing of the purchase of the Graniteville Assets pursuant to the
Graniteville Asset Purchase Agreement and matters related thereto;
(q) receipt of the audited balance sheet of the Graniteville
Assets as of January 2, 1994, January 1, 1995 and December 31, 1995
and any unaudited interim statements that are available for subsequent
periods, and audited statements of income, stockholders equity and
cash flows with respect to the Graniteville Assets for the 10 month
period ended January 2, 1994 and the Fiscal years ended January 1,
1995 and December 31, 1995 and any unaudited interim statements which
are available for subsequent periods; and
(r) receipt of financial information reasonably satisfactory
to the Agent as to the Receivables to be transferred to the
Receivables Subsidiary pursuant to the Receivables Securitization
Program to be closed on the Closing Date.
SECTION 3.02. Conditions to All Borrowings. The obligation of
each Bank to make a Loan on the occasion of each Borrowing, other than a
Borrowing which consists solely of a Refunding Loan, is subject to the
satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing or a
Set Rate Request;
(b) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of
the Borrower contained in Article IV of this Agreement shall be true
on and as of the date of such Borrowing, except for events which have
been disclosed in writing to the Banks and which are described in any
of Sections 4.04, 4.06(a), 4.07 (except the first sentence), 4.14(b)
and (c) or 4.15; and
(d) the fact that, immediately after such Borrowing, the
Working Capital Obligations will not exceed the amount of the
Aggregate Commitment.
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Each Borrowing hereunder, other than a Borrowing which consists solely of a
Refunding Loan, shall be deemed to be a representation and warranty by the
Borrower on the date of such Borrowing as to the truth and accuracy of the
facts specified in paragraphs (b), (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower and (by execution and delivery of the Parent
Guaranty) the Parent represent and warrant that:
SECTION 4.01. Corporate Existence and Power. Each of the
Parent and the Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, is
duly qualified to transact business in every jurisdiction where, by the nature
of its business, such qualification is necessary, and has all corporate powers
and all governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, except for failures which have not
had and would not reasonably be expected to have or cause a Material Adverse
Effect.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Notes, the Security Agreement, the Mortgages and the other Loan
Documents and by the Parent of the Parent Documents (i) are within the
corporate powers of the Parent and the Borrower, respectively, (ii) have been
duly authorized by all necessary corporate action, (iii) require no action by
or in respect of or filing with, any governmental body, agency or official,
(iv) do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Borrower or or the Parent of any material agreement, judgment,
injunction, order, decree or other instrument binding upon the Parent, the
Borrower or any of the Subsidiaries, and (v) do not result in the creation or
imposition of any Lien on any asset of the Parent, the Borrower or any of the
Subsidiaries, except in favor of the Agent.
SECTION 4.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Borrower enforceable in accordance with its
terms, and the Notes, the Security Agreement, the Mortgages and the other Loan
Documents, and the Parent Documents, when executed and delivered in accordance
with this Agreement, will constitute valid and binding obligations of the
Borrower and the Parent, as applicable, enforceable in accordance with their
respective terms, provided
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that the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally.
SECTION 4.04. Financial Information. (a) The consolidated
balance sheet of the Parent and its Consolidated Subsidiaries as of August 25,
1995 and the related consolidated statements of income, shareholders' equity
and cash flows for the Fiscal Year then ended, reported on by Ernst & Young,
copies of which have been delivered to each of the Banks, and the unaudited
consolidated financial statements (with consolidating schedule) of the Parent
for the interim period ended February 23, 1996, copies of which have been
delivered to each of the Banks, fairly present in all material respects, in
conformity with GAAP (except for customary exceptions for unaudited statements
in accordance with the Parent's practices existing on the Closing Date), the
consolidated financial position of the Parent and its Consolidated Subsidiaries
as of such dates and their consolidated results of operations and cash flows
for such periods stated.
(b) Since August 25, 1995 there has been no event, act,
condition or occurrence having or which reasonably could be expected to have or
cause a Material Adverse Effect, except for matters disclosed in the financial
statements for the interim period ended February 23, 1996.
(c) Schedule 4.04 contains a list of all intangibles of
the Parent and its Consolidated Subsidiaries which were recorded on the
financial statements for the interim period ended February 23, 1996 of the
types described in clauses (A) through (C), inclusive, of the definition of
Consolidated Adjusted Tangible Net Worth which were in existence on the day
before the Closing Date.
SECTION 4.05. No Litigation. Except as described on Schedule
4.05 or Schedule 4.14, there is no action, suit or proceeding pending, or to
the Knowledge of the officers of the Parent or the Borrower, overtly
threatened, against or affecting the Parent or the Borrower or any of the
Subsidiaries or with respect to which any of them may become subject as a
result of the acquisition of the Graniteville Assets, before any court or
arbitrator or any governmental body, agency or official which has not
previously been disclosed pursuant to Section 5.01(i) and which has or would
reasonably be expected to have or cause a Material Adverse Effect or which in
any manner draws into question the validity of or which has impaired or would
reasonably be expected to impair the ability of the Borrower to perform its
obligations under, this Agreement, the Notes, the Security Agreement, the
Mortgages or any of the other Loan
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Documents or of the Parent to perform its obligations under the Parent
Documents.
SECTION 4.06. Compliance with ERISA. (a) The Borrower (i)
terminated its only Plan on or about October 31, 1986 pursuant to the
termination procedures under Section 4041 of ERISA and received all necessary
approvals for such termination; (ii) has distributed all vested benefits under
such Plan, and the assets of such Plan so distributed exceeded the amount of
such vested benefits; and (iii) is not required pursuant to the terms of any
applicable collective bargaining agreement to pay or accrue any contributions
with respect to any plan which is a Multiemployer Plan and there has been no
complete or partial withdrawal by the Borrower from any such Multiemployer Plan
as provided by MPPAA.
(b) No non-exempt "prohibited transaction" within the meaning
of Section 4975 of the Internal Revenue Code or Section 406 of ERISA has
occurred with respect to any "employee benefit plan," as defined in Section 3
of ERISA, maintained by the Borrower and which has had or would reasonably be
expected to have or cause a Material Adverse Effect.
SECTION 4.07. Compliance with Laws; Payment of Taxes. The
Parent, the Borrower and the Material Subsidiaries are in compliance with all
applicable laws, regulations and similar requirements of governmental
authorities, except where such compliance is being contested in good faith
through appropriate proceedings or where failure to comply would not have or
reasonably be expected to have or cause a Material Adverse Effect. There have
been filed on behalf of the Parent, the Borrower and the Material Subsidiaries
all Federal, state and local income, excise, property and other tax returns
which to the Knowledge of its officers are required to be filed by them and all
taxes due pursuant to such returns or pursuant to any assessment received by or
on behalf of the Parent, the Borrower or any Material Subsidiary have been
paid, except for taxes which are being contested in good faith through
appropriate proceedings and for which reasonable reserves have been established
in accordance with GAAP. The charges, accruals and reserves on the books of
the Parent, the Borrower and the Material Subsidiaries in respect of taxes or
other governmental charges are, in the opinion of the Parent and Borrower,
adequate. United States income tax returns of the Parent, the Borrower and the
Material Subsidiaries have been closed through the 1992 Fiscal Year.
SECTION 4.08. Subsidiaries. Each of the Material Subsidiaries
is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation, is duly qualified to transact
business in every jurisdiction where, by the nature of its business, such
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qualification is necessary, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted, except where failure of any of the foregoing would
not have or reasonably be expected to have or cause a Material Adverse Effect.
The Parent has no Subsidiaries except for the Borrower and those Subsidiaries
listed on Schedule 4.08, as such schedule is supplemented from time to time,
which accurately sets forth each such Subsidiary's complete name and
jurisdiction of incorporation.
SECTION 4.09. Investment Company Act. Neither the Parent, the
Borrower nor any of the Material Subsidiaries is an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.10. Public Utility Holding Company Act. Neither the
Parent, the Borrower nor any of the Material Subsidiaries is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended.
SECTION 4.11. Ownership of Property; Liens. Each of the
Parent, the Borrower and the Material Subsidiaries has title to its properties
sufficient for the conduct of its business, and none of such property is
subject to any Lien except as permitted in Section 5.11.
SECTION 4.12. No Default. Neither the Parent, the Borrower
nor any of the Material Subsidiaries is, to the Knowledge of their respective
officers, in default under or with respect to any agreement, instrument or
undertaking to which it is a party or by which it or any of its property is
bound which has had or reasonably would be expected to have or cause a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing,
except as previously disclosed pursuant to Section 5.01(e).
SECTION 4.13. Full Disclosure. All information heretofore
furnished by the Parent and the Borrower to the Agent or any Bank for purposes
of or in connection with this Agreement or any transaction contemplated hereby
is, and all such information hereafter furnished by the Parent and the Borrower
to the Agent or any Bank will be, to the Knowledge of their respective
officers, true, accurate and complete in every material respect or based on
reasonable estimates on the date as of which such information is stated or
certified. The Parent and the Borrower have disclosed to the Banks in writing
any and all
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facts which have had or would reasonably be expected to have or cause a
Material Adverse Effect.
SECTION 4.14. Environmental Matters. (a) Except as set forth
on Schedule 4.14, or disclosed pursuant to Section 5.01(j), to the Knowledge of
their respective officers and Plant managers, (i) neither the Parent, the
Borrower nor any Material Subsidiary is subject, or may become subject as a
result of the acquisition of the Graniteville Assets, to any Environmental
Liability which has had or would reasonably be expected to have or cause a
Material Adverse Effect and neither the Parent, the Borrower nor any Material
Subsidiary has been designated as a potentially responsible party under CERCLA
or under any state statute similar to CERCLA, and (ii) none of the Properties
has been identified on any current or proposed (A) National Priorities List
under 40 C.F.R. Section 300, (B) CERCLIS list or (C) any list arising from a
state statute similar to CERCLA.
(b) To the Knowledge of their respective officers and
Plant managers of the Borrower, no Hazardous Materials have been or are being
used, produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed or otherwise handled at, or shipped or transported to or
from the Properties or are otherwise present at, on, in or under the Properties
or the Graniteville Assets, or, at or from any adjacent site or facility
(except for Hazardous Materials, such as cleaning solvents, pesticides and
other materials used or otherwise handled in the ordinary course of business in
material compliance with all applicable Environmental Requirements) that would
reasonably be expected to lead to any material Environmental Liabilities.
(c) To the Knowledge of their respective officers and
Plant managers, the Parent, Borrower, and each of the Material Subsidiaries and
their respective Affiliates, has procured all Environmental Authorizations
necessary for the conduct of its business (after giving effect to the
acquisition of the Graniteville Assets), and is in material compliance with all
Environmental Requirements in connection with the operation of the Properties
and their respective businesses (after giving effect to the acquisition of the
Graniteville Assets), except where failure to so procure or comply would not
reasonably be expected to lead to any material Environmental Liabilities.
SECTION 4.15. Capital Stock. All Capital Stock, debentures,
bonds, notes and all other securities of the Parent, the Borrower and the
Material Subsidiaries presently issued and outstanding are validly and
properly issued in all material respects in accordance with all applicable
laws, including, but not limited to, the "Blue Sky" laws of all applicable
states and the federal securities laws. The issued shares of capital stock
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of the Wholly Owned Subsidiaries are owned by the Parent free and clear of any
Lien or adverse claim. At least a majority of the issued shares of capital
stock of each of the Parent's other Subsidiaries (other than Wholly Owned
Subsidiaries) is owned by the Parent free and clear of any Lien or adverse
claim, except any which are permitted under Section 5.11.
SECTION 4.16. Margin Stock. Neither the Parent, the Borrower
nor any of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of purchasing or carrying any Margin Stock, and no
part of the proceeds of any Loan will be used to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
any Margin Stock, or be used for any purpose which violates, or which is
inconsistent with, the provisions of Regulation X.
SECTION 4.17. Insolvency. After giving effect to the
execution and delivery of the Loan Documents and the Parent Documents and the
making of the Loans under this Agreement, neither the Parent nor the Borrower
will be "insolvent," within the meaning of such term as used in O.C.G.A.
Section 18-2-22 or as defined in Section 101 of Title 11 of the United States
Code or Section 2 of the Uniform Fraudulent Transfer Act, or any other
applicable state law pertaining to fraudulent transfers, as each may be amended
from time to time, or be unable to pay its debts generally as such debts become
due, or have an unreasonably small capital to engage in any business or
transaction, whether current or contemplated.
ARTICLE V
COVENANTS
Each of the Borrower and (by execution and delivery of the
Parent Guaranty) the Parent agrees that, so long as any Bank has any Commitment
hereunder or any amount payable hereunder or under any Note remains unpaid:
SECTION 5.01. Information. The Parent and the Borrower will
deliver to each of the Banks:
(a) (i) as soon as available and in any event within 90
days after the end of each Fiscal Year, a consolidated balance sheet
of the Parent and the Consolidated Subsidiaries as of the end of such
Fiscal Year and the related consolidated statements of income,
shareholders' equity and cash flows for such Fiscal Year, setting
forth in each case in comparative form the figures for the previous
Fiscal Year, all certified by Ernst & Young or other independent
public accountants of nationally recognized
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standing, with such certification to be free of exceptions and
qualifications not acceptable to the Required Banks, together with
unaudited consolidating statements for: (A) each Material Subsidiary
(other than the Borrower), except for any Material Subsidiary as to
which there has been no change in excess of $100,000 in its assets,
liabilities or shareholders' equity since the immediately preceding
Fiscal Quarter; and (B) the Parent during any period in which: (1)
the Borrower is not the sole direct Subsidiary of the Parent; (2) the
Parent has assets (other than the stock of the Borrower) having a book
value in excess of $1,000,000; or (3) the Parent has direct Debt
(other than in connection with (x) the "SunTrust L/C's," as defined in
the SunTrust Intercreditor Agreement, (y) Guarantees of Debt of the
Borrower or a Subsidiary of the Borrower and (z) Debt to a Subsidiary)
in excess of $1,000,000; and
(ii) at the written request of the Required
Banks, as soon as practicable, and in any event within 90 days
after the end of each Fiscal Year in which either (a) the assets of the
Borrower and its consolidated Subsidiaries comprise less than 90% of
the consolidated assets of the Parent and the Consolidated Subsidiaries
as of the end of such Fiscal Year, or (b) the consolidated revenues of
the Borrower and its consolidated Subsidiaries comprise less than 90%
of the consolidated revenues of the Parent and the Consolidated
Subsidiaries, furnish to the Agent the annual consolidated audit report
of the Borrower and its consolidated Subsidiaries, including a balance
sheet, income statement and statement of cash flow, together with the
certification of the above-described accounting firm, with such
certification to be free of exceptions and qualifications not
acceptable to the Required Banks, prepared in accordance with the
standards set forth above with respect to the audit report of the
Parent; and
(b) as soon as available and in any event within 45 days
after the end of each of the first 3 Fiscal Quarters of each Fiscal
Year, a consolidated balance sheet of the Parent and the Consolidated
Subsidiaries as of the end of such Fiscal Quarter and the related
statement of income and statement of cash flows for such Fiscal
Quarter and for the portion of the Fiscal Year ended at the end of
such Fiscal Quarter, setting forth in each case in comparative form
the figures for the corresponding portion of the previous Fiscal Year,
all certified (subject to normal year-end adjustments) as to fairness
of presentation, GAAP and consistency by the chief financial officer
or the chief accounting officer of the Borrower, together with
unaudited consolidating statements for: (i) each Material Subsidiary
(other than the Borrower), except for any Material Subsidiary as to
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which there has been no change in excess of $100,000 in its assets,
liabilities or shareholders' equity since the immediately preceding
Fiscal Quarter; and (ii) the Parent during any period in which: (A)
the Borrower is not the sole direct Subsidiary of the Parent; (B) the
Parent has assets (other than the stock of the Borrower) having a book
value in excess of $1,000,000; or (C) the Parent has direct Debt in
excess of $1,000,000 (other than Debt of the type excluded in Section
5.01(a)(i)(B)(3));
(c) simultaneously with the delivery of each set of
financial statements referred to in paragraphs (a) and (b) above, a
certificate, substantially in the form of
Exhibit F (a "Compliance Certificate"),
of the chief financial officer or the chief accounting officer (i) of
the Parent, setting forth in reasonable detail the calculations
required to establish whether there was compliance with the
requirements of Sections 5.03 through 5.07, inclusive, and 5.09
through 5.11, inclusive, on the date of such financial statements,
(ii) of the Borrower, stating whether, to the Knowledge of such
officer, any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect
thereto, (iii) identifying by name each Consolidated Subsidiary, and
(iv) identifying by name any Material Subsidiary (other than the
Borrower) as to which there has been a change in excess of $100,000 in
its assets, liabilities or shareholders' equity since the immediately
preceding Fiscal Quarter;
(d) simultaneously with the delivery of each set of
annual financial statements referred to in paragraphs (a) and (b)
above, a statement of the firm of independent public accountants which
reported on such statements to the effect that nothing has come to
their attention to cause them to believe that any Default existed on
the date of such financial statements under any of Sections 5.03
through 5.07, inclusive, and 5.09;
(e) within 5 Domestic Business Days after any officer of
the Parent or the Borrower becomes aware of the occurrence of any
Default, a certificate of the chief financial officer or the chief
accounting officer of the Parent or the Borrower setting forth the
details thereof and the action which the Parent or the Borrower is
taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders
of the Parent generally, copies of all financial statements, reports
and proxy statements so mailed;
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(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and annual,
quarterly or monthly reports which the Parent or the Borrower shall
have filed with the Securities and Exchange Commission;
(h) from and after the adoption of any Plan, if and when
any member of the Controlled Group (i) gives or is required to give
notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that
the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under
Title IV of ERISA, a copy of such notice; or (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate or
appoint a trustee to administer any Plan, a copy of such notice;
(i) within 5 Domestic Business Days after any officer of the
Parent or the Borrower becomes aware of any action, suit or proceeding
pending or overtly threatened, against or affecting the Parent or the
Borrower or any of the Subsidiaries or with respect to which any of
them may become subject as a result of the acquisition of the
Graniteville Assets, before any court or arbitrator or any
governmental body, agency or official which has or would reasonably be
expected to have or cause a Material Adverse Effect or which in any
manner draws into question the validity of or which has impaired or
would reasonably be expected to impair the ability of the Borrower to
perform its obligations under, this Agreement, the Notes, the Security
Agreement, the Mortgages or any of the other Loan Documents or of the
Parent to perform its obligations under the Parent Documents, a
certificate of the chief financial officer or the chief accounting
officer of the Parent or the Borrower setting forth the details
thereof and the action which the Parent or the Borrower is taking or
proposes to take with respect thereto;
(j) within 5 Domestic Business Days after any officer of the
Parent or the Borrower becomes aware (1) of any Environmental
Liability to which the Parent, the Borrower or any Material Subsidiary
is subject, or may become subject as a result of the acquisition of
the Graniteville Assets, which has had or would reasonably be expected
to have or cause a Material Adverse Effect, or that the Parent, the
Borrower or any Material Subsidiary has been designated as a
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potentially responsible party under CERCLA or under any state statute
similar to CERCLA, a certificate of the chief financial officer or the
chief accounting officer of the Parent or the Borrower setting forth
the details thereof and the action which the Parent or the Borrower is
taking or proposes to take with respect thereto; and
(k) from time to time such additional information
regarding the financial position or business of the Parent, the
Borrower and the Subsidiaries as the Agent, at the request of any
Bank, may reasonably request.
SECTION 5.02. Inspection of Property, Books and Records. The
Parent and the Borrower will (i) keep, and cause each Subsidiary to keep,
proper books of record and account in which full, true and correct entries to
permit preparation of financial statements in conformity with GAAP shall be
made of all dealings and transactions in relation to its business and
activities; and (ii) permit, and cause each Subsidiary to permit,
representatives of any Bank upon reasonable prior notice given by or through
the Agent to visit and conduct reasonable inspections of any of their
respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their respective officers, and, in coordination with such
officers, employees and independent public accountants. Each of the Parent and
the Borrower agrees to cooperate and assist in such visits and inspections, in
each case at such reasonable times and as often as may reasonably be desired.
SECTION 5.03. Fixed Charge Coverage Ratio. The Fixed Charge
Coverage Ratio, calculated at the end of each Fiscal Quarter, shall be greater
than: (i) 1.75 to 1.0 from the end of the third Fiscal Quarter of the 1996
Fiscal Year through the first Fiscal Quarter of the 1997 Fiscal Year; (ii) 2.00
to 1.0 for the second Fiscal Quarter of the 1997 Fiscal Year; (iii) 2.25 to 1.0
for the third and fourth Fiscal Quarters of the 1997 Fiscal Year; and (iv) 2.50
to 1.0 thereafter.
SECTION 5.04. Senior Debt to Cash Flow Ratio. The Senior Debt
to Cash Flow Ratio, calculated at the end of each Fiscal Quarter, shall be less
than 4.00 to 1.0.
SECTION 5.05. Senior Debt to Capitalization Ratio. The Senior
Debt to Capitalization Ratio, calculated at the end of each Fiscal Quarter,
shall be less than 0.65 to 1.0.
SECTION 5.06. Total Debt to Cash Flow Ratio. The Total Debt to
Cash Flow Ratio, calculated at the end of each Fiscal Quarter, shall be less
than: (i) 5.60 to 1.0 from the end of the third Fiscal Quarter of the 1996
Fiscal Year through the first
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Fiscal Quarter of the 1997 Fiscal Year through the first Fiscal Quarter of the
1997 Fiscal Year; and (ii) 5.0 to 1.0 thereafter.
SECTION 5.07. Restricted Payments. The Parent and the
Borrower will not make any Restricted Payment, except, so long as no Default
shall have occurred and be continuing, Restricted Payments may be made in any
Fiscal Year in an amount not exceeding the sum of (i) $5,000,000, plus (ii) 15%
of positive Consolidated Net Income for such Fiscal Year, plus (iii) the
Restricted Payment Carryover Amount.
SECTION 5.08. Strategy Regarding Interest Rate Protection. On
or before July 29, 1996, the Borrower shall have implemented an interest rate
protection strategy reasonably satisfactory to the Agent, applying customary
credit criteria, which may include the establishment and maintenance of an
Interest Rate Protection Agreement or Agreements on reasonable and customary
terms (but without requiring a maximum aggregate amount of actual, as
distinguished from notional, liability thereunder in excess of the amount set
forth in clause (ii) of the definition of "Obligations").
SECTION 5.09. Loans or Advances. Neither the Parent, the
Borrower nor any of the Material Subsidiaries shall make loans or advances to
any Person except, so long as no Event of Default is in existence:
(A) (i) loans or advances to employees not exceeding
$2,000,000 in the aggregate principal amount outstanding at any time, in each
case made in the ordinary course of business and consistent with practices
existing on August 25, 1995; (ii) deposits required by government agencies or
public utilities; and (iii) loans or advances to Wholly Owned Subsidiaries
(other than from the Parent to the Borrower or as provided in Section 5.09(C))
not exceeding $1,000,000 in the aggregate outstanding; provided that after
giving effect to the making of any loans, advances or deposits permitted by
this Section 5.09(A), the aggregate of all loans and advances permitted in this
Section 5.09(A) does not exceed $4,000,000;
(B) loans or advances from the Parent to the Borrower or from
the Borrower to the Parent;
(C) loans or advances to the Receivables Subsidiary evidenced
by a Purchase Money Note; and
(D) other loans or advances (not including any loans and
advances of the types described in clauses (A), (B) or (C) above) in an
aggregate amount, together with Investments permitted by clause (viii) of
Section 5.10, not exceeding the sum of $15,000,000, including Investments in
Oneita Industries, Inc.
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in the amount of $7,500,000 through subordinated debt (and any conversion
thereof to Capital Stock), plus 10% of positive Consolidated Adjusted Tangible
Net Worth as of the date of measurement.
SECTION 5.10. Investments. Neither the Parent, the Borrower
nor any of the Consolidated Subsidiaries shall make Investments in any Person
except as permitted by Section 5.09 and except Investments in (i) direct
obligations of the United States Government maturing within one year, (ii)
certificates of deposit issued by a commercial bank whose credit is
satisfactory to the Agent, (iii) commercial paper rated A1 or the equivalent
thereof by Standard & Poor's Corporation or P1 or the equivalent thereof by
Moody's Investors Service, Inc. and in either case maturing within 6 months
after the date of acquisition, (iv) tender bonds the payment of the principal
of and interest on which is fully supported by a letter of credit issued by a
United States bank whose long-term certificates of deposit are rated at least
AA or the equivalent thereof by Standard & Poor's Corporation and Aa or the
equivalent thereof by Moody's Investors Service, Inc., (v) Investments by
Borrower in the Receivables Subsidiary and obligations consisting of Standard
Securitization Undertakings, (vi) Investments by the Receivables Subsidiary in
a Special Purpose Vehicle and obligations consisting of Standard Securitization
Undertakings, (vii) loans and advances permitted by Section 5.09, and (viii)
other Investments in an aggregate amount on and after the Closing Date,
together with Investments permitted by clause (D) of Section 5.09, not
exceeding the sum of $15,000,000, including Investments in Oneita Industries,
Inc. in the amount of $7,500,000 through Subordinated Debt (and any conversion
thereof to Capital Stock), plus 10% of positive Consolidated Adjusted Tangible
Net Worth as of the date of measurement.
SECTION 5.11. Negative Pledge. Neither the Parent, the
Borrower nor any Consolidated Subsidiary will create, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired by it, except: (i) as to
the Collateral, Liens securing the Obligations and the Permitted Encumbrances,
and (ii) as to other assets:
(a) Liens existing on the date of this Agreement securing
Debt outstanding on the date of this Agreement and described on
Schedule 5.11;
(b) any Lien existing on any asset of any corporation at
the time such corporation becomes a Consolidated Subsidiary and not
created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of the
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cost of acquiring or constructing such asset, provided that such
Lien attaches to such asset concurrently with or within 18 months after
the acquisition or completion of construction thereof;
(d) any Lien on any asset of any corporation existing at
the time such corporation is merged or consolidated with or into the
Borrower or a Consolidated Subsidiary and not created in contemplation
of such event;
(e) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a Consolidated Subsidiary and
not created in contemplation of such acquisition;
(f) Liens securing Debt owing by any Subsidiary to the
Borrower;
(g) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any
of the foregoing paragraphs of this Section, provided that (i) such
Debt is not secured by any additional assets, and (ii) the amount of
such Debt secured by any such Lien is not increased;
(h) Liens incidental to the conduct of its business or
the ownership of its assets which (i) do not secure Debt and (ii) do
not in the aggregate materially detract from the value of its assets
or materially impair the use thereof in the operation of its business;
(i) any Lien on Margin Stock;
(j) Liens on Receivables Program Assets pursuant to a
Receivables Securitization Program; and
(k) Liens (other than on the Transferor Certificate) not
otherwise permitted by the foregoing paragraphs of this Section
securing Debt (other than indebtedness represented by the Notes) in an
aggregate principal amount at any time outstanding not to exceed
$1,000,000;
Provided Liens permitted by the foregoing paragraphs (b) through (e) inclusive,
and (i) shall at no time secure Debt in an aggregate amount greater than
$2,000,000.
SECTION 5.12. Maintenance of Existence. The Parent and the
Borrower shall, and shall cause each Material Subsidiary to, maintain its
corporate existence and carry on its business in substantially the same manner
and in substantially the same
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fields as such business is now carried on and maintained, except as permitted
by Section 5.14.
SECTION 5.13. Dissolution. Neither the Parent, the Borrower
nor any of the Material Subsidiaries shall suffer or permit dissolution or
liquidation either in whole or in part or redeem or retire any shares of its
own stock or that of any Subsidiary, except as permitted by Section 5.07 or
through corporate reorganization to the extent permitted by Section 5.14.
SECTION 5.14. Consolidations, Mergers and Sales of Assets.
The Parent and the Borrower will not, nor will it permit any Subsidiary to,
consolidate or merge with or into, or sell, lease or otherwise transfer all or
any substantial part of its assets to, any other Person (including in a sale
and leaseback transaction, but excluding sales of inventory in the ordinary
course of business), or discontinue or eliminate any business line or segment,
provided that (a) the Borrower may merge with another Person if (i) such Person
was organized under the laws of the United States of America or one of its
states, (ii) the Borrower is the corporation surviving such merger and (iii)
immediately after giving effect to such merger, no Default shall have occurred
and be continuing, (b) Subsidiaries other than the Borrower may merge with one
another, or with and into the Parent, with the Parent being the surviving
corporation, and (c) the foregoing limitation on the sale, lease or other
transfer of assets and on the discontinuation or elimination of a business line
or segment shall not prohibit, (1) any transfers of Receivables Program Assets
pursuant to a Receivables Securitization Program prior to termination of such
program, or (2) during any Fiscal Year, any other transfer of assets (other
than the Transferor Certificate, which may not be transferred) for 100% cash
consideration or the discontinuance or elimination of a business line or
segment (in a single transaction or in a series of related transactions) unless
the aggregate assets to be so transferred or utilized in a business line or
segment to be so discontinued, when combined with all other assets transferred,
and all other assets utilized in all other business lines or segments
discontinued, during such Fiscal Year exceeds $5,000,000, but in any event
subject to the provisions of Section 2.08(b)(i).
SECTION 5.15. Use of Proceeds. The proceeds of the Loans will
be used (i) to acquire the Graniteville Assets, (ii) to refinance existing
revolving credit and other Debt outstanding, (iii) for working capital and (iv)
for general corporate purposes of the Parent, the Borrower or any Subsidiaries.
No portion of the proceeds of the Loans will be used by the Borrower or any
Subsidiary (A) in connection with, whether directly or indirectly, any tender
offer for, or other acquisition of, stock of any corporation with a view
towards
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obtaining control of such other corporation, except in a negotiated
transaction, (B) directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any Margin Stock, or (C) for
any purpose in violation of any applicable law or regulation.
SECTION 5.16. Compliance with Laws; Payment of Taxes. The
Parent and the Borrower will, and will cause each Subsidiary and each member of
the Controlled Group to, comply with applicable laws (including but not limited
to, from and after the adoption of a Plan, ERISA), regulations and similar
requirements of governmental authorities (including but not limited to PBGC),
except where the necessity of such compliance is being contested in good faith
through appropriate proceedings, or has not had and would not reasonably be
expected to have or cause of Material Adverse Effect. The Parent and the
Borrower will, and will cause each Subsidiary to, pay promptly when due all
taxes, assessments, governmental charges, claims for labor, supplies, rent and
other obligations which, if unpaid, would become a lien against the property of
the Parent, the Borrower or any Subsidiary, except liabilities being contested
in good faith and against which, if required, the Borrower will set up reserves
in accordance with GAAP.
SECTION 5.17. Insurance. The Parent and the Borrower will
maintain, and will cause each Material Subsidiary to maintain (either in the
name of the Parent or the Borrower or in such Subsidiary's own name), with
financially sound and reputable insurance companies, insurance on all its
property, or self insurance, in each case consistent with practices existing on
the Closing Date, all as described on Schedule 5.17.
SECTION 5.18. Change in Fiscal Year. The Parent and the
Borrower will not, and will not permit any Material Subsidiary to, change its
Fiscal Year without the consent of the Required Banks.
SECTION 5.19. Maintenance of Property. The Parent and the
Borrower shall, and shall cause each Material Subsidiary to, maintain all of
its properties and assets in good condition, repair and working order, ordinary
wear and tear excepted and subject to prudent business practices.
SECTION 5.20. Environmental Notices. The Parent and the
Borrower shall furnish to the Agent prompt written notice of all material
Environmental Liabilities, pending, threatened or anticipated Environmental
Proceedings, Environmental Notices, Environmental Judgments and Orders, and, to
the Knowledge of their respective officers and Plant managers, Environmental
Releases at, on, in, under or in any way affecting the Properties or any
adjacent property, and all facts, events, or conditions,
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that would reasonably be anticipated to lead to any material Environmental
Liabilities.
SECTION 5.21. Environmental Matters. The Parent and the
Borrower and its Subsidiaries will not knowingly, and will not knowingly permit
any Third Party to, use, produce, manufacture, process, treat, recycle,
generate, store, dispose of, manage at, or otherwise handle, or ship or
transport to or from the Properties any Hazardous Materials (except for
Hazardous Materials such as cleaning solvents, pesticides and other similar
materials used or otherwise handled in the ordinary course of business in
material compliance with all applicable Environmental Requirements) that would
reasonably be expected to lead to any material Environmental Liabilities.
SECTION 5.22. Environmental Release. Each of the Parent and
the Borrower agrees that upon the occurrence of any material Environmental
Release known to any of their respective officers or Plant managers at or on
any of the Properties it will act immediately to investigate the extent of, and
to take appropriate remedial action with respect to such Environmental Release,
whether or not ordered or otherwise directed to do so by any Environmental
Authority.
SECTION 5.23. Additional Consolidated Senior Debt; Debt of
Receivables Subsidiary. Neither the Parent nor the Borrower shall incur or
permit to exist, or permit any Consolidated Subsidiary other than the
Receivables Subsidiary to incur or permit to exist, any Consolidated Senior
Debt not in existence on the Closing Date, and extensions, renewals,
refinancings or refundings thereof (provided that the amount of such
Consolidated Senior Debt is not increased), other than (i) the Obligations;
(ii) Debt permitted to be secured by Liens permitted by Section 5.11; (iii)
Debt of the types described in clause (vii) of the definition of Debt which is
incurred in the ordinary course of business in connection with the sale or
purchase of goods or to assure performance of an obligation to a utility or a
governmental entity or a worker's compensation obligation; (iv) Receivables
Program Obligations; (v) Debt permitted by Section 5.09; and (vi) other Debt in
an aggregate amount outstanding at any time not exceeding $2,000,000. Nothing
in the foregoing shall prohibit the Borrower from incurring obligations
incurred in connection with Interest Rate Protection Agreements. The Borrower
shall not permit the Receivables Subsidiary to incur any Debt or other
liabilities other than in connection with the Receivables Securitization
Program.
SECTION 5.24. Transactions with Affiliates. Neither the
Borrower nor any of its Subsidiaries shall enter into, or be a party to, any
transaction with any Affiliate of the Borrower or such Subsidiary (which
Affiliate is not the Borrower, the Parent
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or a Subsidiary and in any event excluding the Receivables Securitization
Program), except as permitted by law and in the ordinary course of business and
pursuant to reasonable terms which are no less favorable to Borrower, the
Parent or such Subsidiary than would be obtained in a comparable arm's length
transaction with a Person which is not an Affiliate. Upon request of the
Agent, the Borrower shall fully disclose the terms of any such transaction.
SECTION 5.25. Collateral. (a) All manufacturing plants of
the Borrower are listed on Schedule 5.25, which shows, as to each Plant: (i)
the City, Town or other local jurisdiction, and County and State of its
location; (ii) whether the Property on which such Plant is located is owned or
leased by the Borrower, and if leased, the name and address of the owner;
(iii) all Liens on the Property on which such Plant is located; and (iv) the
name, address and type of interest of any Third Party whose consent is required
in connection with the execution, delivery, recording and performance of a
Mortgage as to such Plant or related Property, and whether such consent has
been obtained. If the Borrower opens any additional manufacturing plants, it
shall promptly furnish to the Agent and the Banks a supplement to Schedule 5.25
including such additional plant and a Mortgage and appropriate UCC-1 financing
statements requested by the Agent with respect thereto.
(b) It is the intent of the parties hereto that the
Obligations shall be secured by the Collateral (including the Rolling Stock, if
notice is given by the Agent pursuant to the provisions of Section 4.7 of the
Security Agreement), subject to the provisions of Section 9.18 regarding the
release of the Receivables Program Assets. At the Closing, the Borrower and
the Parent, as applicable, will execute and deliver to the Agent (i) the
Security Agreement and UCC-1 financing statements relating to the personal
property included in the Graniteville Assets, (ii) the Pledge Agreement, (iii)
the Mortgages (undated) and UCC-1 financing statements relating to the fixtures
located at the premises described therein and (iv) if a Receivables
Securitization Program has been closed or is being closed contemporaneously
with the Closing, the Borrower Pledge Agreement, the Receivables Subsidiary
Pledged Stock and the Purchase Money Note, and the Agent will release the
Receivables Program Assets pursuant to such Section 9.18. However, the
Mortgages and the UCC-1 financing statements related thereto described in
clause (iii) above shall be held by the Agent and not filed for record except
subject and pursuant to the provisions of this Section 5.25. The Agent may
date and file for record any of the Mortgages as to one, or more, or all of the
relevant Plants under the following circumstances applicable thereto (such
circumstances applicable to any Plant being the "Triggering Circumstances" as
to such Plant and the related
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Mortgage): (1) as to any of the SunTrust Collateral Plants, at any time (and
from time to time as to individual Plants), at the direction of 100% of the
Banks, and (2) as to the Revolver Collateral Plants, at any time (and from time
to time as to individual Plants) after the occurrence of an Event of Default,
at the direction of the Required Banks, provided, however, with respect to this
clause (2), that if any such Event of Default giving rise to a Triggering
Circumstance (the "Triggering Event of Default") is waived by the Required
Banks, then the foregoing right shall terminate as to such Triggering Event of
Default (but not as to any subsequent Event of Default) if, for a period of 3
consecutive Fiscal Quarters after the date of such waiver (the "Compliance
Measurement Period"), the Borrower shall have been continuously in compliance
with both (A) the covenants contained in Sections 5.03 through 5.06, inclusive,
as in effect on the Closing Date (without giving effect to any amendments to
such covenants after the Closing Date), and (B) all other provisions of this
Agreement as in effect on the date the Triggering Event of Default occurred,
but such right shall terminate only to the extent not already exercised during
the Compliance Measurement Period and shall not affect any Mortgages which have
become Operative Mortgages during the Compliance Measurement Period. At the
request of the Agent, made not more often than once in any Fiscal Year, the
Borrower shall reexecute any one, or more, or all of the Mortgages described in
clause (iii) above.
(c) At any time following the occurrence of the Triggering
Circumstances applicable to any Plant, the Borrower will, from time to time as
to individual Plants, at the request of the Agent and, (i) as to any of the
Revolver Collateral Plants, at the expense of the Borrower, deliver to the
Agent at the earliest practicable time all of the Real Property Documentation
relating to such Plant, (ii) as to all Plants, cooperate in all respects with
the obtaining of Real Property Documentation with respect thereto and the
filing for record of the related Mortgage and UCC-1 financing statement and
(iii) as to the Revolver Collateral Plants, pay all recording fees and costs
and stamp, intangible or other taxes payable in connection with the filing for
record thereof (collectively, the "Recording Expenses").
(d) The Borrower hereby irrevocably appoints the Agent as the
Borrower's attorney-in-fact, following the applicable Triggering Circumstances,
with full authority in the place and stead of the Borrower and in the name of
the Borrower or otherwise, from time to time in the Agent's discretion, to take
any action which the Agent may deem reasonably necessary or advisable to
accomplish the purposes of this Section 5.25, including, without limitation, to
(i) date any undated Mortgage, (ii) insert in the appropriate place the
outstanding principal balance in any Mortgage pertaining to any Plant located
in North
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Carolina, (iii) select and insert the name and address of the Trustee in any
Mortgage pertaining to any Plant located in North Carolina, and (iv) execute,
deliver and record in the appropriate filing office any instrument (including,
without limitation the relevant Mortgage and UCC-1 financing statement), and to
pay the related Recording Expenses.
SECTION 5.26. Subordinated Debt. So long as any Obligations
remain outstanding and the Commitments have not been terminated, the Borrower
will not: (i) make any prepayments (whether optional or mandatory) of principal
of or other amounts under the 10.25% Subordinated Notes or any other
obligations constituting Subordinated Debt (other than the Borrower's 5.65%
Subordinated Payment-in-Kind Notes due 1998, which will be paid in full on the
Closing Date), or purchase or make any deposits for the defeasance of the
10.25% Subordinated Notes or any other obligations constituting Subordinated
Debt; or (ii) amend or modify any of the documents pertaining to the
Subordinated Debt to (1) shorten the maturity thereof, (2) raise the interest
rate, fees or other amounts payable with respect thereto, (3) change any of the
subordination provisions thereof or (4) make any of the covenants contained
therein more restrictive. The Agent shall furnish to the Banks, promptly after
receipt by the Agent, copies of any drafts received by it of (A) any proposed
amendments to the documents pertaining to the 10.25% Subordinated Notes and (B)
documents pertaining to any Subordinated Debt proposed to be issued after the
Closing Date.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal
of any Loan or shall fail to pay any interest on any Loan within 5
Domestic Business Days after such interest shall become due, or shall
fail to pay any fee or other amount payable hereunder within 5
Domestic Business Days after the later of (i) the date such fee or
other amount becomes due or (ii) the date the Borrower receives a
statement therefor; or
(b) the Borrower or the Parent shall fail to observe or
perform any covenant contained in Sections 5.02(ii), 5.03 to 5.07,
inclusive, Sections 5.11 or 5.18;
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(c) (i) the Borrower or the Parent shall fail to observe
or perform any covenant or agreement contained in this Agreement
(other than those covered by paragraph (a) or (b) above) or any
Principal Document or the Parent Documents and such failure shall not
have been cured within 30 days after the earlier to occur of (i)
written notice thereof has been given to the Borrower by the Agent at
the request of any Bank or (ii) an officer of the Borrower otherwise
becomes aware of any such failure; or
(d) any representation, warranty, certification or
statement made by the Borrower or the Parent in Article IV of this
Agreement or in any certificate, financial statement or other document
delivered pursuant to this Agreement shall prove to have been
incorrect or misleading in any material respect when made (or deemed
made); or
(e) the Borrower or any Material Subsidiary shall fail to
make any payment in respect of Debt outstanding (other than the Notes)
in an amount in excess of $2,000,000 when due or within any applicable
grace period; or
(f) (i) any event or condition (other than one described in
clause (ii) below) shall occur which results in the acceleration of
the maturity of Debt outstanding of the Parent, the Borrower or any
Material Subsidiary (including, without limitation, any required
mandatory prepayment or "put" of such Debt to the Parent, the Borrower
or any Material Subsidiary) or enables (or, with the giving of notice
or lapse of time or both, would enable) the holders of such Debt or
any Person acting on such holders' behalf to accelerate the maturity
thereof (including, without limitation, any required mandatory
prepayment or "put" of such Debt to the Parent, the Borrower or any
Material Subsidiary, if in any of the foregoing events the amount of
Debt involved is in excess of $2,000,000; or (ii) the occurrence of a
"SunTrust L/C Default," as defined in the SunTrust Intercreditor
Agreement) or an event of default under any lease, indenture or other
document relating to the industrial development revenue bonds secured
thereby; or
(g) the Parent, the Borrower or any Material Subsidiary
shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding
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commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; or
(h) an involuntary case or other proceeding shall be
commenced against the Parent, the Borrower or any Material Subsidiary
seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Parent, the
Borrower or any Material Subsidiary under the federal bankruptcy laws
as now or hereafter in effect; or
(i) the Parent, the Borrower or any member of the
Controlled Group shall fail to pay when due any material amount which
it shall have become liable to pay to the PBGC or to a Plan under
Title IV of ERISA; or notice of intent to terminate a Plan or Plans
shall be filed under Title IV of ERISA by the Borrower, any member of
the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of
ERISA to terminate or to cause a trustee to be appointed to administer
any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans to enforce Section 515 or
4219(c)(5) of ERISA and such proceeding shall not have been dismissed
within 30 days thereafter; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that
any such Plan or Plans must be terminated; provided, in each case,
that the effect of any of the foregoing would reasonably be expected
to result in an unfunded liability in excess of $2,000,000; or
(j) one or more judgments or orders for the payment of
money in an aggregate amount in excess of $1,000,000 (exclusive of
amounts covered by insurance) shall be rendered against the Parent,
the Borrower or any Material Subsidiary and such judgment or order
shall continue unsatisfied and unstayed for a period of 30 days; or
(k) a federal tax lien for an amount in excess of
$2,000,000 shall be filed against the Borrower or any Subsidiary under
Section 6323 of the Code or a lien of the PBGC shall be filed against
the Borrower or any Subsidiary under Section 4068 of ERISA and in
either case such lien
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shall remain undischarged for a period of 25 days after the date of
filing; or
(l) G. Stephen Felker or his estate shall cease to maintain
voting control over more than 50% of the Capital Stock of the Parent,
or the Borrower shall cease to be a Wholly Owned Subsidiary; or
(m) the occurrence of any event, act, occurrence, or
condition which the Required Banks reasonably determine either has or
is likely to have or cause a Material Adverse Effect;
(n) (i) the Security Agreement, the Pledge Agreement, any
Operative Mortgage or the Parent Guaranty or, after execution and
delivery thereof, the Borrower Pledge Agreement, shall cease, for any
reason, to be in full force and effect or any party thereto (other
than the Agent or the Banks) shall so assert in writing; or (ii) the
Security Agreement, the Pledge Agreement, or any Operative Mortgage
or, after execution and delivery thereof, the Borrower Pledge
Agreement, shall cease to be effective to grant a Lien on the
Collateral described therein with the priority purported to be created
thereby;
then, and in every such event, the Agent shall: (i) if requested by the
Required Banks, by notice to the Borrower terminate the Commitments and they
shall thereupon terminate; (ii) if requested by the Required Banks, by notice
to the Borrower declare the Revolver Loan Notes (together with accrued interest
thereon) to be, and the Notes (including the Swing Loan Note) shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower
together with interest at the Default Rate accruing on the principal amount
thereof from and after the date of such Event of Default; provided that if any
Event of Default specified in paragraph (g) or (h) above occurs with respect to
the Borrower, without any notice to the Borrower or any other act by the Agent
or the Banks, the Commitments shall thereupon terminate and the Notes (together
with accrued interest thereon) shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower together with interest thereon at the Default
Rate accruing on the principal amount thereof from and after the date of such
Event of Default; (iii) file for record any Mortgages and related UCC-1
financing statement on any of the Revolver Collateral Plants pursuant to
Section 5.25 (which shall not constitute a waiver of or otherwise restrict any
other right, power or remedy under any of the Principal Documents or at law or
in equity); or (iv) exercise any rights, powers or remedies under the Security
Agreement or any Operative Mortgage,
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the Pledge Agreement and if it has been executed and delivered pursuant to
Section 9.18, the Borrower Pledge Agreement. Notwithstanding the foregoing,
the Agent shall have available to it all other remedies at law or equity, and
shall exercise any one or all of them at the request of the Required Banks.
SECTION 6.02. Notice of Default. The Agent shall give notice
to the Borrower of any Default under Section 6.01(c) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks
thereof.
ARTICLE VII
THE AGENT AND THE DOCUMENTATION AGENT
SECTION 7.01. Appointment; Powers and Immunities. Each Bank
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the other Loan Documents, and as collateral agent under the
Mortgage and with respect to any Interest Rate Protection Agreement to which
such Bank is a party, with such powers as are specifically delegated to the
Agent by the terms hereof and thereof, together with such other powers as are
reasonably incidental thereto. The Agent: (a) shall have no duties or
responsibilities except as expressly set forth in this Agreement and the other
Loan Documents, and shall not by reason of this Agreement or any other Loan
Document be a trustee for any Bank; (b) shall not be responsible to the Banks
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any Bank under, this Agreement
or any other Loan Document, or for the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
any other document referred to or provided for herein or therein or for any
failure by the Borrower to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan Document except to the
extent requested by the Required Banks, and then only on terms and conditions
satisfactory to the Agent, and (d) shall not be responsible for any action
taken or omitted to be taken by it hereunder or under any other Loan Document
or any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own gross
negligence or wilful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
The provisions of this Article VII are solely for the benefit of the Agent and
the Banks, and the Borrower shall not have any rights as a third party
beneficiary
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of any of the provisions hereof. In performing its functions and duties under
this Agreement and under the other Loan Documents, the Agent shall act solely
as agent of the Banks and does not assume and shall not be deemed to have
assumed any obligation towards or relationship of agency or trust with or for
the Borrower. The duties of the Agent shall be ministerial and administrative
in nature, and the Agent shall not have by reason of this Agreement or any
other Loan Document a fiduciary relationship in respect of any Bank. The
Borrower, the Agent and the Banks each acknowledge and agree that the
Documentation Agent has no responsibilities or duties under this Agreement or
the other Loan Documents and shall have no liability to any of them hereunder
or thereunder.
SECTION 7.02. Reliance by Agent. The Agent shall be entitled
to rely upon any certification, notice or other communication (including any
thereof by telephone, telefax, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper
Person or Persons, and upon advice and statements of legal counsel, independent
accountants or other experts selected by the Agent. As to any matters not
expressly provided for by this Agreement or any other Loan Document, the Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions signed by the Required
Banks, and such instructions of the Required Banks in any action taken or
failure to act pursuant thereto shall be binding on all of the Banks.
SECTION 7.03. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default or an Event of Default (other than the
nonpayment of principal of or interest on the Loans) unless the Agent has
received notice from a Bank or the Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event
that the Agent receives such a notice of the occurrence of a Default or an
Event of Default, the Agent shall give prompt notice thereof to the Banks. The
Agent shall give each Bank prompt notice of each nonpayment of principal of or
interest on the Loans whether or not it has received any notice of the
occurrence of such nonpayment. The Agent shall (subject to Section 9.06) take
such action hereunder with respect to such Default or Event of Default as shall
be directed by the Required Banks, provided that, unless and until the Agent
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Banks.
SECTION 7.04. Rights of Agent and the Documentation Agent as a
Bank. With respect to the Loans made by it, each of
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Wachovia and First Chicago in its capacity as a Bank hereunder shall have the
same rights and powers hereunder as any other Bank and may exercise the same as
though it were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include Wachovia and First Chicago in
their individual capacities. The Agent and the Documentation Agent may
(without having to account therefor to any Bank) accept deposits from, lend
money to and generally engage in any kind of banking, trust or other business
with the Borrower (and any of its Affiliates) as if it were not acting as the
Agent or the Documentation Agent, as applicable, and the Agent and the
Documentation Agent may accept fees and other consideration from the Borrower
(in addition to any agency fees and arrangement fees heretofore agreed to
between the Borrower and the Agent or the Documentation Agent, as applicable)
for services in connection with this Agreement or any other Loan Document or
otherwise without having to account for the same to the Banks.
SECTION 7.05. Indemnification. Each Bank severally agrees to
indemnify the Agent, to the extent the Agent shall not have been reimbursed by
the Borrower, ratably in accordance with its Commitment, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including, without limitation, counsel fees and
disbursements) or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (excluding, unless an Event of Default has
occurred and is continuing, the normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or any such other documents; provided,
however that no Bank shall be liable for any of the foregoing to the extent
they arise from the gross negligence or wilful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished.
SECTION 7.06 CONSEQUENTIAL DAMAGES. THE AGENT SHALL NOT BE
RESPONSIBLE OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY
FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
SECTION 7.07. Payee of Note Treated as Owner. The Agent may
deem and treat the payee of any Note as the owner
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thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with the Agent and the
provisions of Section 9.08(c) have been satisfied. Any requests, authority or
consent of any Person who at the time of making such request or giving such
authority or consent is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee or assignee of that Note or of any Note or
Notes issued in exchange therefor or replacement thereof.
SECTION 7.08. Nonreliance on Agent and Other Banks. Each Bank
agrees that it has, independently and without reliance on the Agent, the
Documentation Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrower and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Loan Documents. Neither the Agent nor
the Documentation Agent shall be required to keep itself informed as to the
performance or observance by the Borrower of this Agreement or any of the other
Loan Documents or any other document referred to or provided for herein or
therein or to inspect the properties or books of the Borrower or any other
Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder or under
the other Loan Documents, neither the Agent nor the Documentation Agent shall
have any duty or responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of the
Borrower or any other Person (or any of their Affiliates) which may come into
the possession of the Agent.
SECTION 7.09. Failure to Act. Except for action expressly
required of the Agent hereunder or under the other Loan Documents, the Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction
by the Banks of their indemnification obligations under Section 7.05 against
any and all liability and expense which may be incurred by the Agent by reason
of taking, continuing to take, or failing to take any such action.
SECTION 7.10. Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent
may resign at any time by giving notice thereof to the Banks and the Borrower
and the Agent may be removed at any time with or without cause by the Required
Banks. Upon any such resignation or removal, the Required Banks shall
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have the right to appoint a successor Agent, provided that the Borrower shall
have the right to consent to any such successor Agent which is not a Bank,
which consent shall not be unreasonably withheld or delayed. If no successor
Agent shall have been so appointed by the Required Banks and shall have
accepted such appointment within 30 days after the retiring Agent's notice of
resignation or the Required Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent. Any
successor Agent shall be a bank which has a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Article VII shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Agent hereunder.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period:
(a) the Agent determines that deposits in Dollars (in the
applicable amounts) are not being offered in the relevant market for
such Interest Period, or
(b) the Required Banks advise the Agent that the London
Interbank Offered Rate as determined by the Agent will not adequately
and fairly reflect the cost to such Banks of funding Euro-Dollar Loans
for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
Euro-Dollar Loans shall be suspended. Unless the Borrower notifies the Agent
at least 2 Domestic Business Days before the date of any Borrowing of
Euro-Dollar Loans for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date, such Borrowing shall instead be made
as a Base Rate Borrowing.
SECTION 8.02. Illegality. If, after the date hereof, the
adoption of any applicable law, rule or regulation, or any
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change therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof (any such agency being referred to
as an "Authority" and any such event being referred to as a "Change of Law"),
or compliance by any Bank (or its Lending Office) with any request or directive
issued after the date hereof (whether or not having the force of law) of any
Authority shall make it unlawful or impossible for any Bank (or its Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so
notify the Agent, the Agent shall forthwith give notice thereof to the other
Banks and the Borrower, whereupon until such Bank notifies the Borrower and the
Agent that the circumstances giving rise to such suspension no longer exist,
the obligation of such Bank to make Euro-Dollar Loans shall be suspended.
Before giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Lending Office if such designation will avoid the need
for giving such notice and will not, in the judgment of such Bank, be otherwise
materially disadvantageous to such Bank. If such Bank shall determine that it
may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower
shall immediately prepay in full the then outstanding principal amount of each
Euro-Dollar Loan of such Bank, together with accrued interest thereon.
Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall
borrow a Base Rate Loan in an equal principal amount from such Bank (on which
interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base
Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If after
the date hereof, a Change of Law or compliance by any Bank (or its Lending
Office) with any request or directive issued after the date hereof (whether or
not having the force of law) of any Authority:
(i) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding, with respect to any Euro-Dollar Loan,
any such requirement included in an applicable Euro-Dollar Reserve
Percentage, against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Lending Office); or
(ii) shall impose on any Bank (or its Lending Office) or on
the London interbank market any other condition affecting its
Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar
Loans;
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and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction; provided, that the Borrower shall have no liability
hereunder for amounts which were incurred or accrued prior to a date which is
more than 180 days before the Borrower's receipt of the notice pertaining
thereto given pursuant to paragraph (c) below.
(b) If any Bank shall have determined that after the date
hereof the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office) with
any request or directive issued after the date hereof regarding capital
adequacy (whether or not having the force of law) of any Authority, has or
would have the effect of reducing the rate of return on such Bank's capital as
a consequence of its obligations hereunder to a level below that which such
Bank could have achieved but for such adoption, change or compliance (taking
into consideration such Bank's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, within 15
days after demand by such Bank, the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such reduction;
provided, that the Borrower shall have no liability hereunder for amounts
which were incurred or accrued prior to a date which is more than 180 days
before the Borrower's receipt of the notice given pursuant to paragraph (c)
below.
(c) Each Bank will promptly notify the Borrower and the
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment
of such Bank, be otherwise materially disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder, containing
in reasonable detail the calculations therefor, shall be conclusive in the
absence of manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods generally employed in determining
compensation of such type with respect to its other borrowers.
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(d) Notwithstanding the foregoing, in the event the
Borrower is required to pay any Bank amounts pursuant to Section 2.11(c) or to
this Section 8.03 and the designation of a different Lending Office pursuant to
Section 2.11(c) or Section 8.03(c) will not avoid the need for compensation to
such Bank (an "Affected Bank"), the Borrower may give notice to such Affected
Bank (with copies to the Agent) that it wishes to seek one or more assignees
(which may be one or more of the Banks) to assume the Commitment of such
Affected Bank and to purchase its outstanding Loans and Notes; provided, that
if there is more than one Affected Bank which has requested substantially and
proportionally equal compensation hereunder, the Borrower shall elect to seek
an assignee to assume the Commitments of all such Affected Banks. Each
Affected Bank agrees to sell its Commitment, Loans, Notes and interest in this
Agreement in accordance with Section 9.08(c) to any such assignee for an amount
equal to the sum of the outstanding unpaid principal of and accrued interest on
such Loans and Notes, plus all other fees and amounts (including, without
limitation, any compensation claimed by such Affected Banks under Section
2.11(c) or this Section 8.03 due such Affected Bank hereunder calculated, in
each case, to the date such Loans, Notes and interest are purchased. Upon such
sale or prepayment, each such Affected Bank shall have no further commitment or
other obligation to the Borrowers hereunder or under any Note.
(e) Subject to Section 9.08(e), the provisions of this
Section 8.03 shall be applicable with respect to any Transferee, and any
calculations required by such provisions shall be made based upon the
circumstances of such Transferee.
SECTION 8.04. Base Rate Loans or Other Fixed Rate Loans
Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank
to make or maintain any type of Fixed Rate Loans has been suspended pursuant to
Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03, and
the Borrower shall, by at least 5 Euro-Dollar Business Days' prior notice to
such Bank through the Agent, have elected that the provisions of this Section
shall apply to such Bank, then, unless and until such Bank notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank
as Set Rate Loans or Euro-Dollar Loans, as the case may be, shall,
subject to the terms and conditions relating thereto, be made instead
either (A) as Base Rate Loans, or (B) if such demand for compensation
relates to Set Rate Loans, but not Euro-Dollar Loans, as Euro-Dollar
Loans, as the Borrower may elect in the notice to such Bank through
the Agent referred to hereinabove (in all cases interest and
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principal on such Loans shall be payable contemporaneously with the
related Fixed Rate Loans of the other Banks), and
(b) after each of its Set Rate Loans or Euro-Dollar
Loans, as the case may be, has been repaid, all payments of principal
which would otherwise be applied to repay such Fixed Rate Loans shall
be applied to repay its Base Rate Loans instead.
SECTION 8.05. Compensation. Upon the request of any Bank,
delivered to the Borrower and the Agent, the Borrower shall pay to such Bank
such amount or amounts as shall compensate such Bank for any loss, cost or
expense incurred by such Bank, as determined by it in good faith, using
reasonable allocation and attribution methods, as a result of:
(a) any payment or prepayment (pursuant to Section 2.09,
2.10, 6.01, 8.02 or otherwise) of a Fixed Rate Loan on a date other than the
last day of an Interest Period for such Fixed Rate Loan; or
(b) any failure by the Borrower to borrow a Fixed Rate
Loan on the date for the Fixed Rate Borrowing of which such Fixed Rate Loan is
a part specified in the applicable Notice of Borrowing delivered pursuant to
Section 2.02 or failure to borrow a Set Rate Borrowing pursuant to Section
2.01.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telecopier or similar writing) and shall be given to such party at its address
or telecopier number set forth on the signature pages hereof or such other
address or telecopier number as such party may hereafter specify for the
purpose by notice to each other party. Each such notice, request or other
communication shall be effective (i) if given by telecopier, when such telecopy
is transmitted to the telecopier number specified in this Section and the
appropriate confirmation is received, (ii) if given by mail, 3 Domestic
Business Days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified in this Section; provided that
notices to the Agent under Article II or Article VIII shall not be effective
until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or
any Bank in exercising any right, power or privilege hereunder or under any
Note or other Loan Document shall operate
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as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes. The Borrower shall
pay (i) all out-of-pocket expenses of the Agent, including reasonable fees and
disbursements actually incurred of special counsel for the Agent, in connection
with the preparation of this Agreement and the other Loan Documents, any waiver
or consent hereunder or thereunder or any amendment hereof or thereof or any
Default or alleged Default hereunder or thereunder and (ii) if a Default
occurs, all reasonable out-of-pocket expenses actually incurred by the Agent
and the Banks, including reasonable fees and disbursements actually incurred of
counsel, in connection with such Default and collection and other enforcement
proceedings resulting therefrom, including reasonable out-of-pocket expenses
actually incurred in enforcing this Agreement and the other Loan Documents.
The Borrower shall indemnify the Agent and each Bank against any transfer
taxes, documentary taxes, assessments or charges made by any Authority by
reason of the execution and delivery of this Agreement or the other Loan
Documents, except with respect to the SunTrust Collateral Plants.
SECTION 9.04. Indemnification. The Borrower shall indemnify
the Agent, the Documentation Agent and the Banks and each affiliate thereof and
their respective directors, officers, employees and agents from, and hold each
of them harmless against, any and all losses, liabilities, claims or damages to
which any of them may become subject, insofar as such losses, liabilities,
claims or damages arise out of or result from any actual or proposed use by the
Borrower of the proceeds of any extension of credit by any Bank hereunder or
breach by the Borrower of this Agreement or any other Loan Document or from any
investigation, litigation or other proceeding (including, without limitation,
any threatened investigation or proceeding) relating to the foregoing, and the
Borrower shall reimburse the Agent, the Documentation Agent and each Bank, and
each affiliate thereof and their respective directors, officers, employees and
agents, upon demand for any reasonable expenses (including, without limitation,
reasonable legal fees) actually incurred in connection with any such
investigation or proceeding; but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
wilful misconduct of the Person to be indemnified.
SECTION 9.05 Setoff; Sharing of Setoffs. (a) The Borrower
agrees that the Agent and each Bank, and Wachovia as to the Swing Loan Note,
shall have a lien for all indebtedness and
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obligations owing to them from the Borrower upon, except to the extent any such
property is Receivables Program Assets, all deposits or deposit accounts, of
any kind, or any interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to the Agent or any such
Bank or otherwise in the possession or control of the Agent or any such Bank
for any purpose for the account or benefit of the Borrower and including any
balance of any deposit account or of any credit of the Borrower with the Agent
or any such Bank, whether now existing or hereafter established hereby
authorizing the Agent and each Bank at any time or times with or without prior
notice to apply such balances or any part thereof to such of the indebtedness
and obligations owing by the Borrower to the Lenders and/or the Agent then past
due and in such amounts as they may elect, and whether or not the collateral,
if any, or the responsibility of other Persons primarily, secondarily or
otherwise liable may be deemed adequate. For the purposes of this paragraph,
all remittances and property shall be deemed to be in the possession of the
Agent or any such Bank as soon as the same may be put in transit to it by mail
or carrier or by other bailee.
(b) Each Bank agrees that if it shall, by exercising any
right of setoff or counterclaim or otherwise, receive payment of a proportion
of the aggregate amount of principal and interest owing with respect to the
Revolver Loan Note held by it which is greater than the proportion received by
any other Bank in respect of the aggregate amount of all principal and interest
owing with respect to the Revolver Loan Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Revolver Loan Notes held by the other Banks owing to such
other Banks, and such other adjustments shall be made, as may be required so
that all such payments of principal and interest with respect to the Revolver
Loan Notes held by the Banks owing to such other Banks shall be shared by the
Banks pro rata; provided that (i) nothing in this Section shall impair the
right of any Bank to exercise any right of setoff or counterclaim it may have
and to apply the amount subject to such exercise to the payment of indebtedness
of the Borrower other than its indebtedness under the Revolver Loan Notes, and
(ii) if all or any portion of such payment received by the purchasing Bank is
thereafter recovered from such purchasing Bank, such purchase from each other
Bank shall be rescinded and such other Bank shall repay to the purchasing Bank
the purchase price of such participation to the extent of such recovery
together with an amount equal to such other Bank's ratable share (according to
the proportion of (x) the amount of such other Bank's required repayment to (y)
the total amount so recovered from the purchasing Bank) of any interest or
other amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Borrower agrees, to the fullest
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<PAGE> 85
extent it may effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of setoff or counterclaim and other rights
with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.06. Amendments and Waivers. (a) Any provision of
this Agreement, the Notes or any other Loan Documents may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrower and the Required Banks (and, if the rights or duties of the Agent are
affected thereby, by the Agent); provided that, no such amendment or waiver
shall, unless signed by all Banks, (i) change the Commitment of any Bank or
subject any Bank to any additional obligation, (ii) change the principal of or
rate of interest on any Loan or any fees hereunder, (iii) change the
Termination Date or the date fixed for any payment of principal of or interest
on any Loan or any fees hereunder, (iv) change the amount of principal,
interest or fees due on any date fixed for the payment thereof, (v) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes, or the percentage of Banks, which shall be required for the Banks or
any of them to take any action under this Section or any other provision of
this Agreement, (vi) change the manner of application of any payments made
under this Agreement or the Notes, (vii) release or substitute all or any
substantial part of the Collateral, except for the release of the Receivables
Program Assets pursuant to Section 9.18, (viii) release any Guarantee given to
support payment of the Loans (ix) change the percentage of Banks required to
give the direction to the Agent pursuant to clause (i) of the last sentence of
Section 5.25(b) or (x) amend this Section 9.06(a).
(b) The Borrower will not solicit, request or negotiate
for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement unless each Bank shall be informed thereof by the
Borrower and shall be afforded an opportunity of considering the same and shall
be supplied by the Borrower with sufficient information to enable it to make an
informed decision with respect thereto. Executed or true and correct copies of
any waiver or consent effected pursuant to the provisions of this Agreement
shall be delivered to each Bank forthwith following the date on which the same
shall have been executed and delivered by the requisite percentage of Banks.
The Borrower will not, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any Bank (in its capacity as such) as consideration for or as an
inducement to the entering into by such Bank of any waiver or amendment of any
of
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the terms and provisions of this Agreement unless such remuneration is
concurrently paid, on the same terms, ratably to all such Banks.
SECTION 9.07. No Margin Stock Collateral. Each of the Banks
represents to the Agent and each of the other Banks that it in good faith is
not, directly or indirectly (by negative pledge or otherwise), relying upon any
Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 9.08. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided that the Borrower
may not assign or otherwise transfer any of its rights under this Agreement.
(b) Any Bank may at any time sell to one or more Persons
(each a "Participant") participating interests in any Loan owing to such Bank,
any Note held by such Bank, any Commitment hereunder or any other interest of
such Bank hereunder. In the event of any such sale by a Bank of a
participating interest to a Participant, such Bank's obligations under this
Agreement shall remain unchanged, such Bank shall remain solely responsible for
the performance thereof, such Bank shall remain the holder of any such Note for
all purposes under this Agreement, and the Borrower and the Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement. In no event shall a Bank
that sells a participation be obligated to the Participant to take or refrain
from taking any action hereunder except that such Bank may agree that it will
not (except as provided below), without the consent of the Participant, agree
to (i) the change of any date fixed for the payment of principal of or interest
on the related loan or loans, (ii) the change of the amount of any principal,
interest or fees due on any date fixed for the payment thereof with respect to
the related loan or loans, (iii) the change of the principal of the related
loan or loans, (iv) any change in the rate at which either interest is payable
thereon or (if the Participant is entitled to any part thereof) fee is payable
hereunder from the rate at which the Participant is entitled to receive
interest or fee (as the case may be) in respect of such participation, (v) the
release or substitution of all or any substantial part of the Collateral,
except the release of the Receivables Program Assets pursuant to Section 9.18,
or (vi) the release of the Parent Documents. Each Bank selling a participating
interest in any Loan, Note, Commitment or other interest under this Agreement
shall, within 10 Domestic Business Days of such sale, provide the Borrower and
the Agent with written notification stating that such sale has occurred and
identifying the Participant and the interest
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purchased by such Participant. The Borrower agrees that each Participant shall
be entitled to the benefits of Article VIII with respect to its participation
in Loans outstanding from time to time, subject to the provisions of Section
9.08(e).
(c) Any Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of
all, of its rights and obligations under this Agreement, the Notes and the
other Loan Documents (including, without limitation, the obligations and
agreements contained in Section 5 of the Receivables Intercreditor Agreement),
and such Assignee shall assume all such rights and obligations, pursuant to an
Assignment and Acceptance, executed by such Assignee, such transferor Bank and
the Agent (and in the case of an Assignee that is not then a Bank, unless an
Event of Default is in existence, by the Borrower); provided that (i) no
interest may be sold by a Bank to an Assignee which is not then a Bank or
Affiliate thereof pursuant to this paragraph (c) unless the Assignee has
combined capital and surplus of not less than $100,000,000 and shall agree to
assume ratably equivalent portions of the transferor Bank's Commitment, (ii)
the amount of the Commitment of the assigning Bank subject to such assignment
(determined as of the effective date of the assignment) shall be equal to or
greater than $10,000,000; and (iii) the Agent and, except during the existence
of an Event of Default, the Borrower, has consented thereto, which consents
shall not be unreasonably withheld or delayed. Upon (A) execution of the
Assignment and Acceptance by such transferor Bank, such Assignee, the Agent and
(if applicable) the Borrower, (B) delivery of an executed copy of the
Assignment and Acceptance to the Borrower and the Agent, (C) payment by such
Assignee to such transferor Bank of an amount equal to the purchase price
agreed between such transferor Bank and such Assignee, and (D) payment of a
processing and recordation fee of $2,500 to the Agent, such Assignee shall for
all purposes be a Bank party to this Agreement and shall have all the rights
and obligations of a Bank under this Agreement to the same extent as if it were
an original party hereto with a Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by the
Borrower, the Banks or the Agent shall be required. Upon the consummation of
any transfer to an Assignee pursuant to this paragraph (c), the transferor
Bank, the Agent and the Borrower shall make appropriate arrangements so that,
if required and as applicable, new Notes are issued to such Assignee and
transferor Bank.
(d) Subject to the provisions of Section 9.09, the Borrower
authorizes each Bank to disclose to any Participant or Assignee (each a
"Transferee") and any prospective Transferee any and all financial information
in such Bank's possession
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concerning the Borrower which has been delivered to such Bank by the Borrower
pursuant to this Agreement or which has been delivered to such Bank by the
Borrower in connection with such Bank's credit evaluation prior to entering
into this Agreement.
(e) No Transferee shall be entitled to receive any greater
payment under Section 8.03 than the transferor Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made
with the Borrower's prior written consent or by reason of the provisions of
Section 8.02 or 8.03 requiring such Bank to designate a different Lending
Office under certain circumstances or at a time when the circumstances giving
rise to such greater payment did not exist.
(f) Anything in this Section 9.08 to the contrary
notwithstanding, any Bank may assign and pledge all or any portion of the Loans
and/or obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such
assigned Loans and/or obligations made by the Borrower to the assigning and/or
pledging Bank in accordance with the terms of this Agreement shall satisfy the
Borrower's obligations hereunder in respect of such assigned Loans and/or
obligations to the extent of such payment. No such assignment shall release
the assigning and/or pledging Bank from its obligations hereunder.
SECTION 9.09. Confidentiality. Each Bank agrees to exercise
reasonable efforts to keep any information delivered or made available by the
Borrower to it confidential from anyone other than persons employed or retained
by such Bank who are or are expected to become engaged in evaluating,
approving, structuring or administering the Loans; provided, however that
nothing herein shall prevent any Bank from disclosing such information (i) to
any other Bank, (ii) upon the order of any court or administrative agency,
(iii) upon the request or demand of any regulatory agency or authority having
jurisdiction over such Bank, (iv) which has been publicly disclosed by or on
behalf of the Borrower, (v) to the extent reasonably required in connection
with any litigation to which the Agent, any Bank or their respective Affiliates
may be a party, (vi) to the extent reasonably required in connection with the
exercise of any remedy hereunder, (vii) to such Bank's legal counsel and
independent auditors and (viii) to any actual or proposed Participant, Assignee
or other Transferee of all or part of its rights hereunder which has agreed in
writing to be bound by the provisions of this Section 9.09; provided, that,
should disclosure of any such confidential information be required by virtue of
either clause (ii) or (iii) of the immediately preceding sentence, any relevant
Bank shall promptly notify the
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Borrower of same so as to allow the Borrower to seek a protective order or to
take any other appropriate action; provided, further, that, no Bank shall be
required to delay compliance with any directive to disclose any such
information so as to allow the Borrower to effect any such action.
SECTION 9.10. Representation by Banks. Each Bank hereby
represents that it is a commercial lender or financial institution which makes
Loans in the ordinary course of its business and that it will make its Loans
hereunder for its own account in the ordinary course of such business;
provided, however that, subject to Section 9.08, the disposition of the Note or
Notes held by that Bank shall at all times be within its exclusive control.
SECTION 9.11. Obligations Several. The obligations of each
Bank hereunder are several, and no Bank shall be responsible for the
obligations or commitment of any other Bank hereunder. Nothing contained in
this Agreement and no action taken by the Banks pursuant hereto shall be deemed
to constitute the Banks to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Bank shall be a separate and independent debt, and each Bank shall be entitled
to protect and enforce its rights arising out of this Agreement or any other
Loan Document and it shall not be necessary for any other Bank to be joined as
an additional party in any proceeding for such purpose.
SECTION 9.12. Georgia Law. This Agreement and each Note shall
be construed in accordance with and governed by the law of the State of
Georgia.
SECTION 9.13. Severability. In case any one or more of the
provisions contained in this Agreement, the Notes or any of the other Loan
Documents should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby and
shall be enforced to the greatest extent permitted by law.
SECTION 9.14. Interest. In no event shall the amount of
interest due or payable hereunder or under the Notes exceed the maximum rate of
interest allowed by applicable law, and in the event any such payment is
inadvertently made to any Bank by the Borrower or inadvertently received by any
Bank, then such excess sum shall be credited as a payment of principal, unless
the Borrower shall notify such Bank in writing that it elects to have such
excess sum returned forthwith. It is the express intent hereof that the
Borrower not pay and the Banks not receive, directly or indirectly in any
manner whatsoever,
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interest in excess of that which may legally be paid by the Borrower under
applicable law.
SECTION 9.15. Interpretation. No provision of this Agreement
or any of the other Loan Documents shall be construed against or interpreted to
the disadvantage of any party hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured or dictated such provision.
SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction.
THE BORROWER (A) AND EACH OF THE BANKS AND THE AGENT AND THE DOCUMENTATION
AGENT IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, (B) SUBMITS TO THE
NONEXCLUSIVE PERSONAL JURISDICTION IN THE STATE OF GEORGIA, THE COURTS THEREOF
AND THE UNITED STATES DISTRICT COURTS SITTING THEREIN, FOR THE ENFORCEMENT OF
THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS, (C) WAIVES ANY AND ALL
PERSONAL RIGHTS UNDER THE LAW OF ANY JURISDICTION TO OBJECT ON ANY BASIS
(INCLUDING, WITHOUT LIMITATION, INCONVENIENCE OF FORUM) TO JURISDICTION OR
VENUE WITHIN THE STATE OF GEORGIA FOR THE PURPOSE OF LITIGATION TO ENFORCE THIS
AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, AND (D) AGREES THAT SERVICE
OF PROCESS MAY BE MADE UPON IT IN THE MANNER PRESCRIBED IN SECTION 9.01 FOR THE
GIVING OF NOTICE TO THE BORROWER. NOTHING HEREIN CONTAINED, HOWEVER, SHALL
PREVENT THE AGENT FROM BRINGING ANY ACTION OR EXERCISING ANY RIGHTS AGAINST ANY
SECURITY AND AGAINST THE BORROWER PERSONALLY, AND AGAINST ANY ASSETS OF THE
BORROWER, WITHIN ANY OTHER STATE OR JURISDICTION.
SECTION 9.17. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 9.18. Release of Receivables Program Assets.
Contemporaneously with the closing of the Receivables Securitization Program,
upon the written request of the Borrower, the Agent shall execute and deliver
the Receivables Intercreditor Agreement (which will release the security
interest in Receivables Program Assets) and such other instruments as
the Borrower or the Trustee under the Receivables Program Documents may
reasonably request, releasing and terminating the security interest in the
Receivables Program Assets of the Agent pursuant to the Security Agreement and
the UCC-1 financing statements related thereto, provided that: (i) the Borrower
executes and delivers the Borrower Pledge Agreement; and (ii) the Borrower
delivers in pledge to the Agent, for the ratable benefit of the Banks, all of
the Receivables Subsidiary Pledged Stock and the
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Purchase Money Note, to secure payment of the Obligations. Each of the Banks
hereby (a) authorizes the Agent to execute, deliver and perform the Receivables
Intercreditor Agreement and (b) agrees to be bound by the terms and provisions
thereof, including, without limitation, the provisions of Section 5 thereof.
The Borrower agrees that, so long as any Obligations or Commitments remain
outstanding, it will not exercise its right to continue to make sales of
Receivables under (i) the Purchase Agreement (as defined in the Receivables
Intercreditor Agreement) at a time when sales otherwise would automatically
terminate under Section 8.2 thereof, or (ii) under any comparable agreement
under any other Receivables Securitization Program under comparable
circumstances.
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<PAGE> 92
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, under seal, by their respective authorized
officers as of the day and year first above written.
<TABLE>
<S> <C> <C>
AVONDALE MILLS, INC. (SEAL)
By:
------------------------------------------------------------------------
Title:
Avondale Mills, Inc.
506 South Broad Street
Monroe, Georgia 30655
Attention: Chairman and Chief
Executive Officer
Telecopier number: 770-267-2543
Confirmation number: 770-267-2226
COMMITMENTS WACHOVIA BANK OF GEORGIA, N.A.,
- ----------- as Agent and as a Bank (SEAL)
$80,000,000
By:
------------------------------------------------------------------------
Title:
Lending Office
--------------
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Commercial Group
Telecopier number: 404-332-6920
Confirmation number: 404-332-6094
</TABLE>
85
<PAGE> 93
<TABLE>
<S> <C> <C>
$60,000,000 THE FIRST NATIONAL BANK OF
CHICAGO, as Documentation Agent
and as a Bank (SEAL)
By:
------------------------------------------------------------------------
Title:
Lending Office
--------------
The First National Bank of Chicago
1 First National Plaza
Suite 0374
Chicago, Illinois 60670-0374
Attention: Al Chircop
Telecopier number: 312-732-3885
Confirmation number: 312-732-1491
$40,000,000 NATIONSBANK, N.A.
(SEAL)
By:
------------------------------------------------------------------------
Title:
Lending Office
--------------
NationsBank, N.A.
100 N. Tryon Street
Mail Code NC1-007-08-11
Charlotte, North Carolina 28255
Attention: J. Lance Walton
Telecopier number: 704-386-3271
Confirmation number: 704-386-6744
$22,500,000 FIRST ALABAMA BANK (SEAL)
By:
------------------------------------------------------------------------
Title:
Lending Office
--------------
First Alabama Bank
417 N. 20th Street
Birmingham, Alabama 35203
Attention: Mark Howze
Telecopier number: 205-326-7662
Confirmation number: 205-326-7193
</TABLE>
86
<PAGE> 94
<TABLE>
<S> <C>
$22,500,000 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
(SEAL)
By:
------------------------------------------------------------------------
Title:
Lending Office
--------------
First Union National Bank of
North Carolina
301 South College Street
TW-18
Charlotte, North Carolina 28288-0737
Attention: John M. Burlingame
Telecopier number: 704-374-3300
Confirmation number: 704-374-4191
TOTAL COMMITMENTS:
$225,000,000
</TABLE>
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<PAGE> 95
EXHIBIT A-1 Form of Revolver Loan Note
EXHIBIT A-2 Form of Swing Loan Note
EXHIBIT B-1 Form of Opinion of Georgia Counsel for the Borrower and the
Parent
EXHIBIT B-2 Form of Opinion of Alabama Counsel for the Borrower
(v)
<PAGE> 96
<TABLE>
<S> <C>
EXHIBIT B-3 Form of Local Counsel Opinion as to Mortgage
EXHIBIT C Form of Opinion of Special Counsel for the Agent
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Closing Certificate
EXHIBIT H Form of Mortgage
EXHIBIT I Form of Amended and Restated Parent Guaranty
EXHIBIT J Form of Amended and Restated Security Agreement
EXHIBIT K Form of Amended and Restated SunTrust
Intercreditor Agreement
EXHIBIT L Form of Amended and Restated Stock Pledge
Agreement
EXHIBIT M Form of Receivables Intercreditor Agreement
EXHIBIT N Form of Borrower Pledge Agreement
Schedule 4.04 Intangible Assets in Existence Prior to the Closing Date
Schedule 4.05 Litigation
Schedule 4.08 Subsidiaries
Schedule 4.14 Environmental Matters
Schedule 5.11 Existing Liens
Schedule 5.17 Description of Insurance
Schedule 5.25 Plants
</TABLE>
The registrants agree to furnish a copy of the Schedules and Exhibits
listed above to the Securities and Exchange Commission upon request.
(vi)
<PAGE> 1
EXHIBIT 4.4
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (this "Agreement") is
made and entered into as of April 29, 1996 by and between AVONDALE MILLS, INC.
(the "Borrower") and WACHOVIA BANK OF GEORGIA, N.A. as agent for the Banks
parties to the "Credit Agreement" (as hereinafter defined) (the "Agent")
W I T N E S S E T H:
WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement, dated as of even date herewith, among Borrower, the Agent, The First
National Bank of Chicago, as Documentation Agent, and the Banks parties thereto
(as amended or modified from time to time, the "Credit Agreement"), the
Borrower is or may hereafter become indebted to the Banks and the Agent; and
WHEREAS, the Borrower executed and delivered a Security Agreement
dated as of March 29, 1994 (the "Original Security Agreement" pursuant to a
Credit Agreement by and among the Borrower, the Agent and the Banks party
thereto (the "Original Credit Agreement"); and
WHEREAS, in order to secure said indebtedness and to induce the Banks
and the Agent to execute and enter into the Credit Agreement, the Borrower has
agreed to execute and deliver this Agreement, granting a security interest in,
and lien upon, the Collateral to the Agent for the benefit of the Banks, and
continuing in effect the security interest in, and lien upon, the Collateral
granted to the Agent pursuant to the Original Security Agreement; and
WHEREAS, it is the intent of the parties that this Agreement amend,
restate and supersede the Original Security Agreement, and continue in effect
the security interests and liens granted thereto without lapse or loss of
perfection, and that all UCC-1's filed in connection with the Original Security
Agreement continue to perfect the security interests and liens in the
Collateral granted and continued in effect pursuant hereto;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged and Borrower and the Agent hereby covenant and agree as
follows:
1. DEFINITIONS. Unless otherwise defined herein, capitalized
terms used herein have the meanings set forth in the Credit Agreement. In
addition, the following terms have the meanings set forth below, unless the
context requires otherwise:
"Accounts Receivable Collateral" means all rights of
the Borrower to payment for goods sold or leased, or to be sold or to be
leased, or for services rendered or to be rendered,
<PAGE> 2
howsoever evidenced or incurred, including, without limitation, all accounts,
instruments, chattel paper and general intangibles, all returned or repossessed
goods and all books, records, computer tapes, programs and ledger books arising
therefrom or relating thereto, whether now owned or hereafter acquired or
arising.
"Account Debtor" means the Person who is obligated on
any of the Accounts Receivable Collateral or otherwise is obligated as a
purchaser or lessee of any of the Inventory Collateral.
"Act" means the Uniform Commercial Code - Secured
Transactions of Georgia (O.C.G.A. Art. 11-9), and any act that may be
substituted therefor, as from time to time amended.
"Agreement" means this Agreement, together with all
exhibits, riders, supplements, addenda and additions now or hereafter attached
hereto or made a part hereof, and all amendments hereof.
"Collateral" means and includes all of the property
described in Paragraph 4 hereof, including all property of such type consisting
of the Graniteville Assets, but subject to the provisions of Section 11.8 as to
Receivables Program Assets.
"Collateral Locations" means those locations set
forth on Exhibit "A" attached hereto and by this reference made a part hereof.
"Credit Agreement" has the meaning set forth in the
recitals hereto.
"Documentary Collateral" means all chattel paper,
instruments, documents or notes (excluding any of the foregoing arising out of
the sale or lease of goods or the furnishing of services) and all payments
thereunder and instruments and other property from time to time delivered in
respect thereof or in exchange therefor, and all bills of sale, bills of
lading, warehouse receipts, and other documents of title, whether now owned or
hereafter acquired or arising.
"Equipment Collateral" means all equipment of the
Borrower, or in which it has rights, whether now owned or hereafter acquired,
wherever located, including, without limitation, all machinery, furniture,
furnishings, leasehold improvements, motor vehicles, forklifts, rolling stock,
dies and tools used or useful in the Borrower's business but excluding, in any
event, (i) all fixtures, and (ii) all machinery and equipment listed on Exhibit
"B" attached hereto and by this reference made a part hereof.
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"Intangibles Collateral" means all general
intangibles of the Borrower (excluding any general intangibles evidencing
rights of the Borrower to payment for goods sold or leased, or to be sold or
leased, or for services rendered or to be rendered), whether now existing or
hereafter acquired or arising, including, without limitation, all copyrights,
royalties, trademarks, trade names, tax refunds, rights to tax refunds, service
marks, patent and proprietary rights, blueprints, drawings, designs, trade
secrets, plans, diagrams, schematics and assembly and display materials
relating thereto and all customer lists.
"Intercreditor Agreement" means the Amended and
Restated Intercreditor Agreement dated of even date herewith between the
Borrower, the Agent and SunTrust Bank, Atlanta, as amended or supplemented from
time to time.
"Inventory Collateral" means all inventory of the
Borrower, or in which it has rights, whether now owned or hereafter acquired,
wherever located, including, without limitation, all goods of the Borrower held
for sale or lease or furnished or to be furnished under contracts of service,
all goods held for display or demonstration, goods on lease or consignment,
returned and repossessed goods, all raw materials, work-in-process, finished
goods and supplies used or consumed in the Borrower's business, together with
all documents, documents of title, dock warrants, dock receipts, warehouse
receipts, bills of lading or orders for the delivery of all, or any portion, of
the foregoing.
"Permitted Liens" means the liens and encumbrances
pertaining to portions of the Collateral described on Exhibit "C" attached
hereto and by this reference made a part hereof.
In addition to and cumulative with such other
definitions and descriptions as herein may be provided therefor, the terms
"equipment", "inventory", "accounts", "general intangibles", "chattel paper",
"documents of title", "goods", "consumer goods" and "instruments", if and to
the extent used herein, shall have such meanings as may be respectively
ascribed to them in the Act as in existence on date hereof.
1. GRANT OF SECURITY INTEREST. As a general and continuing
collateral security for payment of the Obligations and the performance by
Borrower of all of the provisions of the Loan Documents, the Borrower hereby
grants to the Agent for the ratable benefit of the Banks a security interest in
and security title to all Collateral and the Borrower makes such further
agreements with the Agent in regard thereto as hereinafter set forth.
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2. DESCRIPTION OF COLLATERAL.
The following described property, wherever located,
whether now existing or hereafter acquired or arising constitutes the
Collateral (subject to the provisions of Section 11.8):
(a) the Accounts Receivable Collateral;
(b) the Equipment Collateral;
(c) the Intangibles Collateral;
(d) the Inventory Collateral;
(e) the Documentary Collateral;
(f) the Purchase Money Note; and
(g) all products and proceeds of any and all of
the foregoing, including, without limitation, insurance or
condemnation proceeds, all property received wholly or partially in
trade or exchange for any of the foregoing, and all rents, revenues,
issues, profits and proceeds arising from the sale, lease, license,
encumbrance, collection or any other temporary or permanent
disposition of any of the foregoing or any interest therein.
3. REPRESENTATIONS AND WARRANTIES.
3.1 The Borrower is, or, with respect to Collateral
acquired after the date hereof, will be, the owner of the Collateral free and
clear from any Lien, except for the Permitted Liens. No financing statement
covering any of the Collateral is on file in any public office other than any
evidencing Permitted Liens.
3.2 Location. As of the date hereof, the tangible
portion of the Collateral is situated only at one or more Collateral Locations,
other than as permitted by Section 5.6.
3.3 Name. The name of the Borrower is as set forth on
the signature page hereof and the Borrower has not conducted any business under
any other name during the past 6 years.
3.4 Right to Assign. Borrower has the full right, power
and authority to make this assignment of the Collateral.
3.5 Delivery. Borrower has delivered the Purchase Money
Note and all other agreements, letters of credit, promissory notes, chattel
paper or anything else the physical possession of which is necessary in order
for Agent to perfect or preserve the priority of its Lien in the Collateral.
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<PAGE> 5
3.6 Purchaser of Collateral. Except for the acquisition
of assets from Walton Monroe Mills, Inc., Macfield Spinning, Inc. and
Graniteville Company, during the past 6 years, Borrower has not purchased any
of the Collateral in a bulk transfer or in a transaction which was outside the
ordinary course of the business of Borrower's seller.
4. GENERAL COVENANTS.
4.1 Liens. The Borrower shall keep the Collateral free
and clear of all Liens, except for the Permitted Liens
4.2 Casualty. The Borrower shall promptly notify the
Agent of any material loss of or damage to the Inventory Collateral or the
Equipment Collateral or any part thereof.
4.3 Use of Collateral. Until there occurs an Event of
Default the Borrower may, subject to the provisions of Paragraph 6 hereof, use
the Collateral in any lawful manner not inconsistent with this Agreement or
with the terms or conditions of any policy of insurance thereon.
4.4 Disposition of Collateral. The Borrower may not
sell, lease, exchange or otherwise dispose of any of the Collateral except as
hereinafter specifically provided. Borrower may sell, lease, exchange or
otherwise dispose of any portion of the Inventory Collateral in the ordinary
course of business for cash or upon open account or on terms of payment
ordinarily extended to its customers. Upon the sale, exchange or other
disposition of the Inventory Collateral, the security interest created and
provided for herein shall continue in and attach to any proceeds thereof,
without break in continuity and without further formality or act, including,
without limitation, accounts, contract rights, shipping documents, documents of
title, bills of lading, warehouse receipts, dock warrants, dock receipts and
cash or non-cash proceeds, and in the event of any unauthorized sale, shall
continue in Inventory Collateral itself. Borrower may sell Equipment
Collateral pursuant and subject to the provisions of Sections 2.08(b)(i)(B) and
5.14 of the Credit Agreement. In addition, Borrower may sell, exchange or
otherwise dispose of portions of the Equipment Collateral which are obsolete,
worn-out or unsuitable for continued use by Borrower if such Equipment
Collateral is replaced promptly upon its disposition with equipment
constituting Equipment Collateral having a market value equal or greater than
the Equipment Collateral so disposed of and in which Agent shall obtain and
have a Lien pursuant hereto of the same priority as in the Equipment Collateral
so disposed of.
4.5 Insurance. The Borrower agrees that it will obtain
and maintain insurance on the Inventory Collateral and the Equipment Collateral
as required by Section 5.17 of the Credit Agreement, with loss payable to the
Agent as its interests may appear. Such insurance shall not be cancelable by
the Borrower,
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<PAGE> 6
unless with the prior written consent of the Required Banks, or by the
Borrower's insurer, unless with at least 30 days advance written notice to the
Agent.
4.6 Location. The Borrower agrees not to locate the
Inventory Collateral or the Equipment Collateral (other than (i) Rolling Stock
and other goods which are covered by a certificate of title, as contemplated in
section 11-9-103(3)(a) of the Act and (ii) other goods which are mobile and
which are of a type normally used in more than one jurisdiction and are not
covered by a certificate of title, as contemplated in Section 11-9-103(3)(a) of
the Act) at any location other than a Collateral Location without providing
written notice to the Agent no later than 30 days after such relocation;
provided, however, that nothing contained herein shall be deemed to prohibit
the Borrower, without notice to or the consent of the Agent, from transferring
temporarily (for periods not to exceed 3 months in any event) Inventory
Collateral or Equipment Collateral from a Collateral Location to another
location at any time or from time to time hereafter for the limited purpose of
having work performed on such Inventory Collateral or Equipment Collateral, or
for temporary storage thereof or for shipment thereof to a Collateral Location,
if done in the ordinary course of the Borrower's business. In addition, to the
extent the Borrower should warehouse any of the Inventory Collateral at any
time hereafter at any location other than a Collateral Location, the Borrower
acknowledges and agrees that such warehousing may be conducted only by
warehousemen who have been pre-approved by the Agent and who, in any event,
shall issue non-negotiable warehouse receipts in the Agent's name to evidence
any such warehousing of goods constituting Inventory Collateral. If the
Borrower consigns any part of the Inventory Collateral, it will comply with
Section 2-326 of the Uniform Commercial Code of any state where such Inventory
Collateral is located with respect thereto, by filing in the appropriate public
office or offices UCC-1 financing statements showing the Borrower as consignor
and the Agent as assignee of consignor, and will furnish copies thereof to the
Agent.
4.7 The Borrower shall deliver to the Agent within 60 days
after receiving written notice from the Agent directing it to do so, the
original title certificates to all of the Rolling Stock, together with duly
executed applications in the appropriate form for new certificates of title
thereto showing thereon the Lien of the Agent pursuant to the Security
Agreement.
5. SPECIAL PROVISIONS REGARDING RECEIVABLES AND INVENTORY. Each
item of the Accounts Receivable Collateral arises or will arise under a
contract between the Borrower and an Account Debtor, or from the bona fide sale
or delivery of goods to or performance of services for, an Account Debtor. The
Borrower will promptly notify the Agent of all returns, repossessions and
recoveries which are reasonably expected to result in losses to the Borrower in
excess of $500,000 in any month. From and after
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<PAGE> 7
the occurrence of any Event of Default and during the continuation thereof, (i)
the Agent may collect, realize, sell or otherwise deal with the Accounts
Receivable Collateral or any and all sums owing or which may become due upon
any items of the Inventory Collateral or any part thereof in such manner, upon
such terms and conditions and at such time or times as may seem to it advisable
and without notice to the Borrower, and (ii) the Borrower hereby irrevocably
designates and appoints the Agent its true and lawful attorney either in the
name of the Agent or the name of the Borrower to take such actions and any
other actions as the Agent may deem necessary or desirable in order to realize
upon the Inventory Collateral and the Accounts Receivable Collateral,
including, without limitation, power to endorse in the name of Borrower, any
checks, drafts, notes, or other instruments received in payment of or on
account of the Inventory Collateral or the Accounts Receivable Collateral. The
Agent shall not be liable or accountable for any failure to collect, realize,
sell or obtain payment of the Accounts Receivable Collateral or any and all
sums owing or which may become due upon any items of the Inventory Collateral
or any part thereof and shall not be bound to institute proceedings for the
purpose of collecting, realizing, or obtaining payment of the same or for the
purpose of preserving any rights of the Agent, the Borrower or any other Person
in respect of the same. From and after the occurrence of any Event of Default
and during the continuation thereof, (i) all moneys collected or received by
the Borrower in respect of the Accounts Receivable Collateral or any and all
sums owing or which may become due upon any items of the Inventory Collateral
shall be received as trustee in trust for the Agent for the ratable benefit of
the Banks and shall be forthwith paid over to the Agent for the ratable benefit
of the Banks at the Agent's request, and (ii) all moneys collected or received
by the Agent in respect of the Accounts Receivable Collateral or any and all
sums owing or which may become due upon any items of the Inventory Collateral
or other Collateral may be applied to the Obligations in the order which the
Required Banks deem best or, in the sole discretion of the Required Banks, may
be released to the Borrower, all without prejudice to the liability of the
Borrower or the Agent's right to hold and realize upon this security.
6. PRESERVATION. The Borrower will take all reasonably necessary
and appropriate measures to obtain, maintain, protect and preserve any material
Intangibles Collateral including, without limitation, registration thereof with
the appropriate state or federal governmental agency or department.
7. REMEDIES. Upon the occurrence and during the existence of any
Event of Default, the Agent for the ratable benefit of the Banks shall have all
of the rights and remedies described in Sections 8.1 through 8.5 inclusive, and
it may exercise any one, more, or all of such remedies, in its sole discretion,
without thereby waiving any of the others, subject, however, to the provisions
of Section 11.7.
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7.1 General Remedies of a Secured Party. The Agent shall
have all the rights and remedies of a "secured party" under the Act (regardless
of whether the Act has been enacted in the jurisdiction where the rights or
remedies are asserted, including, without limitation, the right to take
possession of any of the Collateral or the proceeds thereof by such means
(without breach of the peace) and through agents or otherwise as it may elect,
the right to sell, lease, or otherwise dispose of the Collateral or any portion
thereof, the right to apply the proceeds derived therefrom to any and all of
the Obligations secured thereby in such order as the Agent may elect, and, for
this purpose, the right to sign in the name of the Borrower any transfer,
conveyance, or instrument necessary in the premises. Any such disposition of
the Collateral may be in its then condition or following any commercially
reasonable preparation or processing thereof, by public or private proceedings,
by one or more contracts, as a unit or in parcels, at any time or place and on
any terms, so long as the same are commercially reasonable.
7.2 Notice of Disposition. The Agent shall give the
Borrower written notice of the time and place of any public sale of the
Collateral or the time after which any other intended disposition thereof is to
be made. The requirement of sending reasonable notice shall be met if such
notice is mailed postage prepaid or otherwise given to the undersigned at its
last address as shown on the Agent's records at least 10 days before such
disposition.
7.3 Receiver. In addition to the foregoing, the Agent,
at the direction of the Required Banks, may appoint any person to be a receiver
(which term shall include a receiver and manager) of the Collateral, including,
without limitation, any rents and profits thereof and may remove any receiver
and appoint another in its (his) stead, and such receiver so appointed shall
have power to take possession of the Collateral and to carry on or concur in
carrying on the business of the Borrower, and to dispose of or concur in the
disposition of the Collateral or any part thereof in the manner described
hereinabove. Any such receiver shall for all purposes be deemed to be the
agent of the Borrower. The Agent may from time to time fix the remuneration of
such receiver. The Agent and the Banks in appointing or refraining from
appointment of such receiver shall not incur any liability to the receiver, the
Borrower or otherwise.
7.4 Assemblage. In facilitation of the foregoing, the
Agent may require that the Borrower assemble and make available all of or any
portion of the Collateral at a location reasonably designated by the Agent, all
at the expense of the Borrower.
7.5 Application of Proceeds. All moneys from time to
time received by the Agent from the disposition of Collateral shall be applied
by the Agent for the benefit of the Banks in the following manner: first, in
discharge of all reasonable expenses
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of re-taking, holding, preserving, preparing for sale or lease, selling,
leasing, and the like of the Collateral including, without limitation, fees and
expenses of any receivers and attorneys, insurance premiums, tax payments and
the like; secondly, to all outstanding fees and other expenses owing under the
Credit Agreement or the other Loan Documents in such order as the Required
Banks shall elect; thirdly, ratably to accrued interest on the Obligations;
fourthly, ratably to the remaining balances of the Obligations then
outstanding; lastly, to the Borrower, any residue.
8. FURTHER ASSURANCES. The Borrower shall from time to time
forthwith on the Agent's reasonable request do, make and execute, and use
reasonable good faith efforts to cause to be done, made and executed, such
financing statements, certificates of title, landlord's and mortgagee's
waivers, estoppel certificates, further assignments, documents, acts, matters
and things as may be required by the Agent of or with respect to the Collateral
or any part thereof or as may be required to give effect to these presents, and
the Borrower hereby constitutes and appoints the Agent as the true and lawful
attorney of the undersigned irrevocably with full power of substitution to do,
make, and execute all such statements, assignments, documents, acts, matters,
or things with the right to use the name of the Borrower whenever and wherever
it may be reasonably deemed necessary or expedient.
9. DEALINGS. The Agent may grant extensions of time and other
indulgences, take and give up securities, accept compositions, grant releases
and discharges and otherwise deal with the Borrower, debtors of the Borrower,
sureties and others and with the Collateral and other securities as the Agent
may see fit without prejudice to the liability of the Borrower or the Agent's
right to hold and realize upon this security.
10. GENERAL.
10.1 Governing Laws. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Georgia.
10.2 Non-Exclusivity of Remedies. No remedy for the
enforcement of the rights of the Agent hereunder shall be exclusive of or
dependent on any other such remedy but any one or more of such remedies may
from time to time be exercised independently or in combination.
10.3 Waiver. Each and every right granted to the Agent
under this Agreement, under any other Loan Document or allowed to the Agent by
law or in equity, shall be cumulative and may be exercised from time to time by
the Agent in its sole discretion. No failure on the part of the Agent to
exercise, and no delay in exercising, any right shall operate as a waiver
thereof, nor shall any single or partial exercise by the Agent of any right
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preclude any other or future exercise thereof or the exercise of any other
right.
10.4 Counterparts. This Agreement may be executed in two
or more counterparts, each of which when fully executed shall be an original,
and all of said counterparts taken together shall be deemed to constitute one
and the same agreement.
10.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the permitted successors and assigns
of the parties hereto.
10.6 Reimbursement. If any taxes, fees or other costs
shall be payable on account of the execution, issuance, delivery, or recording
of this Agreement or any financing statements, certificates, documents or
instruments executed in connection herewith, by reason of any existing or
hereafter enacted federal, state, or provincial statute, the Borrower will pay
all such taxes, fees or other costs, including any applicable interest and
penalty, and will indemnify and hold the Agent and the Banks harmless from and
against liability in connection therewith.
11.7 SunTrust Intercreditor Agreement. Notwithstanding any
term or provision hereof to the contrary, as to the SunTrust Collateral Plants,
the rights, powers and remedies of the Agent hereunder are and shall be subject
to and shall be governed by the terms of the SunTrust Intercreditor Agreement.
11.8 Release of Receivable Program Assets. The security
interest of the Agent in the Accounts Receivable Collateral that is or becomes
Receivables Program Assets and any other Collateral that is or becomes
Receivables Program Assets, in each case other than Excluded Receivables
Assets, is subject to release under the circumstances, and subject to
satisfaction of the conditions, set forth in Section 9.18 of the Credit
Agreement, and from and after such release, the Collateral shall not include
such Accounts Receivable Collateral or such other Collateral and the provisions
of this Agreement shall be ignored and shall have no further force or effect
with respect to such Accounts Receivable Collateral or such other Collateral,
except to the extent of Excluded Receivables Assets.
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IN WITNESS WHEREOF, the Borrower and the Agent have executed
this Agreement and affixed their respective seals thereto.
AGENT:
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent for the Banks (SEAL)
By:
----------------------------
Title:
BORROWER:
AVONDALE MILLS, INC (SEAL)
By:
----------------------------
Title:
Attest:
------------------------
Title:
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EXHIBIT A - Schedule of Outside Inventory Locations
EXHIBIT B - Excluded Equipment
EXHIBIT C - List of Liens
The registrants agree to furnish a copy of the Exhibits listed above to the
Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 4.5
AMENDED AND RESTATED PARENT GUARANTY
THIS AMENDED AND RESTATED PARENT GUARANTY (this "Guaranty") is
made as of the 29th day of April, 1996, by Avondale Incorporated, a Georgia
corporation (the "Parent") in favor of the Agent, for the ratable benefit of
the Banks, under the Credit Agreement referred to below;
W I T N E S S E T H
WHEREAS, Avondale Mills, Inc., an Alabama corporation (the
"Borrower") and WACHOVIA BANK OF GEORGIA, N.A., as Agent (the "Agent"), and The
First National Bank of Chicago, as Documentation Agent, and certain other Banks
from time to time party thereto have entered into a certain Amended and
Restated Credit Agreement dated as of April 29, 1996 (as it may be amended or
modified from time to time, the "Credit Agreement"), providing, subject to the
terms and conditions thereof, for extensions of credit to be made by the Banks
to the Borrower for the benefit of the Borrower and of the Parent;
WHEREAS, the Parent executed a Parent Guaranty dated as of
March 29, 1994, in connection with the Original Credit Agreement (the "Original
Parent Guaranty");
WHEREAS, it is a condition precedent to the Agent and the
Banks executing the Credit Agreement that the Parent execute and deliver this
Guaranty whereby the Parent shall guarantee the payment when due of all
principal, interest and other amounts that shall be at any time payable by the
Borrower under the Credit Agreement, the Notes and the other Principal
Documents; and
WHEREAS, in consideration of the financial and other support
that the Borrower has provided, and such financial and other support as the
Borrower may in the future provide, to Parent, and in order to induce the Banks
and the Agent to enter into the Credit Agreement, the Parent is willing to
guarantee the obligations of the Borrower under the Credit Agreement, the
Notes, and the other Principal Documents;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit
Agreement and not otherwise defined herein have, as used herein, the respective
meanings provided for therein.
<PAGE> 2
SECTION 2. Representations, Warranties and Covenants. The
Parent incorporates herein by reference as fully as if set forth herein all of
the representations and warranties of the Parent contained in Article IV of the
Credit Agreement (which representations and warranties shall be deemed to have
been renewed by the Parent upon each Borrowing under the Credit Agreement to
the same extent and with the same effect as provided therein with respect to
the renewal thereof by the Borrower) and all covenants of the Parent contained
in Article V of the Credit Agreement. In the event the Parent issues any
Capital Stock after the Closing Date, the Parent will make available to the
Borrower, by loan, equity contribution or other means, an amount equal to 100%
of the Net Cash Proceeds thereof, in order that the Borrower can comply, on a
timely basis, with the provisions of Section 2.08(b)(ii) of the Credit
Agreement.
SECTION 3. The Guaranty. The Parent hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the Borrower pursuant to the Credit Agreement, and the full and punctual
payment of all other amounts payable by the Borrower under the Credit Agreement
and the other Principal Documents, including principal, interest, fees, costs
and indemnification amounts, and any extensions and renewals thereof in whole
or in part, and any other amounts constituting Obligations as defined in the
Credit Agreement (all of the foregoing obligations being referred to
collectively as the "Guaranteed Obligations"). Upon failure by the Borrower to
pay punctually any such amount, the Parent agrees that it shall forthwith on
demand pay the amount not so paid at the place and in the manner specified in
the Credit Agreement, the relevant Note or the relevant Principal Document, as
the case may be. This Guaranty is an amendment to and restatement of, and
supersedes, the Original Parent Guaranty.
SECTION 4. Guaranty Unconditional. The obligations of the
Parent hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of the Borrower under the
Credit Agreement, any Note, or any other Principal Document, by
operation of law or otherwise or any obligation of any other guarantor
of any of the Obligations;
(ii) any modification or amendment of or supplement to
the Credit Agreement, any Note, or any other Principal Document;
(iii) any release, nonperfection or invalidity of any
direct or indirect security for any obligation of the Borrower under the
Credit Agreement,
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any Note, any Principal Document, or any obligations of any other
guarantor of any of the Obligations;
(iv) any change in the corporate existence, structure
or ownership of the Borrower or any other guarantor of any of the
Guaranteed Obligations, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Borrower, or any other guarantor
of the Guaranteed Obligations, or its assets or any resulting release or
discharge of any obligation of the Borrower, or any other guarantor of
any of the Guaranteed Obligations;
(v) the existence of any claim, setoff or other rights
which the Parent may have at any time against the Borrower, any other
guarantor of any of the Guaranteed Obligations, the Agent, any Bank or
any other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against the Borrower, or any other guarantor of any of the Guaranteed
Obligations, for any reason related to the Credit Agreement, any other
Principal Document, or any other guaranty, or any provision of
applicable law or regulation purporting to prohibit the payment by the
Borrower, or any other guarantor of the Guaranteed Obligations, of the
principal of or interest on any Note or any other amount payable by the
Borrower under the Credit Agreement, the Notes, or any other Principal
Document; or
(vii) any other act or omission to act or delay of any
kind by the Borrower, any other guarantor of the Guaranteed Obligations,
the Agent, any Bank or any other Person or any other circumstance
whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the Guarantor's obligations
hereunder.
SECTION 5. Discharge Only Upon Payment In Full; Reinstatement
In Certain Circumstances. The Parent's obligations hereunder shall remain in
full force and effect until all Guaranteed Obligations shall have been paid in
full and the Commitments under the Credit Agreement shall have terminated or
expired. If at any time any payment of the principal of or interest on any
Note or any other amount payable by the Borrower under the Credit Agreement or
any other Principal Document is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, the Parent's obligations hereunder with respect to such payment
shall be
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reinstated as though such payment had been due but not made at such time.
SECTION 6. Waiver of Notice by the Parent. The Parent
irrevocably waives acceptance hereof, presentment, demand, protest and, to the
fullest extent permitted by law, any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against the
Borrower, any other guarantor of the Guaranteed Obligations, or any other
Person.
SECTION 7. Other Waivers by the Parent. The Parent hereby
expressly waives, renounces, and agrees not to assert, any right, claim or
cause of action, including, without limitation, a claim for reimbursement,
subrogation, indemnification or otherwise, against the Borrower arising out of
or by reason of this Guaranty or the obligations of the Parent hereunder,
including, without limitation, the payment or securing or purchasing of any of
the Guaranteed Obligations by the Parent. The waiver, renunciation and
agreement contained in the immediately preceding sentence is for the benefit of
the Agent and the Banks and also for the benefit of the Borrower who may assert
the benefits thereof as a third-party beneficiary, and the Parent may be
released from such waiver, renunciation and agreement only by the execution and
delivery, by the Agent, the Required Banks and the Borrower, of an instrument
expressly releasing the Parent therefrom.
SECTION 8. Stay of Acceleration. If acceleration of the time
for payment of any amount payable by the Borrower under the Credit Agreement,
any Note or any other Principal Document is stayed upon the insolvency,
bankruptcy or reorganization of the Borrower, all such amounts otherwise
subject to acceleration under the terms of the Credit Agreement, any Note or
any other Principal Document shall nonetheless be payable by the Parent
hereunder forthwith on demand by the Agent made at the request of the Required
Banks.
SECTION 9. Notices. All notices, requests and other
communications to any party hereunder shall be given or made by telecopier or
other writing and telecopied or mailed or delivered to the intended recipient
at its address or telecopier number set forth on the signature pages hereof or
such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the Agent in accordance with the provisions of
Section 9.01 of the Credit Agreement. Except as otherwise provided in this
Guaranty, all such communications shall be deemed to have been duly given when
transmitted by telecopier, or personally delivered or, in the case of a mailed
notice, 3 Domestic Business Days after such communication is deposited in the
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mails with first class postage prepaid, in each case given or addressed as
aforesaid.
SECTION 10. No Waivers. No failure or delay by the Agent or
any Banks in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies provided in this Guaranty, the Credit
Agreement, the Notes, and the other Principal Documents shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 11. Successors and Assigns. This Guaranty is for the
benefit of the Agent and the Banks and their respective successors and assigns
and in the event of an assignment of any amounts payable under the Credit
Agreement, the Notes, or the other Principal Documents, the rights hereunder,
to the extent applicable to the indebtedness so assigned, may be transferred
with such indebtedness. This Guaranty may not be assigned by the Parent without
the prior written consent of the Agent and the Required Banks, and shall be
binding upon the Parent and its successors and permitted assigns.
SECTION 12. Changes in Writing. Neither this Guaranty nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Parent and the Agent with the consent of the
Required Banks.
SECTION 13. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF GEORGIA. EACH OF THE PARENT AND THE AGENT HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT SITTING IN
ATLANTA, GEORGIA AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE PARENT
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE
PARENT AND THE AGENT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 14. Taxes, etc. All payments required to be made by
the Parent hereunder shall be made without setoff or counterclaim and free and
clear of and without deduction or withholding for or on account of, any present
or future
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taxes, levies, imposts, duties or other charges of whatsoever nature imposed by
any government or any political or taxing authority to the same extent and with
the same effect as provided in Section 2.11(c) of the Credit Agreement with
respect to payments made by the Borrower.
IN WITNESS WHEREOF, the Parent has caused this Guaranty to be
duly executed by its authorized officer as of the date first above written.
AVONDALE INCORPORATED
By:
-----------------------------
Title:
Avondale Incorporated
506 South Broad Street
Monroe, Georgia 30655
Attention: Chairman and
Chief Executive Officer
Telecopier number: 770-267-2543
Telephone number: 770-267-2226
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<PAGE> 1
EXHIBIT 4.6
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT
THIS AMENDED AND RESTATED STOCK PLEDGE AGREEMENT (this
"Agreement"), is made and entered into as of April 29, 1996, by and between
Wachovia Bank of Georgia, N.A., a national banking association, as agent for the
Banks parties to the "Credit Agreement" (as hereinafter defined)(the "Agent"),
and Avondale Incorporated, a Georgia corporation ("Pledgor");
W I T N E S S E T H:
WHEREAS, the Pledgor executed and delivered a Stock Pledge Agreement
dated as of March 29, 1994 (the "Original Pledge Agreement" pursuant to a Credit
Agreement of even date therewith by and among the Borrower, the Agent and the
Banks party thereto (the "Original Credit Agreement"); and
WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement, dated as of even date herewith, among Borrower, the Agent, The First
National Bank of Chicago, as Documentation Agent, and the Banks parties thereto
(as amended or modified from time to time, the "Credit Agreement"), the Original
Credit Agreement has been amended and restated, and the Banks have made or will
make loans to the Borrower; and
WHEREAS, the obligations of the Banks to extend financial
accommodations under the Credit Agreement is conditioned on, among other things,
the execution and delivery by Pledgor of the Parent Guaranty (as defined in the
Credit Agreement) and this Agreement in order to secure said indebtedness and to
induce the Banks and the Agent to execute and enter into the Credit Agreement,
the Borrower has agreed to execute and deliver this Agreement, granting a
security interest in, and lien upon, the Pledged Stock to the Agent for the
benefit of the Banks, and continuing in effect the security interest in, and
lien upon, the Pledged Stock granted to the Agent pursuant to the Original
Pledge Agreement; and
WHEREAS, pursuant to the Parent Guaranty, Pledgor has guaranteed
payment of all of the Obligations; and
WHEREAS, to induce the Banks to extend or to continue to extend
financial accommodations to the Borrower, Pledgor has agreed to enter into this
Agreement; and
<PAGE> 2
WHEREAS, Pledgor is the sole owner of 100% of the Capital Stock of the
Borrower and will be benefitted by such financial accommodations by the Banks to
the Borrower;
WHEREAS, it is the intent of the parties that this Agreement amend,
restate and supersede the Original Pledge Agreement, and continue in effect the
security interests and liens granted thereto without lapse or loss of
perfection;
NOW, THEREFORE, for the sum of $10 in hand paid and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and to induce the Banks to extend financial accommodations from
time to time to the Borrower, Pledgor and the Agent hereby agree as follows:
1. Defined Terms. Capitalized terms contained herein but not
defined herein shall have the meanings given them in the Credit Agreement.
2. Pledge of Collateral. Pledgor does hereby pledge,
hypothecate, assign, transfer, set over, deliver and grant a security interest
in and to the Agent in all that Capital Stock of Avondale Mills, Inc. set forth
and described on Exhibit "A" attached hereto and by reference made part hereof
(which stock is simultaneously herewith being delivered to the Agent,
accompanied by blank stock powers signed by Pledgor), together with any and all
other securities, cash or other property at any time and from time to time
receivable or otherwise distributed in respect of or in exchange for any or all
of such pledged stock, and together with the proceeds thereof (hereinafter said
property being collectively referred to as the "Collateral"), all as security
for the payment of all of the Obligations in existence from time to time.
3. Holding of Collateral and Rights. Pledgor acknowledges and
agrees that the Agent shall hold the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto
forever, subject, however, to the provisions of Sections 8 and 14 hereof and to
the return of the Collateral (or such portion thereof as may be existing from
time to time hereafter after giving effect to the terms hereof) by the Agent to
Pledgor pursuant to Section 4 hereof or upon the final and indefeasible payment
in full of all the Obligations and termination in writing of any and all credit
commitments with respect thereto.
4. Intentionally Omitted.
5. Representations and Warranties; Certain Covenants. The Parent
incorporates herein by reference as fully as if set forth
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herein all of the representations and warranties of the Parent contained in
Article IV of the Credit Agreement (which representations and warranties shall
be deemed to have been renewed by Pledgor upon each Borrowing under the Credit
Agreement to the same extent and with the same effect as provided therein with
respect to the renewal thereof by the Borrower) and all covenants of Pledgor
contained in Article V of the Credit Agreement. In addition, Pledgor hereby
represents and warrants (which representations and warranties likewise shall be
deemed to have been renewed by Pledgor upon each Borrowing under the Credit
Agreement) that: (i) Pledgor has the complete and unconditional authority to
pledge the Collateral; (ii) Pledgor holds the Collateral free and clear of any
and all liens, charges, encumbrances and security interests thereon (other than
in favor of the Agent) and has good right, title and legal authority to pledge
the Collateral in the manner contemplated herein; (iii) all stock now owned or
hereafter owned by Pledgor and constituting or which will constitute Collateral
hereunder is, or will be on date of pledge thereof, validly issued, fully paid
and non-assessable; and (iv) no authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or regulatory body is
required either (1) for the pledge by Pledgor of the Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by
Pledgor or (2) for the exercise by Agent of the voting or other rights provided
for in this Agreement or the remedies in respect of the Collateral pursuant to
this Agreement (except as may be required in connection with the exercise of
such rights or remedies by laws affecting the voting, offering and sale of
securities generally).
6. Delivery of Additional Securities; Further Assurances.
Pledgor further covenants with the Agent that Pledgor will cause any additional
securities or other property issued to or received by Pledgor with respect to
any of the Collateral (except as provided in Section 8 below), whether for value
paid by Pledgor or otherwise, and including stock dividends, to be deposited
forthwith with the Agent and be pledged hereunder, in each case accompanied by
blank stock powers or other proper instruments of assignment duly executed by
Pledgor in such form as may be reasonably required by the Agent. Pledgor agrees
that at any time and from time to time, at the expense of Pledgor, Pledgor will
promptly execute and deliver all further instruments and documents, and take all
further action that the Agent may reasonably request, in other to perfect and
protect the security interest granted or purported to be granted hereby or to
enable the Agent to exercise and enforce its rights, powers and remedies
hereunder with respect to any Collateral.
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7. Name in Which Collateral Held. Pledgor further acknowledges
and agrees that the Agent may hold any of the Collateral in its own name,
endorsed or assigned in blank or in the name of any nominee or nominees, and
that the Agent may deliver any or all of the Collateral to the issuer or issuers
thereof for the purpose of making denominational exchanges or registrations of
transfer or for such other purposes in furtherance of this Agreement as the
Agent may deem advisable.
8. Voting Rights; Dividends, Etc. (a) So long as no Event of
Default shall have occurred and be continuing and the Agent has not, subject to
the provisions of Section 14 hereof, delivered a notice to Pledgor of the
Agent's intention to exercise voting and other consensual rights pursuant to
this Section 8:
(i) Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any part
thereof for any purpose not prohibited by the terms of this Agreement, the
Parent Guaranty, the Credit Agreement or any other Loan Documents; provided,
however, that the Pledgor shall give the Agent at least 5 Domestic Business
Days' prior written notice of the manner in which it intends to exercise any
right if such action would have a material adverse effect on the value of the
Collateral, and following request therefor by the Agent, Pledgor shall not
exercise or refrain from exercising any such right; and
(ii) the Agent shall execute and deliver (or cause to
be executed and delivered) to Pledgor all such proxies and other instruments as
Pledgor may reasonably request for the purpose of enabling Pledgor to exercise
the voting and other rights which it is entitled to exercise pursuant to clause
(i) above.
(iii) Pledgor shall be entitled to receive and retain
any nonliquidating cash dividends, interest or any other distribution of
property paid, payable or otherwise distributed in cash in respect of the
Collateral.
(b) Subject to the provisions of Section 14 hereof, upon
the occurrence and during the continuance of an Event of Default, and with
respect to clause (i) below, the delivery of a notice to Pledgor of the Agent's
intention to exercise voting and other consensual rights pursuant thereto:
(i) All rights of Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to exercise
pursuant to Section 8(a) shall cease, and all such rights shall thereupon become
vested in the Agent who shall
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<PAGE> 5
thereupon have the sole right to exercise such voting and other consensual
rights; provided, however, Pledgor shall continue to have the rights to exercise
such voting and other consensual rights notwithstanding the occurrence and
continuance of an Event of Default until the Agent, subject to the provisions of
Section 14 hereof, delivers a notice to Pledgor of the Agent's intention to
exercise such voting and other consensual rights.
(ii) All rights of Pledgor to receive cash dividends,
interest, proceeds or other distributions in cash from the Collateral, which it
would otherwise be authorized to receive and retain pursuant to Section 8(a)
shall cease and all rights to dividends, interest, proceeds and other
distributions shall thereupon be vested in the Agent, who shall thereupon have
the sole right to receive and hold as Collateral such interest or other
distributions. All dividends, interest, proceeds and other distributions which
are received by Pledgor contrary to these provisions shall be received in trust
for the benefit of the Agent, shall be segregated from other property or funds
of Pledgor and shall be forthwith delivered to the Agent as Collateral in the
same form as so received (with any necessary endorsement).
9. Agent Appointed Attorney-in-Fact. Pledgor hereby irrevocably
appoints the Agent as Pledgor's attorney-in-fact, with full authority in the
place and stead of Pledgor and in the name of Pledgor or otherwise, from time to
time in the Agent's discretion, after the occurrence and during the continuance
of an Event of Default, and subject to the provisions of Section 14 hereof,
where applicable, to take any action and to execute any instrument which the
Agent may deem reasonably necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation, to receive, endorse and collect
all instruments made payable to Pledgor representing any dividend, principal
and/or interest payment or other distribution in respect of the Collateral or
any part thereof and to give full discharge for the same, when and to the
extent permitted by this Agreement.
10. The Agent May Perform. If Pledgor fails to perform any
agreement contained herein, the Agent may take reasonable action to perform, or
cause performance of, such agreement, and the reasonable expenses of the Agent
incurred in connection therewith shall be payable by Pledgor under Section 13;
provided, that, the Agent shall exercise commercially reasonable efforts to
notify Pledgor prior to taking any such action (although the failure to so
notify Agent shall not limit the Agent's rights hereunder).
11. Reasonable Care. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the
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<PAGE> 6
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Agent accords the Agent's own property, it
being understood that the Agent shall not have responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, unless reasonably
requested to do so by Pledgor, or (ii) taking any necessary steps to preserve
rights against any parties with respect to any Collateral.
12. Events of Default. The following shall constitute "Events of
Default" hereunder:
(a) Should Pledgor assign, attempt to encumber, subject to
further pledge or security interest, sell, transfer or otherwise dispose of any
of the Collateral without the prior written consent of the Agent;
(b) If an "Event of Default" occurs under any of the
Credit Agreement, the other Loan Documents or the Parent Guaranty; or
(c) If any representations or warranties made herein by
Pledgor shall be untrue in any material respect when made or furnished.
13. Remedies. If any Event of Default shall have occurred and be
continuing:
(a) Subject to the provisions of Section 14 hereof, the
Agent may exercise (in compliance with all applicable securities laws) in
respect of the Collateral, in addition to other rights and remedies provided for
herein or otherwise available to them, all the rights and remedies of a secured
party on default under the Uniform Commercial Code in effect in the State of
Georgia at that time, and the Agent may also, without notice except as specified
below, sell (in compliance with all applicable securities laws) the Collateral
or any part thereof in one or more parcels at public or private sale, at any
exchange, over the counter or at any of the Agent's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or prices and upon
such other terms as the Agent may deem commercially reasonable or otherwise in
such manner as necessary to comply with applicable federal and state securities
laws. The Agent shall be authorized at any such sale (if it deems it advisable
to do so) to restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Collateral for their own
account for investment and not with a view to the distribution or sale thereof,
and upon
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consummation of any such sale the Agent shall have the right to assign, transfer
and deliver to the purchaser or purchasers at any such sale and such purchasers
shall hold the property sold absolutely, free from any claim or right on the
part of Pledgor, and Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay and/or appraisal which it now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted. Subject to the provisions of Section 14 hereof, the Agent shall give
Pledgor at least 10 days' notice of the time and place of any public sale or the
time after which any private sale is to be made , which Pledgor agrees shall
constitute reasonable notification. At any such sale, the Agent may bid (which
bid may be, in whole or in part, in the form of cancellation of Obligations) for
and purchase the whole or any part of the Collateral. The Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. If sale of all or any part of the Collateral is made on credit or
for future delivery, the Collateral so sold may be retained by the Agent until
the sale price is paid by the purchaser or purchasers thereof, but the Agent
shall not incur any liability in case any such purchaser or purchasers shall
fail to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may be sold again upon like notice. Pledgor agrees
that any sale of the Collateral conducted by the Agent in accordance with the
foregoing provisions of this Section 13 shall be deemed to be a commercially
reasonable sale under O.C.G.A. Section 11-9-504 of the Georgia Uniform
Commercial Code. As an alternative to exercising the power of sale herein
conferred upon them, the Agent may proceed by a suit or suits at law or in
equity to foreclose the security interest granted under this Agreement and to
sell the Collateral, or any portion thereof, pursuant to a judgment or decree of
a court or courts of competent jurisdiction.
(b) Any cash held by the Agent as Collateral and all cash
proceeds received by the Agent in respect of any sale of, collection from, or
other realization upon or any part of the Collateral following the occurrence of
an Event of Default shall be applied by the Agent for the benefit of the Banks
in the following manner: first, in discharge of all expenses incurred by the
Agent which Pledgor is obligated to reimburse the Agent pursuant to Section 15
hereof; secondly, to all outstanding fees and other expenses owing under the
Credit Agreement or the other Loan Documents in such order as the Required Banks
shall elect; thirdly, to accrued and unpaid interest on the Obligations in such
order as the Required Banks may elect; and lastly, to the
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<PAGE> 8
principal balances of any such Obligations then outstanding in such order as the
Required Banks may elect.
(c) Any surplus of such cash or cash proceeds held by the
Agent and remaining after payment in full of all the Obligations shall be paid
over to Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.
14. Standstill as to Certain Remedies. Notwithstanding any other
provision in this Agreement to the contrary, the right of the Agent with respect
to voting and other consensual rights pursuant to Section 8(b) hereof and with
respect to sale of the Collateral pursuant to Section 13(a) hereof shall not
vest and may not be exercised for a period of 90 days after whichever of the
following is applicable (the "Standstill Period"):
(i) with respect to an Event of Default under Section 6.01(b) of the
Credit Agreement arising out of a breach of any of Sections 5.03 through 5.06,
inclusive, of the Credit Agreement, the earlier to occur of (x) written notice
thereof has been given to the Pledgor by the Agent, or (y) an officer of the
Pledgor otherwise becomes aware of any such breach, or (z) the date which is 30
days after the end of the Fiscal Quarter in which such breach occurs;
(ii) with respect to any Event of Default under Section 6.01(m) of the
Credit Agreement, written notice thereof has been given to the Pledgor by the
Agent; and
(iii) with respect to any other Event of Default, the date of
occurrence of such Event of Default,
in each case, unless a "Standstill Termination Event" occurs during the
Standstill Period, in which case such rights may be exercised by the Agent
immediately or at any time thereafter, so long as such Event of Default
continues. The term "Standstill Termination Event" means the occurrence of any
of the following events:
(a) An Event of Default under Section 5.02(ii) of the Credit Agreement;
(b) The Consolidated Cash Flow of the Pledgor and its Consolidated
Subsidiaries, determined on a consolidated basis in accordance with GAAP,
calculated for the fiscal month of the Pledgor just ended and the immediately
preceding 11 fiscal months of the Pledgor, is less than $55,000,000;
(c) The Fixed Charge Coverage Ratio, calculated at the end of each
fiscal month of the Pledgor, is greater than 1.25 to 1.0;
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(d) The Borrower or the Pledgor shall create any Lien securing Debt in
excess of $1,000,000 on any of the Collateral or any Plant which is not
permitted by Section 5.11 of the Credit Agreement;
(e) An Event of Default under Section 5.14 of the Credit Agreement, but
if such Event of Default relates to a sale of assets, only if the amount thereof
exceeds the amount permitted by Section 5.14 by $2,000,000;
(f) The Borrower or the Pledgor shall incur any Debt of the types
described in clauses (i) or (ii) of the definition of Debt in the Credit
Agreement, or Debt of others of such type Guaranteed by the Borrower or the
Pledgor, in excess of $4,000,000, which is not permitted by Section 5.23 of the
Credit Agreement, or the Receivables Subsidiary shall incur any Debt or other
liabilities other than in connection with the Receivables Securitization
Program;
(g) The Pledgor or any Subsidiary which is not a Wholly-Owned
Subsidiary shall make any Restricted Payments in any Fiscal Year in an amount in
excess of $2,000,000 over the maximum amount permitted by Section 5.07 of the
Credit Agreement;
(h) An Event of Default occurs under Section 5.26 of the Credit
Agreement;
(i) The Borrower shall fail to pay within 5 days of the date when due
(other than by reason of acceleration of maturity pursuant to Section 6.01 of
the Credit Agreement) any principal of any Loan, or shall fail to pay any
interest on any Loan within 10 Domestic Business Days after such interest shall
become due, or, if the Event of Default which commences the Standstill Period
arose from a failure to pay principal (other than by reason of acceleration of
maturity pursuant to Section 6.01 of the Credit Agreement) of or interest on the
Loans, such failure continues after the date such Event of Default occurred for
5 days, with respect to a principal payment failure, or 5 Domestic Business
Days, with respect to an interest payment failure;
(j) An Event of Default occurs under any of Sections 6.01(g), (h) or
(l) of the Credit Agreement; or
(k) The Pledgor fails to comply with the provisions of the last
sentence of this Section 14.
So long as the Event of Default which commenced the Standstill Period continues,
the Pledgor will furnish to the Agent, as soon as available and in any event,
within 21 days after the end of each fiscal month of the Pledgor, commencing
with the fiscal
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month in which such Event of Default occurs, the financial statements required
to be furnished by Section 5.01(b) of the Credit Agreement, but on a monthly
basis, for each fiscal month of the Parent and the portion of the Fiscal Year
ended at the end of such fiscal month, together with a statement of the chief
financial officer or the chief accounting officer of the Pledgor, setting forth
in reasonable detail the calculations required to establish whether a Standstill
Termination Event has occurred under paragraph (b) or (c) above.
15. Expenses. Pledgor will, upon demand, pay to the Agent the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel, actually incurred, and of any experts and agents, and
including any taxes or fees incurred on account of the execution, issuance,
delivery or recording of this Agreement or other documents executed in
connection herewith which the Agent may incur in connection with (i) the sale
of, collection from, or other realization upon, any of the Collateral, or (ii)
the exercise or enforcement of any of the rights of the Agent hereunder, or
(iii) the failure by Pledgor to perform or observe any of the provisions hereof.
16. Security Interest Absolute. All rights of the Agent
hereunder, the security interest granted to the Agent hereunder, and all
obligations of Pledgor hereunder, shall be absolute and unconditional
irrespective of any of the following, and Pledgor expressly consents to the
occurrence of any of such events and waives, in its capacity as Pledgor, to the
extent permitted by law, any defense arising therefrom:
(i) any lack of validity or enforceability of any of
the Loan Documents or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from any of the Loan
Documents;
(iii) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or consent to or
departure from any of the Loan Documents, including, without limitation, the
Security Agreement and any Operative Mortgages or any other guaranty for all or
any of the Obligations; or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Pledgor in respect of the
Obligations or in respect of this Agreement.
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17. Amendments, Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by the Agent
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
18. No Waiver; Cumulative Remedies. No failure on the part of the
Agent to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy by the Agent preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.
19. Severability. If any provision of this Agreement or the
application thereof to any party hereto or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to any other party thereto or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
20. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telecopier or
similar writing) and shall be given to such party at its address or telecopier
number set forth on the signature pages or at such other address or telecopier
number as such party may hereafter specify for the purpose by notice to each
other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section and the appropriate confirmation is
received, (ii) if given by mail, 3 Domestic Business Days after such
communication is deposited in the mail, with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section 20.
21. Time is of the Essence. Time is of the essence in this
Agreement.
22. Interpretation. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or dictated such provision.
11
<PAGE> 12
23. The Agent Not Joint Venturer. Neither this Agreement nor any
agreements, instruments, documents or transactions contemplated hereby shall in
any respect be interpreted, deemed or construed as making the Agent a partner or
joint venturer with Pledgor or as creating any similar relationship or entity,
and Pledgor agrees that it will not make any contrary assertion, contention,
claim or counterclaim in any action, suit or other legal proceeding involving
the Agent and Pledgor.
24. Jurisdiction. Pledgor agrees that any legal action or
proceeding with respect to this Agreement may be brought in the courts of the
State of Georgia or the United States of America for the Northern District of
Georgia, Atlanta Division, all as the Agent may elect. By execution of this
Agreement, Pledgor hereby submits to each such jurisdiction, hereby expressly
waiving whatever rights may correspond to it by reason of its present or future
domicile. Nothing herein shall affect the right of the Agent to commence legal
proceedings or otherwise proceed against Pledgor in any other jurisdiction or to
serve process in any manner permitted or required by law.
25. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia and shall inure to
the benefit of and be binding upon the successors and assigns of the parties
hereto.
26. Counterparts. This Agreement may be executed in two or more
counterparts, each of which when fully executed shall be an original, and all of
said counterparts taken together shall be deemed to constitute one and the same
agreement.
[Signatures on Following Page]
12
<PAGE> 13
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly
executed under seal as of the date first above written.
"PLEDGOR"
AVONDALE INCORPORATED (SEAL)
By:
------------------------------
Title:
Avondale Incorporated
506 South Broad Street
Monroe, Georgia 30655
Attention: Chairman and
Chief Executive Officer
Telecopier number: 770-267-2543
Telephone number: 770-267-2226
ACCEPTED AND AGREED:
WACHOVIA BANK OF GEORGIA, N.A.,
in its capacity as Agent
By:
----------------------------
Title:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Commercial Group
Telecopier number: 404-332-6220
Telephone number: 404-332-6094
13
<PAGE> 14
Exhibit A to Amended and Restated
Stock Pledge Agreement
DESCRIPTION OF THE CAPITAL STOCK OF AVONDALE MILLS, INC.
1,000 Shares, $1.00 Par Value Common Stock Evidenced by
Certificate No. 1
14
<PAGE> 1
EXHIBIT 4.7
The registrants have excluded from filing herewith instruments
relating to (i) the $3,000,000 Refunding Revenue Bonds (Avondale Mills, Inc.
Project), Series 1992, issued by The Industrial Development Board of
the Town of Bon Air, Alabama; (ii) the $4,000,000 Industrial Development
Revenue Bonds (Walton Monroe Mills, Inc. Project), Series 1992A, issued by the
Development Authority of Walton County; (iii) the $2,000,000 Industrial
Development Revenue Refunding Bonds (Walton Monroe Mills, Inc. Project),
Series 1992B, issued by the Development Authority of Walton County; (iv) the
$10,000,000 Refunding Revenue Bonds (Avondale Mills, Inc. Project), Series
1988, issued by the Yancey County Industrial Facilities and Pollution Control
Financing Authority; (v) the $5,000,000 Refunding Revenue Bonds (Avondale
Mills, Inc. Project), Series 1990, issued by City of Walhalla, South Carolina;
and (vi) the $5,000,000 Refunding Revenue Bonds (Avondale Mills, Inc.
Project), Series 1989, issued by The Lee County Industrial Facilities Pollution
Control and Financing Authority. The registrants hereby agree to furnish a
copy of the agreements relating to these bonds to the Securities and Exchange
Commission upon request.
<PAGE> 1
EXHIBIT 10.1
================================================================================
RECEIVABLES PURCHASE AGREEMENT
dated as of April 29, 1996
among
AVONDALE MILLS, INC.
and
CERTAIN AFFILIATES,
as Sellers
and
AVONDALE RECEIVABLES COMPANY,
as Buyer
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Timing of Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 Consideration for Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.4 No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.5 No Assumption of Obligations Relating to Receivables, Related Assets or Contracts . . . . . . . . . . . 3
SECTION 1.6 True Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.7 Addition of Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.8 Termination of Status as a Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.9 Contribution of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 1.10 Insurance Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1 Calculation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.2 Definitions and Calculations Related to Purchase Price Percentage . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 Purchase Price Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.2 The Buyer Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.3 Application of Funds; Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.4 Servicing of Receivables and Related Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.5 Adjustments for Noncomplying Receivables and Dilution . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.6 Payments and Computations, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.2 Certification as to Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.3 Timing of Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.2 Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.3 Representations and Warranties of Sub-Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI
GENERAL COVENANTS OF THE SELLERS
SECTION 6.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.2 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.3 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE SPECIFIED ASSETS
SECTION 7.1 Rights of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 7.2 Responsibilities of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.3 Further Action Evidencing Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 7.4 Collection of Receivables; Rights of Buyer and Its Assignees . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination by the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.2 Automatic Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 9.2 Indemnification Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 10.2 Notices, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 10.3 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 10.4 Binding Effect; Assignability; Survival of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 10.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 10.6 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 10.7 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10.8 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 10.9 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 10.11 Acknowledgment and Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 10.12 No Partnership or Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 10.13 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 10.14 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 10.15 Recourse to Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
EXHIBITS
EXHIBIT A Form of Buyer Note
EXHIBIT B Form of Seller Assignment Certificate
SCHEDULES
SCHEDULE 1 Litigation and Other Proceedings
SCHEDULE 2 Changes in Financial Condition
SCHEDULE 3 Offices of the Sellers where Records are Maintained
SCHEDULE 4 Legal Names, Trade Names and Names Under Which the Companies Do Business
SCHEDULE 5 Software Programs and Licenses
</TABLE>
iii
<PAGE> 5
This RECEIVABLES PURCHASE AGREEMENT, dated as of April 29, 1996 (this
"Agreement"), is made among AVONDALE MILLS, INC., an Alabama corporation
("Avondale"), certain affiliates of Avondale that become party hereto in
accordance with the terms hereof (together with Avondale, the "Sellers"), and
AVONDALE RECEIVABLES COMPANY, a Delaware corporation ("Buyer").
Pursuant to the Pooling and Servicing Agreement dated as of the date
hereof (as amended, supplemented or otherwise modified from time to time, the
"Pooling Agreement"), Buyer intends to transfer its interests in the
Receivables sold pursuant hereto, together with Receivables contributed to
Buyer by Avondale from time to time, to the Trust in order to, among other
things, finance its purchases hereunder. Except as otherwise defined herein,
capitalized terms have the meanings assigned to them in Appendix A to the
Pooling Agreement, and this Agreement shall be interpreted in accordance with
the conventions set forth in Part B of such Appendix A.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell. Each Seller hereby
sells, transfers, assigns, sets over and conveys to Buyer, and Buyer agrees to
purchase from each Seller, at the times set forth in Section 1.2, all of such
Seller's right, title and interest in, to and under:
(a) all Receivables of such Seller (other than Contributed
Receivables) that existed and were owing to such Seller or to
Graniteville Company as at the closing of such Seller's business on
the Initial Cut-Off Date,
(b) all Receivables (other than Contributed Receivables)
created by such Seller that arise during the period from and including
the closing of such Seller's business on the Initial Cut-Off Date to
but excluding the earlier to occur of (i) the Purchase Termination
Date and (ii) the Termination Effective Date (if any) for such Seller,
(c) all Related Security with respect to such Receivables of
such Seller,
<PAGE> 6
(d) all proceeds of the foregoing, including all funds
received by any Person in payment of any amounts owed (including
invoice prices, finance charges, interest and all other charges, if
any) in respect of any Receivable described above or Related Security
with respect to any such Receivable, or otherwise applied to repay or
discharge any such Receivable (including insurance payments that a
Seller or the Servicer applies in the ordinary course of its business
to amounts owed in respect of any such Receivable and net proceeds of
any sale or other disposition of repossessed goods that were the
subject of any such Receivable) or other collateral or property of any
Obligor or any other party directly or indirectly liable for payment
of such Receivables, and
(e) all Records relating to any of the foregoing.
As used herein, (i) "Purchased Receivables" means the items listed
above in clauses (a) and (b), (ii) "Related Purchased Assets" means the items
listed above in clauses (c), (d) and (e), (iii) "Related Assets" means the
Related Purchased Assets and the Related Contributed Assets, (iv) "Purchased
Assets" means the Purchased Receivables and the Related Purchased Assets, (v)
"Specified Assets" means the Purchased Receivables, the Contributed Receivables
and the Related Assets and (vi) "Specified Receivables" means the Purchased
Receivables and the Contributed Receivables.
SECTION 1.2 Timing of Purchases.
(a) Initial First Issuance Date Purchases. All of the Purchased
Assets of each Seller that existed at the closing of such Seller's business on
the Initial Cut-Off Date shall be sold automatically to Buyer on the First
Issuance Date.
(b) Regular Purchases. Except to the extent otherwise provided in
Section 8.2 or (with respect to any Seller) Section 1.8, after the closing of a
Seller's business on the Initial Cut-Off Date until the closing of such
Seller's business on the Business Day immediately preceding the Purchase
Termination Date, all Receivables and the Related Assets of each Seller shall
be sold automatically to Buyer pursuant hereto immediately (and without further
action by any Person) upon the creation of the Receivable or Related Asset.
SECTION 1.3 Consideration for Purchases. On the terms and subject to
the conditions set forth in this Agreement, Buyer agrees to make Purchase Price
payments to the Sellers in accordance with Article III.
SECTION 1.4 No Recourse. Except as specifically provided in this
Agreement, the sale and purchase of Purchased Assets under this Agreement shall
be without recourse to the Sellers; it being understood that (i) each Seller
shall be liable to Buyer for all representations, warranties, covenants and
indemnities made by such Seller pursuant to the
Page 2
<PAGE> 7
terms of this Agreement, all of which obligations are limited so as not to
constitute recourse to such Seller for the credit risk of the Obligors, and
(ii) Avondale shall be liable to Buyer to the extent specified in the Seller
Guaranty.
SECTION 1.5 No Assumption of Obligations Relating to Receivables,
Related Assets or Contracts. None of Buyer, any Servicer nor the Trustee shall
have any obligation or liability to any Obligor or other customer or client of
a Seller (including any obligation to perform any of the obligations of such
Seller under any Receivable, related Contracts or any other related purchase
orders or other agreements). No such obligation or liability is intended to be
assumed by Buyer, any Servicer or the Trustee hereunder, and any assumption
thereof is expressly disclaimed.
SECTION 1.6 True Sales. The Sellers and Buyer intend the transfers
of Receivables hereunder to be true sales by the Sellers to Buyer that are
absolute and irrevocable and that provide Buyer with the full benefits of
ownership of the Receivables, and none of the Sellers nor Buyer intends the
transactions contemplated hereunder to be, or for any purpose to be
characterized as, loans from Buyer to any Seller.
It is, further, not the intention of Buyer or any Seller that the
conveyance of the Specified Assets by a Seller be deemed a grant of a security
interest in the Specified Assets by such Seller to Buyer to secure a debt or
other obligation of such Seller. However, in the event that, notwithstanding
the intent of the parties, any Specified Assets are property of any Seller's
estate, then (i) this Agreement also shall be deemed to be and hereby is a
security agreement within the meaning of the UCC, and (ii) the conveyance by
such Seller provided for in this Agreement shall be deemed to be a grant by
such Seller to Buyer of, and such Seller hereby grants to Buyer, a security
interest in and to all of such Seller's right, title and interest in, to and
under the Specified Assets to secure (1) the rights of Buyer hereunder and (2)
a loan by Buyer to such Seller in the amount of the related Purchase Price of
the Purchased Assets sold by it or the Unpaid Balance of any Contributed
Receivables and the Related Contributed Assets, as the case may be. Each
Seller and Buyer shall, to the extent consistent with this Agreement, take such
actions as may be necessary to ensure that, if this Agreement were found to
create a security interest in the Specified Assets, such security interest
would be a perfected security interest of first priority (subject to Permitted
Adverse Claims) in favor of Buyer under applicable law and will be maintained
as such throughout the term of this Agreement.
SECTION 1.7 Addition of Sellers. Any Domestic Subsidiary of Avondale
or of Avondale Incorporated may become a Seller hereunder and sell its accounts
receivable and property of the types that constitute Related Assets hereunder
to Buyer if (x) the last sentence of this Section applies or (y) the
Modification Condition is satisfied with respect to such addition; provided
that prior to the first addition of a Subsidiary as Seller pursuant to this
Section, Avondale shall have delivered to Buyer and the Trustee the executed
Seller Guaranty and an opinion of counsel (reasonably satisfactory to Buyer and
Trustee)
Page 3
<PAGE> 8
as to the due authorization, execution, delivery and enforceability of the
Seller Guaranty. Avondale and the Domestic Subsidiary that is proposed to be
added as a Seller shall give to Buyer, the Trustee and the Rating Agencies not
less than 30 days' (or such shorter number of days as is acceptable to Trustee)
prior written notice of the effective date of the addition of the Domestic
Subsidiary as a Seller. Once the notice has been given, any addition of a
Domestic Subsidiary of Avondale or Avondale Incorporated as a Seller pursuant
to this section shall become effective on the first Business Day following the
expiration of the notice period (or such later date as may be specified in the
notice) on which (i) the Modification Condition has been satisfied, (ii) the
Servicer shall have delivered to the Trustee a supplement to the Monthly Report
then in effect as described in Section 3.5(e) of the Pooling Agreement and
shall have confirmed in writing to the Trustee that the Seller Guaranty covers
Obligations of such Domestic Subsidiary, and (iii) such Domestic Subsidiary and
the parties hereto shall have executed and delivered the agreements,
instruments and other documents and the amendments or other modifications to
the Transaction Documents, in form and substance reasonably satisfactory to
Buyer and the Trustee, that Buyer or the Trustee reasonably determine are
necessary or appropriate to effect the addition. The Modification Condition
need not be satisfied as to any new Seller if (x) the new Seller is in the same
line of business as one or more existing Sellers or a related line of business,
(y) the aggregate Unpaid Balance of the new Seller's outstanding Receivables on
the last Cut-Off Date prior to the day that it becomes a Seller is less than 5%
of the aggregate Unpaid Balance of all Receivables (including the new Seller's
Receivables) on such Cut-Off Date and (z) no more than two other Persons have
become Sellers during the preceding twelve months without satisfaction of the
Modification Condition.
SECTION 1.8 Termination of Status as a Seller. (a) At any time when
more than one Person is a Seller, a Seller may terminate its obligation to sell
its Receivables and Related Assets to Buyer if such Seller (a "Terminating
Seller") is either a Voluntary Terminating Seller or a Mandatory Terminating
Seller.
(b) A "Voluntary Terminating Seller" is a Seller that satisfies the
following requirements:
(i) such Seller shall have given Buyer, the Trustee and the
Rating Agencies not less than 30 days' (or such shorter period as is
acceptable to the Trustee) prior written notice of its intention to
terminate its obligation to sell its Receivables and Related Purchased
Assets to the Buyer (the date on which such notice is given by the
Terminating Seller being the "Terminating Seller Notice Date"),
(ii) an Authorized Officer of the Terminating Seller shall
have certified that the termination by the Terminating Seller of its
status as a Seller will not have a Material Adverse Effect,
(iii) both immediately before and after giving effect to the
termination by the Terminating Seller, no Early Amortization Event or
Unmatured Early Amortization Event shall have occurred and be
continuing or shall reasonably be expected to occur, and
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<PAGE> 9
(iv) either (x) such Seller is a Permitted Terminating Seller
or (y) the Modification Condition is satisfied with respect to the
termination by such Seller.
"Permitted Terminating Seller" means a Voluntary Terminating Seller
that satisfies the following requirements: (x) the aggregate Unpaid Balance of
such Seller's Receivables on the Cut-Off Date immediately preceding its
Terminating Seller Notice Date would not exceed 20% of the aggregate Unpaid
Balance of all Receivables, calculated as of such Cut-Off Date, and (y) the
aggregate Unpaid Balance of such Seller's Receivables on such Cut-Off Date,
together with the Previously Terminated Seller Amount in respect of Sellers
terminated pursuant to this subsection 1.8(b), would not exceed 25% of the sum
of the Previously Terminated Seller Amount and the aggregate Unpaid Balance of
all Receivables (calculated as of such Cut-Off Date).
"Previously Terminated Seller Amount" means, on any day, the aggregate
Unpaid Balance of Receivables originated by all Sellers previously terminated
pursuant to this subsection 1.8(b), calculated with respect to any Seller as of
the Cut-Off Date immediately preceding its Terminating Seller Notice Date.
(c) A "Mandatory Terminating Seller" is a Seller that has ceased to
be a Subsidiary of Avondale or that has sold all or substantially all of its
assets to any Person (other than an Avondale Person). Avondale shall give the
Buyer, the Trustee and the Rating Agencies not less than 20 days' (or such
shorter period as is acceptable to the Trustee) prior written notice of
circumstances that would cause a Seller to become a Mandatory Terminating
Seller.
(d) Each Terminating Seller shall have a "Termination Effective
Date," determined as follows. The Termination Effective Date for a Voluntary
Terminating Seller shall be the first date on which the conditions specified in
Section 1.8(b) are satisfied. The Termination Effective Date for a Mandatory
Terminating Seller shall be the date on which such Seller ceases to be a
Subsidiary of Avondale or has sold all or substantially all of its assets to
any Person (other than an Avondale Person). As of the Termination Effective
Date for any Terminating Seller, such Terminating Seller shall be relieved of
its obligation to sell, and the Buyer shall be relieved to its obligation to
buy, Receivables (and Related Purchased Assets with respect thereto) originated
by such Terminating Seller on or after such date. Such Terminating Seller
shall not be relieved of its other Obligations, to the extent such Obligations
relate to Receivables (and Related Assets with respect thereto) originated
before such Termination Effective Date, except that: (i) any Mandatory
Terminating Seller shall not be bound by Section 6.3(d) on and after its
Termination Effective Date, and (ii) no Terminating Seller shall be bound by
Section 6.1, 6.2, 6.3, 7.3 or 10.6 after the aggregate Unpaid Balance of
Receivables originated by such Seller and included in the Receivables Pool is
reduced to zero (whether by sale, payment or write-off of such Receivables;
provided, that any write-offs are made
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in a manner consistent with such Seller's prior practices and the applicable
Credit and Collection Policy).
(e) A Terminating Seller may require the Buyer to exercise its rights
under Section 13.19 of the Pooling Agreement to cause the Trustee to convey all
of its right, title and interest in, to and under all (but not less than all)
of the Specified Assets originated by such Terminating Seller to a Person
designated by such Terminating Seller against receipt, in cash, of a release
price of not less than the aggregate Unpaid Balance of the released
Receivables. No such release and conveyance shall, however, be permitted if as
a result thereof, any Avondale Person would acquire any of such Terminating
Seller's Specified Receivables.
(f) A Terminating Seller may (i) sell its Buyer Note to any other
Seller for a purchase price equal to the present value of the outstanding
principal amount thereof or (ii) transfer its Buyer Note to Avondale as a
dividend.
SECTION 1.9 Contribution of Receivables. Avondale hereby transfers
to Buyer, as a contribution to the capital of Buyer, all its right, title and
interest in, to and under:
(a) (i) Receivables of Avondale having (x) a Purchase Price equal to
$45,000,000, and (y) among the existing Receivables, the oldest invoice dates
as of the closing of Avondale's business on the Initial Cut-Off Date, and (ii)
all other Receivables contributed by Avondale pursuant to Section 3.1 (the
Receivables in clauses (i) and (ii) being the "Contributed Receivables"),
(b) all Related Security with respect to the Contributed Receivables,
(c) all proceeds of the foregoing, including all funds received by
any Person in payment of any amounts owed (including invoice prices, finance
charges, interest and all other charges, if any) in respect of any Contributed
Receivable or Related Security with respect to any such Contributed Receivable,
or otherwise applied to repay or discharge any such Contributed Receivable
(including insurance payments that Avondale or the Servicer applies in the
ordinary course of its business to amounts owed in respect of any such
Contributed Receivable and net proceeds of any sale or other disposition or
repossessed goods that were the subject of any such Contributed Receivable) or
other collateral or property of any Obligor or any other party directly or
indirectly liable for payment of such Contributed Receivables, and
(d) all Records relating to any of the foregoing (the items listed
above in clauses (b), (c) and (d) being referred to herein as the "Related
Contributed Assets").
SECTION 1.10 Insurance Claims. If Servicer shall have filed a claim
under any applicable credit insurance policy with respect to an Obligor and
Buyer is entitled to
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request reconveyance by the Trustee of Receivables owed by such Obligor
pursuant to Section 13.19(b) of the Pooling Agreement, Buyer shall so request
such reconveyance and shall, upon receipt of such reconveyance, convey all of
its right, title and interest in such Receivables to the relevant Sellers or
the relevant insurer (as requested) pursuant to a Limited Warranty Assignment.
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1 Calculation of Purchase Price. (a) On each Settlement
Date, the Servicer shall deliver to Buyer, the Trustee and Avondale a report (a
"Settlement Report") with respect to Buyer's purchases of Receivables from the
Sellers during the immediately preceding Settlement Period, as more fully
described in Section 3.3. "Settlement Period" means each of: (i) the First
Issuance Date and (ii) each fiscal week of Avondale following the Closing Date.
"Settlement Date" means with respect to each Settlement Period, the first
Business Day following the end of such Settlement Period.
(b) The "Purchase Price" to be paid to such Seller for the Purchased
Receivables and Related Purchased Assets that are to be sold by a Seller to the
Buyer during a Settlement Period shall be determined in accordance with the
following formula:
PP = AUB x PPP
where:
PP = the aggregate Purchase Price for the Purchased
Receivables and Related Purchased Assets sold by such
Seller during such period,
AUB = the "Aggregate Unpaid Balance" of the Purchased
Receivables sold by such Seller during such period.
For purposes of this calculation, "Aggregate Unpaid
Balance" shall mean (i) for purposes of calculating
the Purchase Price of Receivables sold by such Seller
on the First Issuance Date, the sum of the Unpaid
Balance of each Receivable generated by such Seller,
as measured as at the closing of such Seller's
business on the Initial Cut-Off Date, and (ii) for
purposes of calculating the Purchase Price of
Receivables sold by such Seller during each
Settlement Period thereafter, the sum of the Unpaid
Balance of the Receivables sold by such Seller on
each day during such Settlement Period, calculated at
the time of such sale to Buyer, and
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PPP = the Purchase Price Percentage applicable to the
Receivables sold during such period, as determined
pursuant to Section 2.2.
SECTION 2.2 Definitions and Calculations Related to Purchase Price
Percentage.
(a) "Purchase Price Percentage" for the Receivables to be sold by a
Seller on any day during a Distribution Period shall mean the percentage
determined in accordance with the following formula:
PPP = 100% - (LLR + PDRR)
where:
PPP = the Purchase Price Percentage in effect during such
Distribution Period,
LLR = the Loss to Liquidation Ratio (expressed as a
percentage) in effect during such Distribution
Period, and
PDRR = the Purchase Discount Reserve Ratio (expressed as a
percentage) in effect during such Distribution
Period, as determined on such day pursuant to
subsection (b) below.
The Purchase Price Percentage, the Loss to Liquidation Ratio and the Purchase
Discount Reserve Ratio shall be recomputed by the Servicer on each Report Date,
in each case as of the then most recent Cut-Off Date, and shall become
effective on the next Distribution Date.
(b) "Purchase Discount Reserve Ratio" for the Receivables to be sold
on any day shall mean a percentage determined in accordance with the following
formula:
PDRR = (TD/360 x DR) + PD
where:
PDRR = the Purchase Discount Reserve Ratio in effect during
such Distribution Period,
TD = the Turnover Days during the Calculation Period
preceding the first day of such Distribution Period,
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DR = the Discount Rate (expressed as a percentage) in
effect during such Distribution Period as determined
pursuant to subsection (c) below, and
PD = a profit discount equal to 0.20%; provided that such
percentage may be changed by written agreement of the
Sellers and Buyer if, prior to giving effect to such
change, (i) Buyer shall have provided to the Trustee
and the Rating Agencies a Bankruptcy Opinion that
takes such change into account and (ii) the
Modification Condition shall have been satisfied.
(c) "Discount Rate" for the Receivables to be sold on any day during
a Distribution Period shall mean a fraction (expressed as a percentage) having
(i) a numerator equal to 4 multiplied by an amount equal to the accrued
Carrying Costs for the three Calculation Periods preceding the first day of
such Distribution Period, and (ii) a denominator equal to the aggregate Unpaid
Balance of the Receivables as of the last day of the Calculation Period
preceding the first day of such Distribution Period; provided that, for the
first three Calculation Periods, the Discount Rate shall be 5.04%.
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 Purchase Price Payments. On the terms and subject to the
conditions of this Agreement, Buyer shall pay to the Sellers the Purchase Price
for the Receivables and Related Assets purchased by Buyer hereunder: (i) by
making a cash payment on each Business Day to Avondale (for the account of the
Sellers as an estimated payment) to the extent that Buyer has cash available to
make the payment under Section 3.3, (ii) by increasing the principal amount
outstanding under the relevant Buyer Notes on the dates and as provided in
Section 3.3, or (iii) at the option of Avondale (as evidenced by notice to the
Servicer), only in the case of Avondale as Seller, considering such excess to
have been contributed to Buyer by Avondale as a capital contribution, on the
dates and as provided in Section 3.3.
Each Seller agrees that, prior to the Seller Maturity Date, Buyer
shall be required to make payments in respect of the payment obligations
evidenced by the Buyer Notes only to the extent that it has cash available
under Section 3.3.
SECTION 3.2 The Buyer Notes. (a) On the First Issuance Date, Buyer
will deliver to each Seller a promissory note, substantially in the form of
Exhibit A, payable to the order of such Seller (each such promissory note, as
the same may be amended, supplemented, endorsed or otherwise modified from time
to time, together with any
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promissory note issued from time to time in substitution therefor or renewal
thereof in accordance with the Transaction Documents, being herein called a
"Buyer Note"). Each Buyer Note is payable in full on the date (the "Seller
Maturity Date") that is one year and one day after the date on which all
Investor Certificates and Purchased Interests have been repaid in full and the
Revolving Periods for all Investor Revolving Certificates and Purchased
Interests have terminated. Each Buyer Note bears interest at a rate per annum
equal to the rate publicly announced by the Trustee from time to time as its
"reference" or "prime" rate, determined as of each Cut-Off Date. Buyer may
prepay all or part of the outstanding balance of any Buyer Note from time to
time without any premium or penalty, unless the prepayment would result in a
default in Buyer's payment of any other amount required to be paid by it under
any Transaction Document.
(b) The Initial Servicer (or its designee) shall hold all Buyer Notes
for the benefit of the Sellers and shall make all appropriate recordkeeping
entries with respect to the Buyer Notes or otherwise to reflect the payments on
and adjustment of the Buyer Notes; provided, however, that if any such Buyer
Notes are pledged to secure the obligations of any Seller, such Buyer Notes may
be delivered to and held by the holder(s) of such obligations or its or their
agent or representative. The Initial Servicer's books and records shall
constitute rebuttable presumptive evidence of the principal amount of and
accrued interest on each Buyer Note at any time. Each Seller hereby
irrevocably authorizes the Initial Servicer to mark its Buyer Note "CANCELLED"
and return it to Buyer upon the final payment thereof.
SECTION 3.3 Application of Funds; Settlement. (a) If, on any day
during a Settlement Period, Buyer receives proceeds of transfers pursuant to
the Pooling Agreement, Buyer shall apply the funds as follows:
first, to pay its existing expenses and to set aside funds for
the payment of expenses that are then accrued (in each case to the
extent such expenses are permitted to exist under Section 7.2(l) of
the Pooling Agreement),
second, if the Termination Effective Date has occurred for a
Terminating Seller, to repay amounts owed by the Buyer to such
Terminating Seller under its Buyer Note, and
third, to pay to Avondale (for the account of all Sellers
other than a Terminating Seller) an estimated payment (an "Estimated
Payment") for Receivables sold during such Settlement Period.
(b) On the Settlement Date for each Settlement Period,
Avondale shall calculate the following amounts for each Seller:
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(i) the aggregate Purchase Price for Receivables
sold by such Seller during such Settlement Period,
(ii) the sum of the Seller Dilution Adjustments and
Sellers Noncomplying Receivables Adjustments for such Seller
during such Settlement Period, calculated as provided in
Section 3.5,
(iii) the aggregate amount of payments (if any)
received by the Buyer during such Settlement Period in respect
of Receivables for which such Seller previously made Seller
Noncomplying Receivables Adjustment,
(iv) an amount (the "Net Payable Amount") equal to
the sum (whether positive or negative) of: (A) the amount
determined pursuant to clause (i) minus (B) the amount
determined pursuant to clause (ii) plus (C) the amount
determined pursuant to clause (iii),
(v) if such Seller's Net Payable Amount is a
positive number, a fraction (such Seller's "Settlement
Percentage"), the numerator of which is such Seller's Net
Payable Amount and the denominator of which is the sum of the
positive Net Payable Amounts for all Sellers.
(c) If a Seller's Net Payable Amount for a Settlement Period
is a positive number, Avondale shall pay to such Seller its Settlement
Percentage of the aggregate Estimated Payments received by Avondale
during such Settlement Period (or, if less, such Seller's Net Payable
Amount). If such Net Payable Amount is greater than the amount so
payable by Avondale, such Seller's Buyer Note shall be automatically
increased by the amount of such excess or (if such Seller is Avondale
and Avondale so elects by notice to Servicer, Buyer and Trustee) such
excess shall be deemed to be a capital contribution to Buyer.
(d) If such Seller's Net Payable Amount for a Settlement
Period is a negative number, such Seller's Buyer Note shall be reduced
by the absolute value of such Net Payable Amount. If such absolute
value exceeds the outstanding principal amount of such Buyer Note,
such Seller shall pay the amount of such excess to the Buyer in
immediately available funds, which payment shall be deemed to be
Collections and shall be deposited in the Master Collection Account on
such Settlement Date.
(e) If the portion of the Estimated Payments allocated to
Sellers pursuant to this Section is less than 100% of such payments:
(i) Buyer shall (to the extent not otherwise prohibited by law or the
Transaction Documents) direct Avondale to apply the excess portion of
such payments to additional amounts owed under any Buyer Notes and,
(ii) to the extent funds remain after the application described in
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clause (i), Buyer may elect to direct Avondale to apply such funds to
the extension of loans by Buyer to the Sellers or the declaration by
Buyer of dividends to Avondale. Otherwise, Avondale shall promptly
return such funds to the Buyer.
(f) If at any time Buyer is required to make any payment
to Trustee on account of the Net Invested Amount for any Series or
Purchased Interest exceeding the Base Amount for such Series or
Purchased Interest, then Avondale (on behalf of the Sellers) shall
immediately pay to Transferor, for deposit to the Equalization
Account, an amount equal to such excess. Amounts not paid pursuant to
the foregoing sentence shall bear interest as provided in Section 3.6.
SECTION 3.4 Servicing of Receivables and Related Assets. Consistent
with Buyer's ownership of the Receivables and the Related Assets, as between
the parties to this Agreement, Buyer shall have the sole right to service,
administer and collect the Receivables, to assign the right and to delegate the
right to others. Without limiting the generality of Section 10.11, each Seller
hereby acknowledges and agrees that Buyer may assign to the Trustee or Servicer
for the benefit of the Investor Certificateholders and Purchasers any or all
rights to payment and remedies of Buyer hereunder and agrees to cooperate fully
with the Servicer and the Trustee in the exercise of such rights and remedies.
As more fully described in Section 7.4(b) and in the Pooling Agreement, the
Trustee may exercise the rights in the place of Buyer (as assignee or
otherwise) only after the designation of a Servicer other than the Initial
Servicer pursuant to Section 10.2 of the Pooling Agreement.
At Trustee's request in connection with the exercise of such rights,
each Seller will (A) assemble all of the Records that are necessary or
appropriate to collect the Receivables and Related Transferred Assets, and
shall make the same available to Trustee at one or more places selected by
Trustee or its designee, and (B) permit, upon not less than two Business Days'
prior written notice, any Successor Servicer and its agents, employees and
assignees access to their respective facilities and their respective Records.
SECTION 3.5 Adjustments for Noncomplying Receivables and Dilution.
(a) If at any time any of Buyer, the Servicer, the Trustee or a Seller shall
determine that any Receivable identified by a Seller (as evidenced in a report
of the Servicer) as an Eligible Receivable on the date of Purchase thereof by
Buyer or the contribution thereof to Buyer was in fact a Seller Noncomplying
Receivable on such date, or that any of the representations and warranties made
by the related Seller in Section 5.1(k) with respect to such Receivable was not
true on such date, such Seller shall be deemed to have received on the date of
such determination a Collection of the Receivable in an amount equal to the
Unpaid Balance of the Receivable (the sum of all such amounts for such Seller
on any day being called the "Seller Noncomplying Receivables Adjustment" for
such Seller for such day), and such Seller Noncomplying Receivables Adjustment
shall be settled in the manner provided for in Section 3.1.
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(b) If on any day the aggregate Unpaid Balance of the Receivables
sold or contributed to Buyer on or before such date by a Seller is reduced in
any manner described in the definition of "Dilution" (the total of the
reductions being called the "Seller Dilution Adjustment" for the Seller for
such day), then such Seller shall be deemed to have received on such day a
Collection of Receivables in the amount of the Seller Dilution Adjustment and
such Seller Dilution Adjustment shall be settled in the manner provided in
Section 3.1.
SECTION 3.6 Payments and Computations, Etc. (a) All amounts to be
paid by a Seller to Buyer hereunder shall be received in accordance with the
terms hereof no later than 1:00 p.m., New York City time, on the day when due
in Dollars in immediately available funds in an account that Buyer shall from
time to time specify in writing. Payments received by Buyer after such time
shall be deemed to have been received on the next Business Day. In the event
that any payment otherwise is scheduled to become due on a day that is not a
Business Day, then payment shall become due on the next Business Day. Each
Seller shall, to the extent permitted by law, pay to Buyer, on demand, interest
on all amounts not paid when due hereunder at 2% per annum above the interest
rate on the applicable Buyer Note in effect on the date the payment was due;
provided, however, that the interest rate shall not at any time exceed the
maximum rate permitted by applicable law. All computations of interest payable
hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the first but excluding the last day) elapsed.
(b) All amounts to be paid by Buyer to a Seller hereunder shall be
paid to Servicer (for the account of such Seller) no later than 2:00 p.m., New
York City time, on the day when due in Dollars in immediately available funds
to an account that the Initial Servicer shall from time to time specify in
writing. Payments received by Servicer after such time shall be deemed to have
been received on the next Business Day. Servicer shall promptly remit payments
received by it in immediately available funds to such account as the applicable
Seller shall from time to time specify in writing. In the event that any
payment otherwise is scheduled to become due on a day that is not a Business
Day, then such payment shall become due on the next Business Day. The Buyer
shall, to the extent permitted by law, pay to the applicable Seller, on demand,
interest on all amounts not paid when due hereunder at 2% per annum above the
interest rate on the applicable Buyer Note in effect on the date the payment
was due; provided, however, that the interest rate shall not at any time exceed
the maximum rate permitted by applicable law. All computations of interest
payable hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first but excluding the last day) elapsed.
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ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase. The initial
purchase hereunder is subject to the conditions precedent that (i) each of the
conditions precedent to the execution, delivery and effectiveness of each other
Transaction Document (other than a condition precedent in any other Transaction
Document relating to the effectiveness of this Agreement) shall have been
fulfilled to the satisfaction of Buyer, and (ii) Buyer shall have received (or
in the case of subsection (f) below, shall have delivered) each of the
following, on or before the First Issuance Date, each (unless otherwise
indicated) dated the date hereof or the First Issuance Date and each in form
and substance satisfactory to Buyer:
(a) Seller Assignment Certificates. A Seller Assignment
Certificate from each Seller in the form of Exhibit B, duly completed,
executed and delivered by such Seller,
(b) Resolutions. A copy of the resolutions of the Board of
Directors of each Seller approving this Agreement and the other
Transaction Documents to be delivered by it hereunder and the
transactions contemplated hereby and thereby and addressing such other
matters as may be required by Buyer, certified by its Secretary or
Assistant Secretary, each as of a recent date acceptable to Buyer,
(c) Good Standing Certificate of each Seller; Certificates as
to Foreign Qualification of each Seller. A good standing certificate
for each Seller, issued as of a recent date by the Secretary of State
of: (i) the jurisdiction of its incorporation and (ii) each state in
which such Seller transacts business and where the failure so to be in
good standing reasonably could be expected to have a Material Adverse
Effect,
(d) Incumbency Certificate. A certificate of the Secretary
or Assistant Secretary of each Seller certifying, as of a recent date
reasonably acceptable to Buyer, the names and true signatures of the
officers authorized on such Seller's behalf to sign the Transaction
Documents to be delivered by such Seller (on which certificate Buyer,
the Trustee and the Servicer may conclusively rely until such time as
Buyer shall receive from such Seller (with a copy to the Trustee and
the Servicer), a revised certificate meeting the requirements of this
subsection),
(e) Other Transaction Documents. Original copies, executed
by each of the parties thereto in such reasonable number as shall be
specified by Buyer, of each of the other Transaction Documents to be
executed and delivered in connection herewith,
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(f) Buyer Notes. The Buyer Notes, executed by Buyer, and
(g) License Agreements. Duly executed counterparts of (i)
software license agreements between each Seller or Servicer that uses
its own proprietary software in the origination or servicing of
Receivables or Related Assets and Buyer, and (ii) consents given with
respect to any license agreement between a Seller or Servicer and any
third party vendor, permitting the assignment thereof to a replacement
Servicer.
SECTION 4.2 Certification as to Representations and Warranties. Each
Seller (by accepting the Purchase Price paid for each Purchase) and Avondale
(upon a contribution of Receivables and Related Assets to the Buyer) shall be
deemed to have certified with respect to such Receivables and Related Assets to
be sold or contributed on such day that its representations and warranties
contained in Article V (excluding, with respect to any day after the First
Issuance Date, Section 5.1(i)) are true and correct on and as of such day, with
the same effect as though made on and as of such day.
SECTION 4.3 Timing of Conveyance. Upon the origination of a
Receivable and Related Asset, title to the Receivable or Related Asset shall
vest in Buyer, whether or not the conditions precedent to the Purchase were in
fact satisfied; provided, however, that Buyer shall not be deemed to have
waived any claim it may have under this Agreement for the failure by a Seller
in fact to satisfy any such condition precedent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the Sellers. In order
to induce Buyer to enter into this Agreement and to make purchases hereunder,
each Seller hereby makes the representations and warranties set forth in this
section with respect to itself at the times and to the extent set forth in
Section 4.2 (it being understood that only Avondale makes the representations
and warranties set forth below with respect to any Contributed Receivables and
Related Contributed Assets).
(a) Organization and Good Standing. Such Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has full
power and authority to own its properties and to conduct its business
as the properties presently are owned and the business presently is
conducted. Such Seller had at all relevant times, and now has, all
necessary corporate power, authority and legal right to own, sell and
(if applicable) contribute its Receivables and the Related Assets.
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(b) Due Qualification. Such Seller is duly qualified to do
business and is in good standing as a foreign corporation (or is
exempt from such requirements), and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires
qualification, licenses or approvals and where the failure so to
qualify, to obtain the licenses and approvals or to preserve and
maintain the qualification, licenses or approvals is likely to have a
Material Adverse Effect.
(c) Power and Authority; Due Authorization. Such Seller has
(i) all necessary corporate power and authority to (A) execute and
deliver this Agreement and the other Transaction Documents to which it
is a party, (B) perform its obligations under this Agreement and the
other Transaction Documents to which it is a party, and (C) sell,
assign and (if applicable) contribute the Receivables and the Related
Assets on the terms and subject to the conditions herein and therein
provided and (ii) duly authorized by all necessary action such sale,
assignment and (if applicable) contribution, the execution, delivery
and performance of this Agreement and the other Transaction Documents
to which it is a party and the consummation of the transactions
provided for in this Agreement and the other Transaction Documents to
which it is a party.
(d) Valid Sale; Binding Obligations. Each sale of
Receivables and Related Assets made by such Seller pursuant to this
Agreement, and each contribution of Receivables and Related Assets
made to Buyer shall constitute a valid sale (except in the case of
Contributed Receivables and Related Contributed Assets), transfer and
assignment of all of such Seller's right, title and interest in, to
and under such Receivables and the Related Assets of such Seller to
Buyer that is perfected and of first priority under the UCC and
otherwise, enforceable against creditors of, and purchasers from, such
Seller and free and clear of any Adverse Claim (other than any
Permitted Adverse Claim or any Adverse Claim arising solely as a
result of any action taken by Buyer hereunder or by the Trustee under
the Pooling Agreement); and this Agreement constitutes, and each other
Transaction Document to which such Seller is a party when duly
executed and delivered will constitute, a legal, valid and binding
obligation of such Seller, enforceable against it in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general principles
of equity, regardless of whether enforceability is considered in a
proceeding in equity or at law.
(e) No Conflict or Violation. The execution, delivery and
performance of, and the consummation of the transactions contemplated
by, this Agreement and the other Transaction Documents to be signed by
such Seller and the fulfillment of the terms hereof and thereof will
not (i) conflict with, violate, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse
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of time or both) a default under, (A) its Certificate of Incorporation
or Bylaws or (B) any indenture, loan agreement, mortgage, deed of
trust or other material agreement or instrument to which such Seller
is a party or by which it or any of its properties is bound, (ii)
result in the creation or imposition of any Adverse Claim upon any of
the Receivables or Related Assets other than pursuant to this
Agreement and the other Transaction Documents, or (iii) conflict with
or violate any applicable federal, state, local or foreign law or any
decision, decree, order, rule or regulation applicable to it or any of
its properties of any court or of any federal, state, local or foreign
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over it or any of its properties,
which conflict, violation, breach, default or Adverse Claim,
individually or in the aggregate, is likely to have a Material Adverse
Effect.
(f) Litigation and Other Proceedings. Except as described in
Schedule 1, (i) there is no action, suit, proceeding or investigation
pending or, to the best knowledge of such Seller, overtly threatened
against it before any court, regulatory body, arbitrator,
administrative agency or other tribunal or governmental
instrumentality and (ii) it is not subject to any order, judgment,
decree, injunction, stipulation or consent order of or with any court
or other government authority that, in the case of each of clauses (i)
and (ii), (A) asserts the invalidity of this Agreement or any other
Transaction Document, (B) seeks to prevent the sale, assignment or
contribution of any Receivables or Related Assets by such Seller to
Buyer, the issuance of the applicable Seller Assignment Certificate or
the consummation of any of the transactions contemplated by this
Agreement or any other Transaction Document, (C) seeks any
determination or ruling that would materially and adversely affect the
performance by such Seller of its obligations under this Agreement or
any other Transaction Document or the validity or enforceability of
this Agreement or any other Transaction Document, (D) seeks to affect
adversely the income tax attributes of the purchases hereunder or the
applicable Seller Assignment Certificate, in the case of each of the
foregoing whether under the United States Federal income tax system or
any state income tax system, or (E) individually or in the aggregate
for all such actions, suits, proceedings and investigations is likely
to have a Material Adverse Effect.
(g) Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority or other
Person that are required to be obtained by such Seller, and all
notices to and filings (except, in respect of enforceability against
any Obligor that is the United States government or any of its
agencies or instrumentalities, any filings under the Federal
Assignment of Claims Act and any consents required by states with
respect to any Specified Receivables arising from any state or local
government agency or instrumentality, so long as such Receivables are
not reported as Eligible Receivables), with any Governmental Authority
or other Person that are required to be made by it, in the
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case of each of the foregoing in connection with the conveyance of
Receivables and Related Assets or the due execution, delivery and
performance by such Seller of this Agreement, such Seller's Seller
Assignment Certificate or any other Transaction Document to which it
is a party and the consummation of the transactions contemplated by
this Agreement and the other Transaction Documents, have been obtained
or made and are in full force and effect, except where the failure to
obtain or make any such authorization, consent, order, approval,
notice or filing, individually or in the aggregate for all such
failures, is likely to have a Material Adverse Effect.
(h) Bulk Sales Act. No transaction contemplated by this
Agreement or any other Transaction Document requires compliance with,
or will be subject to avoidance under, any bulk sales act or similar
law.
(i) Financial Condition. The Pro Forma Financial Data,
copies of which have been furnished to Buyer and the Trustee, fairly
present in all material respects on a pro forma basis the consolidated
financial position, results of operations and cash flows of Avondale
and its consolidated Subsidiaries as at the dates specified therein
and the consolidated results of the operations of Avondale and its
consolidated Subsidiaries for the periods ended on such dates, all in
accordance with GAAP consistently applied throughout the periods
reflected therein (except as indicated therein and, in the case of
quarterly financial statements, subject to year-end adjustments and
the absence of notes thereto), and, except as set forth in Schedule 2,
or in the offering circular described below, since August 25, 1995
through the date hereof there has been no material adverse change in
the financial condition, business or operations of Avondale and its
consolidated Subsidiaries. "Pro Forma Financial Data" means the pro
forma consolidated financial data included in the offering circular,
dated April 26, 1996, with respect to the proposed offering of Senior
Subordinated Notes due 2006 to be issued by Avondale.
(j) Margin Regulations. No use of any funds obtained by such
Seller under this Agreement will conflict with or contravene any of
Regulations G, T, U and X promulgated by the Federal Reserve Board
from time to time.
(k) Quality of Title. (i) Immediately before each purchase
to be made by Buyer hereunder and (in the case of Avondale) each
contribution to be made to Buyer, each Receivable and Related Asset of
such Seller that is then to be transferred to Buyer thereunder, and
the related Contracts, shall be owned by such Seller free and clear of
any Adverse Claim (other than any Permitted Adverse Claim or any
Adverse Claim arising solely as the result of any action taken by
Buyer hereunder or by the Trustee under the Pooling Agreement);
provided that the existence of an Adverse Claim that is released on
the First Issuance Date (upon
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application of the proceeds of the issuance of Certificates on that
date) shall not constitute a breach of this representation and
warranty; and such Seller shall have made all filings and shall have
taken all other action under applicable law in each relevant
jurisdiction in order to protect and perfect the ownership interest of
Buyer and its successors in the Receivables and Related Assets against
all creditors of, and purchasers from, such Seller.
(ii) Whenever Buyer makes a purchase hereunder from
such Seller (or accepts a contribution from Avondale), the
Buyer shall have acquired a valid and perfected first priority
ownership interest in each Specified Asset sold by such Seller
or contributed by Avondale on such date, free and clear of any
Adverse Claim (other than any Permitted Adverse Claim or any
Adverse Claim arising solely as the result of any action taken
by Buyer hereunder or by the Trustee under the Pooling
Agreement).
(iii) No effective financing statement or other
instrument similar in effect that covers all or part of any
Receivable originated by such Seller, any interest therein or
any Related Asset with respect thereto is on file in any
recording office except financing statements as to termination
statements or releases that are filed on the First Issuance
Date or fifth Business Day after the First Issuance Date and
(x) such as may be filed (A) in favor of such Seller in
accordance with the Contracts, (B) in favor of Buyer pursuant
to this Agreement and (C) in favor of the Trustee, for the
benefit of the Investor Certificateholders and Purchasers, in
accordance with the Pooling Agreement, (y) such as may have
been identified to Buyer prior to the First Issuance Date and
termination statements relating to which have been placed with
LEXIS Document Services (or a similar service acceptable to
the Trustee) for filing within five Business Days of the First
Issuance Date, and (z) such as may be filed with respect to
Receivables (and Related Assets with respect thereto) that are
not Specified Receivables in favor of Persons bound by an
Intercreditor Agreement. No effective financing statement or
instrument similar in effect relating to perfection that
covers any inventory of such Seller that might give rise to
Receivables is on file in any recording office except for (so
long as an Intercreditor Agreement is in effect) financing
statements or instruments in favor of creditors of such Seller
bound by such Intercreditor Agreement.
(iv) No Purchase by Buyer from such Seller (or, in
the case of Avondale, no capital contribution to Buyer)
constitutes a fraudulent transfer or fraudulent conveyance
under the United States Bankruptcy Code or applicable state
bankruptcy or insolvency laws or is otherwise void
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or voidable or subject to subordination under similar laws or
principles or for any other reason.
(v) Each Purchase by Buyer from such Seller
constitutes a true and valid sale of the Receivables and
Related Assets under applicable state law and true and valid
assignments and transfers for consideration (and not merely a
pledge of the Receivables and Related Assets for security
purposes), enforceable against the creditors of such Seller,
and no Receivables or Related Assets transferred to Buyer
hereunder shall constitute property of such Seller.
(l) Eligible Receivables. (i) On the date of each Purchase
of Receivables hereunder from such Seller (or, in the case of
Avondale) contribution from such Seller, each such Receivable, unless
otherwise identified to Buyer and the Trustee by the Servicer in the
Daily Report for such date, is an Eligible Receivable, and (ii) on the
date of each Daily Report or Monthly Report that identifies a
Receivable originated by such Seller as an Eligible Receivable, such
Receivable is an Eligible Receivable.
(m) Accuracy of Information. All written information
furnished by or on behalf of such Seller to Buyer, the Servicer or the
Trustee pursuant to or in connection with any Transaction Document or
any transaction contemplated herein or therein shall not contain any
untrue statement of a material fact or omit to state material facts
necessary to make the statements made not misleading, in each case on
the date the statement was made and in light of the circumstances
under which the statements were made or the information was furnished.
(n) Offices. The principal place of business and chief
executive office of such Seller is located at the address set forth
under such Seller's signature hereto, and any other location which has
been such Seller's principal place of business or chief executive
office during the past four months or in which such Seller keeps (or
has kept during the past four months) Records, Contracts, purchase
orders and agreements related to the Receivables or Related Assets
(and all original documents relating thereto) is specified in Schedule
3 (or at such other locations, notified to the Servicer and the
Trustee in accordance with Section 6.1(f), in jurisdictions where all
action required pursuant to Section 7.3 has been taken and completed).
(o) Account Banks and Payment Instructions. The names and
addresses of all the banks, together with the account numbers of the
accounts at the banks, into which Collections are paid as of the First
Issuance Date have been accurately identified to Buyer in a letter
from such Seller to Buyer dated the First Issuance Date or have been
specified in the notices as shall have been delivered thereafter
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pursuant to Section 6.3(c). Each Account Bank has executed and
delivered an Account Agreement to Buyer and the Trustee. Such Seller
has instructed all Obligors to submit all payments on the Receivables
and Related Assets directly to one of the Lockbox Accounts. Any
payments not made directly to the Account Banks will be forwarded by
the recipient of such payments to the Account Banks within two
Business Days.
(p) Compliance with Applicable Laws. Such Seller is in
compliance with the requirements of all applicable laws, rules,
regulations and orders of all Governmental Authorities (federal,
state, local or foreign, and including environmental laws), a
violation of any of which, individually or in the aggregate for all
such violations, is likely to have a Material Adverse Effect.
(q) Legal Names. Except as set forth in Schedule 4, since
January 1, 1990 such Seller has not been known by any legal name other
than its corporate name as of the date hereof, except to the extent
permitted otherwise pursuant to Section 6.3(e), nor has such Seller
been the subject of any merger or other corporate reorganization since
January 1, 1990 that resulted in a change of name, identity or
corporate structure. Such Seller uses no trade names other than its
actual corporate name and the trade names set forth in Schedule 4.
(r) Investment Company Act. Such Seller is not, and is not
controlled by, an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended.
(s) Taxes. Such Seller has filed or caused to be filed all
tax returns and reports required by law to have been filed by it and
has paid all taxes, assessments and governmental charges thereby shown
to be owing, except: (x) any such taxes, assessments or charges (i)
that are being diligently contested in good faith by appropriate
proceedings, (ii) for which adequate reserves in accordance with GAAP
shall have been set aside on its books and (iii) with respect to which
no Adverse Claim, except Permitted Adverse Claims, has been imposed
upon any Receivables or Related Assets, or (y) where the failure so to
file or pay would not have a Material Adverse Effect or result in an
Adverse Claim (except Permitted Adverse Claims) imposed against any
Receivables or Related Assets.
(t) Software Programs. Each software program, and any
license or other agreement relating to such program, used in the
origination or servicing of Receivables and Related Assets as of the
First Issuance Date is described in Schedule 5.
SECTION 5.2 Representations and Warranties of Buyer. From the date
hereof until the Purchase Termination Date, Buyer hereby represents and
warrants that (a) this
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Agreement (i) has been duly authorized, executed and delivered by Buyer and
(ii) constitutes the legal, valid and binding obligation of Buyer, enforceable
against it in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether enforceability is considered in a
proceeding in equity or at law, and (b) the execution, delivery and performance
of this Agreement does not violate any applicable law or any agreement to which
Buyer is a party or by which its properties are bound.
SECTION 5.3 Representations and Warranties of Sub-Servicer. In order
to induce Buyer to enter into this Agreement and to make purchases hereunder:
(a) Each Seller, in its capacity as a Sub-Servicer, hereby represents
and warrants as to itself that all information furnished by or on behalf of
such Person to Buyer, Servicer or the Trustee pursuant to or in connection with
any Transaction Document or any transaction contemplated herein or therein
shall not contain any untrue statement of a material fact or omit to state
material facts necessary to make the statements made not misleading, in each
case on the date the statement was made and in light of the circumstances under
which the statements were made or the information was furnished, and
(b) without limiting the foregoing, each Seller, in its capacity as a
Sub-Servicer, hereby represents and warrants as to itself that, on the date of
each Daily Report or Monthly Report that identifies a Receivable originated by
such Seller as an Eligible Receivable, such Receivable is an Eligible
Receivable.
ARTICLE VI
GENERAL COVENANTS OF THE SELLERS
SECTION 6.1 Affirmative Covenants. Subject to Section 1.8, from the
First Issuance Date until the first day following the Purchase Termination Date
on which (x) all Obligations of the Sellers shall have been finally and fully
paid and (y) performed and the Invested Amount for each Series or Purchased
Interest shall have been reduced to zero (or payment for such Series or
Purchased Interest has been duly provided in accordance with the Pooling
Agreement), unless Buyer shall otherwise give its prior written consent, each
Seller hereby agrees that it will perform the covenants and agreements set
forth in this section.
(a) Compliance with Laws, Etc. Such Seller will comply in
all material respects with all applicable laws, rules, regulations,
judgments, decrees and orders (including those relating to the
Receivables, the Related Assets, the related
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Contracts of such Seller and any other agreements related thereto), in
each case to the extent the failure to comply, individually or in the
aggregate for all such failures, reasonably could be expected to have
a Material Adverse Effect.
(b) Preservation of Corporate Existence. Such Seller will
preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and
remain qualified in good standing as a foreign corporation in each
jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualifications
reasonably could be expected to have a Material Adverse Effect.
(c) Receivables Reviews. Such Seller shall, during regular
business hours upon not less than five Business Days' prior notice,
permit Buyer and its agents or representatives, at the expense of such
Seller, (i) to examine and make copies of and abstracts from, and to
conduct accounting reviews of, all Records in the possession or under
the control of such Seller relating to the Receivables or Related
Assets generated by such Seller, and (ii) to visit the offices and
properties of such Seller for the purpose of examining the materials
described in clause (i) above, and to discuss matters relating to any
Receivables or any Related Assets of such Seller or such Seller's
performance hereunder with any of the Authorized Officers of such
Seller or, with the prior consent of an Authorized Officer of such
Seller, with employees of such Seller having knowledge of such matters
(the examinations set forth in the foregoing clauses (i) and (ii)
being herein called a "Seller Receivables Review"). Buyer and its
agents or representatives shall be entitled to conduct Seller
Receivables Reviews whenever Buyer, in its reasonable judgment, deems
it appropriate; provided, that prior to the occurrence and continuance
of an Early Amortization Event, Buyer (or its agent or representative)
shall give such Seller at least five Business Days' prior notice of
any Seller Receivables Review, and Buyer shall have the right to
request a Seller Receivables Review not more than twice in any
calendar year.
(d) Keeping of Records and Books of Account. Such Seller
shall maintain and implement administrative and operating procedures
(including an ability to recreate records evidencing its Receivables
and Related Assets in the event of the destruction of the originals
thereof), and shall keep and maintain all documents, books, records
and other information that, in the reasonable determination of Buyer
and the Trustee, are necessary or advisable in accordance with prudent
industry practice and custom for transactions of this type for the
collection of all Receivables and the Related Assets. Upon the
reasonable request of Buyer made at any time after the occurrence of a
Servicer Default that has not been waived in writing by the Trustee,
such Seller will deliver copies of all books and records maintained
pursuant to this subsection to the Trustee. Such Seller shall
maintain at all times accurate and complete books, records and
accounts relating to the
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Receivables, Related Assets and Contracts and all Collections thereon
in which timely entries shall be made. Such books and records shall
be marked to indicate the sales (and, in the case of Avondale,
contributions) of all Receivables and Related Assets hereunder and
shall include (i) all payments received and all credits and extensions
granted with respect to the Receivables and (ii) the return,
rejection, repossession or stoppage in transit of any merchandise, the
sale of which has given rise to a Receivable that has been purchased
by or contributed to Buyer.
(e) Performance and Compliance with Receivables and
Contracts. Such Seller will, at its expense, timely and fully perform
and comply with all provisions, covenants and other promises required
to be observed by it under the Contracts of such Seller related to the
Receivables and Related Assets, in each case to the extent failure to
perform or comply is likely to have a Material Adverse Effect.
(f) Location of Records and Offices. Such Seller will keep
its principal place of business and chief executive office, and the
offices where it keeps all Records related to the Receivables and the
Related Assets (and all original documents relating thereto), at the
addresses referred to in Schedule 3 or, upon not less than 30 days'
prior written notice given by such Seller to Buyer, the Trustee and
the Rating Agencies, at such other locations in jurisdictions where
all action required by Section 7.3 shall have been taken and completed.
(g) Credit and Collection Policies. Such Seller will comply
in all material respects with its Credit and Collection Policy in
regard to each Receivable of such Seller and the Related Assets and
the Contracts related to each such Receivable, where the failure so to
comply, individually or in the aggregate for all such failures, is
likely to have a Material Adverse Effect.
(h) Separate Corporate Existence of Buyer. Such Seller
hereby acknowledges that the Trustee, on behalf of the Trust, is
entering into the transactions contemplated by the Transaction
Documents in reliance upon Buyer's identity as a legal entity separate
from such Seller and the other Related Persons. Therefore, from and
after the date hereof until the first day following the Purchase
Termination Date on which all Obligations shall have been fully paid
and performed and the Invested Amount for each Series or Purchased
Interest shall have been reduced to zero, such Seller will, and will
cause each other Related Person to, take all reasonable steps to
continue their respective identities as separate legal entities and to
make it apparent to third Persons that each is an entity with assets
and liabilities distinct from those of Buyer and that Buyer is not a
division of the Servicer, such Seller, Avondale or any other Person.
Without limiting the foregoing, Avondale and each Seller will, and
will cause each other Avondale Person to, operate, conduct their
respective businesses and otherwise act
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in a manner which is consistent in all material respects with the
factual assumptions in each Bankruptcy Opinion for each Series.
(i) Payment Instructions to Obligors. Such Seller will
instruct all Obligors to submit all payments either (i) to one of the
lockboxes maintained at the Lockbox Banks for deposit in a Lockbox
Account or to a Concentration Account or (ii) directly to one of the
Lockbox Accounts.
(j) Segregation of Collections. Such Seller shall use
reasonable efforts to minimize the deposit of any funds other than
Collections into any of the Lockbox Accounts and, to the extent that
any such funds nevertheless are deposited into any of the Lockbox
Accounts, shall promptly identify any such funds, or shall cause the
funds to be so identified, to Buyer, the Servicer and the Trustee
(following which notice, Buyer shall cause the Servicer to return all
the funds to such Seller).
(k) Identification of Eligible Receivables. Such Seller will
(i) establish and maintain such procedures as are necessary for
determining no less frequently than each Business Day whether each
Receivable qualifies as an Eligible Receivable, and for identifying,
on any Business Day, all Receivables to be sold on that date that are
not Eligible Receivables, and (ii) except as permitted in Section
3.5(c) of the Pooling Agreement, notify Buyer prior to the occurrence
of a Purchase (and, in the case of Avondale, before a contribution of
Receivables and Related Assets) if a Receivable to be sold hereunder
will, to such Seller's knowledge, not be an Eligible Receivable as of
the date of such Purchase or contribution.
(l) Accuracy of Information. All written information
furnished on and after the First Issuance Date by or on behalf of such
Seller to Buyer, the Servicer or the Trustee pursuant to or in
connection with any Transaction Document or any transaction
contemplated herein or therein shall not contain any untrue statement
of a material fact or omit to state material facts necessary to make
the statements made not misleading, in each case on the date the
statement was made and in light of the circumstances under which the
statements were made or the information was furnished.
(m) Taxes. File or cause to be filed, and cause each Person
with whom it shares consolidated tax liability to file, all Federal,
state and local tax returns that are required to be filed by it
(except where the failure to file such returns is not likely to have a
Material Adverse Effect) and pay or cause to be paid all taxes shown
to be due and payable on taxes or assessments (except: (i) only such
taxes or assessments the validity of which are being contested in good
faith by appropriate proceedings and with respect to which such Seller
shall have set aside adequate reserves on its books in accordance with
GAAP, and which proceedings are not likely to have a Material Adverse
Effect or (ii) where the failure so to file
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or pay would not have a Material Adverse Effect or result in an
Adverse Claim (except Permitted Adverse Claims) imposed against any
Receivables or Related Assets.
(n) Software Licenses. Use its reasonable efforts to cause
all software licenses or similar agreements used by the Sellers or
Servicer in the origination or servicing of Receivables to expressly
permit use by any substitute Servicer of the materials subject to such
licenses or agreements.
SECTION 6.2 Reporting Requirements. Subject to Section 1.8, from the
First Issuance Date until the first day following the Purchase Termination Date
on which (x) all Obligations of the Sellers shall have been finally and fully
paid and performed and (y) the Invested Amount for each Series or Purchased
Interest shall have been reduced to zero (or payment for such Series or
Purchased Interest has been duly provided in accordance with the Pooling
Agreement), such Seller agrees that it will, unless Buyer and the Trustee shall
otherwise give prior written consent, and (with respect to the notices
described below in subsections (c) and (d)) unless the Modification Condition
has been satisfied, furnish to Buyer and the Trustee (and in the case of the
notices described below in subsections (c), (d) and (f), to the Rating
Agencies):
(a) Quarterly Financial Statements. Within 45 days after the
end of each of the first three fiscal quarters of each fiscal year of
Avondale, copies of the unaudited consolidated balance sheets of
Avondale and its consolidated Subsidiaries as at the end of the fiscal
quarter and the related unaudited consolidated statements of income
and cash flows, in each case for the fiscal quarter and for the period
from the beginning of the fiscal year through the end of such fiscal
quarter, prepared in accordance with GAAP consistently applied
throughout the periods reflected therein and certified (subject to
year end adjustments and the omission of footnotes) by the chief
financial officer or chief accounting officer of Avondale,
(b) Annual Financial Statements. As soon as possible and in
any event within 90 days after the end of each fiscal year of
Avondale, a copy of the audited consolidated balance sheet of Avondale
and its consolidated Subsidiaries as at the end of the fiscal year and
the related consolidated statements of income, stockholders' equity
and cash flows of Avondale and its consolidated Subsidiaries for the
fiscal year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year and prepared in
accordance with GAAP consistently applied throughout the periods
reflected therein, together with a report thereon without
Impermissible Qualification, by Ernst & Young LLP (or such other
independent certified public accountants of a nationally recognized
standing in the United States of America as shall be selected by
Avondale),
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(c) Early Amortization Events. As soon as possible, and in
any event within five Business Days after an Authorized Officer of
such Seller has obtained knowledge of the occurrence of any Early
Amortization Event or any Unmatured Early Amortization Event, a
written statement of an Authorized Officer of such Seller describing
the event and the action that such Seller proposes to take with
respect thereto, in each case in reasonable detail,
(d) Material Adverse Effect. As soon as possible and in any
event within five Business Days after an Authorized Officer of such
Seller has knowledge thereof, written notice that describes in
reasonable detail any event or occurrence that, individually or in the
aggregate for all such events or occurrences, has had, or is likely to
have, a Material Adverse Effect,
(e) Proceedings. As soon as possible and in any event within
five Business Days after an Authorized Officer of such Seller has
knowledge thereof, written notice of (i) any litigation, investigation
or proceeding of the type described in Section 5.1(f) not previously
disclosed to Buyer and (ii) any judgment, settlement or other final
disposition with respect to any such previously disclosed litigation,
investigation or proceeding, and
(f) Other. Promptly, from time to time, (i) such other
information, documents, records or reports respecting the Receivables
or the Related Assets or (ii) such other publicly available
information respecting the condition or operations, financial or
otherwise, of such Seller, in each case as Buyer may from time to time
reasonably request in order to protect the interests of Buyer, the
Trustee or the Certificateholders under or as contemplated by this
Agreement.
SECTION 6.3 Negative Covenants. Subject to Section 1.8, from the
First Issuance Date until the first day following the Purchase Termination Date
on which (x) all Obligations of the Sellers shall have been finally and fully
paid and performed and (y) the Invested Amount for each Series or Purchased
Interest shall have been reduced to zero (or payment for such Series or
Purchased Interest has been duly provided in accordance with the Pooling
Agreement), unless Buyer and the Trustee shall otherwise give prior written
consent, each Seller hereby agrees that it will perform the covenants and
agreements set forth in this section.
(a) Sales, Liens, Etc. Except as otherwise provided herein
or in the Pooling Agreement, such Seller will not (i)(A) sell, assign
(by operation of law or otherwise) or otherwise transfer to any
Person, (B) pledge any interest in, (C) grant, create, incur, assume
or permit to exist any Adverse Claim (other than Permitted Adverse
Claims) to or in favor of any Person upon or with respect to, or (D)
cause to be filed any financing statement or equivalent document
relating to perfection with respect to, any Transferred Asset or any
Contract related to any
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Receivable, or upon or with respect to any lockbox or account to which
any Collections of any such Receivable or any Related Assets are sent
or any interest therein, or (ii) assign to any Person any right to
receive income from or in respect of any of the foregoing.
In the event that such Seller fails to keep any Specified
Assets free and clear of any Adverse Claim (other than a Permitted
Adverse Claim, any Adverse Claims arising hereunder, and other Adverse
Claims permitted by any other Transaction Document), Buyer may
(without limiting its other rights with respect to such Seller's
breach of its obligations hereunder) make reasonable expenditures
necessary to release the Adverse Claim. Buyer shall be entitled to
indemnification for any such expenditures pursuant to the
indemnification provisions of Article IX. Alternatively, Buyer may
deduct such expenditures as an offset to the Purchase Price owed to
such Seller hereunder.
Such Seller will not pledge or grant any security interest in
its inventory, the Buyer Note or the capital stock of Buyer unless
prior to any pledge or grant such Seller, Buyer, the Trustee and the
Person for whose benefits the pledge or grant is being made have
entered into an Intercreditor Agreement.
(b) Extension or Amendment of Receivables; Change in Credit
and Collection Policy or Contracts. Such Seller will not, (i) without
the prior written consent of Buyer and the Trustee, which consent will
not be unreasonably withheld or delayed, extend, amend or otherwise
modify the terms of any Receivable or Contract in a manner that is
likely to have a Material Adverse Effect or (ii) change the terms and
provisions of the Credit and Collection Policy in any material respect
unless (x) with respect to collection policies, the change is made
with the prior written approval of the Trustee, Buyer and each
Purchaser Agent, which consent will not be unreasonably withheld or
delayed, and the Modification Condition is satisfied with respect
thereto, (y) with respect to collection procedures, the change is made
with prior written notice to the Trustee, Buyer and each Purchaser
Agent and no Material Adverse Effect would result and (z) with respect
to accounting policies relating to Receivables that have become
Write-Offs, the change is made in accordance with GAAP.
(c) Change in Payment Instructions to Obligors. Such Seller
will not (i) add or terminate any bank as an Account Bank from those
listed in the letter referred to in Section 5.1(o) unless, prior to
any such addition or termination, Buyer, the Trustee and the Rating
Agencies shall have received not less than ten Business Days' prior
written notice of the addition or termination and, not less than ten
Business Days prior to the effective date of any such proposed
addition or termination, Buyer and the Trustee shall have received (A)
counterparts of the applicable type of Account Agreement with each new
Account Bank, duly
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executed by such new Account Bank and all other parties thereto, and
(B) copies of all other agreements and documents signed by the Account
Bank and such other parties with respect to any new Bank Account, all
of which agreements and documents shall be reasonably satisfactory in
form and substance to Buyer and the Trustee, or (ii) make any change
in its instructions to Obligors, given in accordance with Section
5.1(o), regarding payments to be made to such Seller or payments to be
made to any Account Bank, other than changes in the instructions that
direct Obligors to make payments to another Bank Account at such
Account Bank or another Account Bank or to the Master Collection
Account.
(d) Mergers, Acquisitions, Sales, etc. Except for (i)
mergers or consolidations in which such Seller is the surviving
Person, (ii) mergers or consolidations of a Subsidiary of Avondale
into such Seller or (iii) mergers or consolidations in which the
surviving Person expressly assumes the performance of this Agreement
and the Modification Condition shall have been satisfied with respect
to the consolidation or merger, the Seller will not be a constituent
corporation to any merger or consolidation. Such Seller will give the
Rating Agencies and the Trustee written notice of any such permitted
merger or consolidation promptly following completion thereof. Unless
the Modification Condition is satisfied, such Seller will not,
directly or indirectly, transfer, assign, convey or lease, whether in
one transaction or in a series of transactions, all or substantially
all of its assets or sell or assign, with or without recourse, any
Receivables or Related Assets, in each case other than pursuant to
this Agreement.
(e) Change in Name. Such Seller will not (i) change its
corporate name or (ii) change the name under or by which it does
business in any manner that would or may make any financing statement
filed by such Seller in accordance herewith seriously misleading
within the meaning of Section 9-402(7) of an applicable enactment of
the UCC, in each case unless such Seller shall have given Buyer, the
Servicer, the Trustee and the Rating Agencies 30 days' prior written
notice thereof and unless, prior to any change in name, such Seller
shall have taken and completed all action required by Section 7.3.
(f) Certificate of Incorporation. Avondale will not cause or
permit Buyer to amend its Certificate of Incorporation without the
Trustee's prior written consent, which consent will not be
unreasonably withheld or delayed.
(g) Amendments to Transaction Documents. Such Seller will
not amend or otherwise modify or supplement any Transaction Document
to which it is a party unless (i) Buyer and the Trustee shall have
given prior written consent to each amendment, modification or
supplement and (ii) the Modification Condition shall have been
satisfied.
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(h) Accounting for Purchases. Such Seller shall prepare its
financial statements in accordance with GAAP, and any financial
statements that are made publicly available and which are consolidated
to include Buyer will contain footnotes stating that such Seller has
sold or contributed its Receivables to Buyer and that the assets of
Buyer will not be available to Avondale and its Subsidiaries unless
Buyer's liabilities have been paid in full. Such Seller shall not
prepare any financial statements that account for the transactions
contemplated in this Agreement in any manner other than as a sale or
contribution of Specified Assets by such Seller to Buyer, or in any
other respect account for or treat the transactions contemplated in
this Agreement (including but not limited to accounting and, where
taxes are not consolidated, for tax reporting purposes) in any manner
other than as a sale or contribution of Specified Assets by such
Seller to Buyer.
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE SPECIFIED ASSETS
SECTION 7.1 Rights of Buyer. (a) Subject to Section 7.4(b), each
Seller hereby authorizes Buyer, the Servicer and/or their respective designees
to take any and all steps in such Seller's name and on behalf of such Seller
that Buyer, the Servicer and/or their respective designees determine are
reasonably necessary or appropriate to collect all amounts due under any and
all Specified Assets, including endorsing the name of such Seller on checks and
other instruments representing Collections and enforcing such Seller's rights
under such Specified Assets.
(b) Except as set forth in Section 3.3 with respect to Seller
Noncomplying Receivables, Buyer shall have no obligation to account for any
Specified Asset to any Seller. Buyer shall have no obligation to account for,
or to return Collections, or any interest or other finance charge collected
pursuant thereto, to any Seller, irrespective of whether such Collections and
charges are in excess of the Purchase Price for the Purchased Assets.
(c) Buyer shall have the unrestricted right to further assign,
transfer, deliver, hypothecate, subdivide or otherwise deal with the Specified
Assets, and all of Buyer's right, title and interest in, to and under this
Agreement, on whatever terms Buyer shall determine, pursuant to the Pooling
Agreement or otherwise.
(d) Buyer shall have the sole right to retain any gains or profits
created by buying, selling or holding the Specified Assets and shall have the
sole risk of and responsibility for losses or damages created by such buying,
selling or holding.
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SECTION 7.2 Responsibilities of the Sellers. Anything herein to the
contrary notwithstanding, each Seller hereby agrees:
(a) to deliver directly to the Servicer (for Buyer's
account), within two Business Days after receipt thereof, any
Collections that it receives, in the form so received, and agrees that
all such Collections shall be deemed to be received in trust for Buyer
and shall be maintained and segregated separate and apart from all
other funds and moneys of such Seller until delivery of such
Collections to the Servicer,
(b) to perform all of its obligations hereunder and under the
Contracts to the same extent as if the Receivables had not been sold
hereunder, and the exercise by Buyer or its designee or assignee of
Buyer's rights hereunder or in connection herewith shall not relieve
such Seller from any of its obligations under the Contracts or Related
Assets related to the Receivables,
(c) that it hereby grants to Buyer an irrevocable power of
attorney, with full power of substitution, coupled with an interest,
to take in the name of such Seller all steps necessary or advisable to
endorse, negotiate or otherwise realize on any writing or other right
of any kind held or transmitted by such Seller or transmitted or
received by Buyer (whether or not from such Seller) in connection with
any Transferred Asset, and
(d) to the extent that such Seller does not own the computer
software that such Seller uses to account for Receivables, such Seller
shall use its reasonable efforts to provide Buyer, any Successor
Servicer and the Trustee with such licenses, sublicenses and/or
assignments of contracts as Buyer, such Successor Servicer or the
Trustee reasonably shall require with regard to all services and
computer hardware or software used by such Seller that relate to the
servicing of the Specified Assets.
SECTION 7.3 Further Action Evidencing Purchases. Subject to Section
1.8, each Seller agrees that from time to time, at its expense, it will
promptly, upon reasonable request by Buyer, Servicer or Trustee, execute and
deliver all further instruments and documents, and take all further action, in
order to perfect, protect or more fully evidence the Purchase by Buyer or
contribution to Buyer of the Receivables and the Related Assets under this
Agreement (as applicable), or to enable Buyer to exercise or enforce any of its
rights under any Transaction Document. Each Seller further agrees that from
time to time, at its expense, it will promptly, upon request, take all action
that Buyer, the Servicer or the Trustee may reasonably request in order to
perfect, protect or more fully evidence the Purchase or contribution of the
Receivables and the Related Assets or to enable Buyer
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or the Trustee (as the assignee of Buyer) to exercise or enforce any of its
rights hereunder or under any other Transaction Document. Without limiting the
generality of the foregoing, upon the request of Buyer or the Trustee, each
Seller will:
(a) execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as Buyer or the Trustee may reasonably
determine to be necessary or appropriate, and
(b) mark the master data processing records evidencing the
Receivables with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO AVONDALE
RECEIVABLES COMPANY ("BUYER") PURSUANT TO A RECEIVABLES
PURCHASE AGREEMENT, DATED AS OF APRIL 29, 1996, AMONG AVONDALE
MILLS, INC. ("PARENT"), CERTAIN OF ITS AFFILIATES AND BUYER;
AND SUCH RECEIVABLES HAVE BEEN TRANSFERRED TO THE AVONDALE
MASTER TRUST PURSUANT TO A POOLING AND SERVICING AGREEMENT,
DATED AS OF THE SAME DATE, AMONG BUYER, AS TRANSFEROR, PARENT,
AS THE INITIAL SERVICER, AND MANUFACTURERS AND TRADERS TRUST
COMPANY, AS TRUSTEE."
Each Seller hereby authorizes Buyer or its designee to file one or
more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Receivables and Related
Assets of such Seller, in each case whether now existing or hereafter generated
by such Seller. Except for material performance obligations of such Seller to
any Obligor hereunder or under any of the Contracts, if (i) such Seller fails
to perform any of its agreements or obligations under this Agreement and does
not remedy the failure within the applicable cure period, if any, and (ii)
Buyer in good faith reasonably believes that the performance of such agreements
and obligations is necessary or appropriate to protect its interests under this
Agreement, then Buyer or its designee may (but shall not be required to)
perform, or cause performance of, such agreement or obligation and the
reasonable expenses of Buyer or its designee or assignee incurred in connection
with such performance shall be payable by such Seller as provided in Section
9.1.
SECTION 7.4 Collection of Receivables; Rights of Buyer and Its
Assignees. (a) Each Seller hereby transfers to the Trustee (as transferee of
Buyer's interest in the Specified Assets) the ownership of, and the exclusive
dominion and control over, each of the Bank Accounts and all related lockboxes
owned by such Seller, and such Seller hereby
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agrees to take any further action that Buyer or the Trustee may reasonably
request in order to effect or complete the transfer. Each Seller further
agrees to use reasonable efforts to prevent funds other than proceeds of the
Specified Assets from being deposited in any Bank Account.
(b) Buyer may, at any time after an Early Amortization Event or
Servicer Default that has not been waived in writing by Trustee, direct the
Obligors of Receivables, or any of them, to pay all amounts payable under any
Transferred Asset directly to the Trustee or its designees. Furthermore, in
each such case, each Seller shall, at the request of Buyer and at such Seller's
expense, promptly give notice of the Trust's interest in the Receivables of the
Obligor and the Related Assets to each such Obligor and direct that payments be
made directly to the Trustee or its designee, which notice shall be acceptable
in form and substance to Buyer. In addition, in each such case, each Seller
hereby authorizes Buyer to take any and all steps in such Seller's name and on
its behalf that are necessary or desirable, in the reasonable determination of
Buyer, to collect all amounts due under any and all Specified Assets, including
endorsing such Seller's name on checks and other instruments representing
Collections and enforcing the Specified Assets and the Contracts related to the
Receivables. The Trustee may exercise any of the foregoing rights in the place
of Buyer (as assignee or otherwise) at any time following the designation of a
Servicer other than the Initial Servicer pursuant to Section 10.2 of the
Pooling Agreement.
(c) At any time when (i) an Early Amortization Event shall have
occurred and remain continuing or (ii) a Servicer other than the Initial
Servicer has been designated pursuant to Section 10.2 of the Pooling Agreement,
each Seller shall, at Buyer's request, assemble all of the Records that
evidence the Receivables and Related Assets originated by such Seller, or that
are otherwise necessary or desirable to collect the Receivables or Related
Assets, and make the same available to Buyer or the Trustee at a place selected
by the Trustee or its designee.
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination by the Sellers. Prior to the commencement of
a Series Amortization Period or an Early Amortization Period in respect of any
Series or Purchased Interest, the Sellers may terminate all of their agreements
to sell Receivables hereunder to Buyer by giving Buyer and the Trustee not less
than thirty days' prior written notice of their election not to continue to
sell Receivables to Buyer; provided that such notice must be given as to all
Sellers, and provided further, that such notice shall specify the effective
date of termination. The Trustee shall notify the Certificateholders of all
Series within five Business Days of receiving any such termination notice.
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SECTION 8.2 Automatic Termination. (a) Unless otherwise agreed to
by the Sellers and the Buyer in writing, the agreement of each Seller to sell
Receivables hereunder, and the agreement of Buyer to purchase Receivables from
such Seller hereunder, shall terminate automatically upon the first date on
which all Series and Purchased Interests are in accumulation, amortization or
early amortization periods; provided, however, that notwithstanding anything to
the contrary in this Agreement, if, at any time prior to such date, an event
specified in the definition of Bankruptcy Event occurs (without regard to the
60 day grace period specified in paragraph (a) of that definition) as a result
of a bankruptcy proceeding being filed against a Seller, then on and after the
date on which such bankruptcy proceeding is filed until the dismissal of the
proceeding Buyer shall not purchase Receivables and Related Assets from such
Seller.
(b) If the Internal Revenue Service or the PBGC files one or more Tax
or ERISA Liens against the assets of any Seller or Buyer (including
Receivables), then (and for so long as such Liens remain in place) Buyer shall
not purchase any Receivables or Related Assets from such Seller (or from any
Seller if such Lien is filed against Buyer); provided Buyer may continue to
purchase Receivables and Related Assets for a period of fifteen days following
such filing if (i) the aggregate amount secured by such Tax or ERISA Liens is
less than $2,000,000 or (ii) the amount so secured is bonded in a manner that
satisfies the Modification Condition.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by the Sellers. Without limiting any other
rights that any RPA Indemnified Party (as defined below) may have hereunder or
under applicable law, each Seller agrees to indemnify Buyer, each of its
successors, permitted transferees and assigns, and all officers, directors,
shareholders, controlling Persons, employees and agents of any of the foregoing
(each of the foregoing Persons being individually called a "RPA Indemnified
Party"), forthwith on demand, from and against any and all damages, losses,
claims (whether on account of settlements or otherwise), judgments, liabilities
and related reasonable costs and expenses (including reasonable attorneys' fees
and disbursements) awarded against or incurred by any of them arising out of or
as a result of any of the following (all of the foregoing being collectively
called "RPA Indemnified Losses"):
(a) any representation or warranty made in writing by such
Seller (or any of its Authorized Officers) under any of the
Transaction Documents, any Monthly Report, any Daily Report or any
other information or report delivered by or on behalf of such Seller
or the Servicer with respect to such Seller or the Receivables or
Related Assets originated by such Seller (including without limitation
any
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representation, warranty, information or report relied upon by Buyer
in connection with the offering or sale of any Certificate or
Purchased Interest), that contained any untrue statement of a material
fact or omitted to state material facts necessary to make the
statements not misleading when made,
(b) the failure by such Seller to comply with any applicable
law, rule or regulation with respect to any Receivable or any Related
Asset or to comply with any Contract related thereto, or the
nonconformity of any Receivable, the related Contract or any Related
Assets with any such applicable law, rule or regulation,
(c) the failure to vest and maintain vested in Buyer a first
priority perfected ownership interest in the Receivables originated by
such Seller and the Related Assets, free and clear of any Adverse
Claim (other than an Adverse Claim created in favor of Buyer pursuant
to this Agreement or in favor of the Trustee pursuant to the Pooling
Agreement), whether existing at the time of the sale of such
Receivable or at any time thereafter and without regard to whether
such Adverse Claim was a Permitted Adverse Claim,
(d) any failure of such Seller to perform its duties or
obligations in accordance with the provisions of the Transaction
Documents,
(e) any products liability claim, personal injury or property
damage suit, environmental liability claim or any other claim or
action by a party other than Buyer of whatever sort, whether sounding
in tort, contract or any other legal theory, arising out of or in
connection with the goods or services that are the subject of any
Specified Assets with respect thereto,
(f) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Specified Assets, whether at the time of any sale or at any
subsequent time,
(g) any dispute, claim, offset or defense (other than the
discharge in bankruptcy) of an Obligor to the payment of any
Receivable originated by such Seller or Related Asset, or purported
Receivable or Related Asset, including a defense based on such
Receivable's or the related Contract's not being a legal, valid and
binding obligation of the Obligor enforceable against it in accordance
with its terms, and
(h) any tax or governmental fee or charge (other than
franchise taxes and taxes on or measured by the net income of Buyer or
any of its assignees), all interest and penalties thereon or with
respect thereto, and all reasonable out-of-pocket costs and expenses,
including the reasonable fees and expenses of counsel
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in defending against the same, that may arise by reason of the
purchase or ownership of the Receivables originated by such Seller or
any Related Asset connected with any such Receivables.
Notwithstanding the foregoing (and with respect to clause (ii) below, without
prejudice to the rights that Buyer may have pursuant to the other provisions of
this Agreement or the provisions of any of the other Transaction Documents), in
no event shall any RPA Indemnified Party be indemnified for any RPA Indemnified
Losses (i) resulting from gross negligence or willful misconduct on the part of
the RPA Indemnified Party (or gross negligence or willful misconduct on the
part of its officers, directors, employees, affiliates or agents), or the
breach by such RPA Indemnified Party of its obligations under any Transaction
Document, (ii) to the extent the same includes losses in respect of Receivables
and reimbursement therefor that would constitute credit recourse to such Seller
for the amount of any Receivable or Related Asset not paid by the related
Obligor, (iii) resulting from the action or omission of the Servicer (unless
the Servicer is a Related Person), (iv) to the extent the same are or result
from lost profits, (v) to the extent the same are or result from taxes on or
measured by the net income of the RPA Indemnified Party and (vi) to the extent
the same constitute consequential, special or punitive damages.
If for any reason the indemnification provided above in this section
is unavailable to a RPA Indemnified Party or is insufficient to hold a RPA
Indemnified Party harmless, then such Seller shall contribute to the maximum
amount payable or paid to the RPA Indemnified Party as a result of the loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the RPA Indemnified Party on the one
hand and such Seller on the other hand, but also the relative fault of the RPA
Indemnified Party (if any) and such Seller and any other relevant equitable
considerations.
SECTION 9.2 Indemnification Actions. If any action, suit, proceeding
or investigation is commenced, as to which an RPA Indemnified Party proposes to
demand indemnification, it shall notify the applicable Sellers with reasonable
promptness; provided, however, that any failure by such RPA Indemnified Party
to notify the Sellers shall not relieve the Sellers from their obligations
hereunder (except to the extent that the Sellers are prejudiced by such failure
to promptly notify). The applicable Sellers shall be entitled to assume the
defense of any such action, suit, proceeding or investigation, including the
employment of counsel reasonably satisfactory to the RPA Indemnified Party.
The RPA Indemnified Party shall have the right to counsel of its own choice to
represent it, but the fees and expenses of such counsel shall be at the expense
of such RPA Indemnified Party unless: (a) the Sellers have failed promptly to
assume the defense and employ counsel reasonably satisfactory to the RPA
Indemnified Party in accordance with the preceding sentence, or (b) the RPA
Indemnified Party shall have been advised by counsel that there exists an
actual or potential conflict of interests among the Sellers and such RPA
Indemnified Party, including situations in which one or more legal defenses may
be available to such RPA Indemnified Party that are inconsistent with those
available to the
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Sellers; provided, however, that the Sellers shall not, in connection with any
one such action or proceeding or separate but substantially similar actions or
proceedings arising out of the same general allegations, be liable for fees and
expenses of more than one separate firm of attorneys (other than local counsel)
at any time for all RPA Indemnified Parties; and such counsel shall, to the
extent consistent with its professional responsibilities, cooperate with the
Sellers and any counsel designated by the Sellers.
Each of the Sellers further agrees that it will not, without the prior
written consent of the applicable RPA Indemnified Party, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not any RPA Indemnified Party is an actual or potential
party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of each RPA Indemnified
Party from all liability and obligations arising therefrom.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc. (a) The provisions of this
Agreement may from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and signed by Buyer and each
Seller (with respect to an amendment) or by Buyer (with respect to a waiver or
consent by it) and, in the case of any amendment, modification or waiver, to
the extent provided in Section 7.2(j) of the Pooling Agreement, by the Trustee,
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. If any outstanding
Investor Certificates or Purchased Interests have been rated, this Agreement
shall not be amended unless Buyer shall have delivered the proposed amendment
to the Rating Agencies at least ten Business Days (or such shorter period as
shall be acceptable to each of them) prior to the execution and delivery
thereof and the Modification Condition has been satisfied with respect to such
amendment.
(b) No failure or delay on the part of Buyer, any RPA Indemnified
Party, the Trustee or any other third party beneficiary referred to in Section
10.11(a) in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. No notice to or demand on any Seller in any case shall entitle
it to any notice or demand in similar or other circumstances. No waiver or
approval by Buyer or the Trustee under this Agreement shall, except as may
otherwise be stated in the waiver or approval, be applicable to subsequent
transactions. No waiver or approval under this Agreement shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
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SECTION 10.2 Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent
by certified mail, postage prepaid, by facsimile or by overnight courier, to
the intended party at the address or facsimile number of such party set forth
under its name on the signature pages hereof or at such other address or
facsimile number as shall be designated by the party in a written notice to the
other parties hereto given in accordance with this section. Copies of all
notices and other communications provided for hereunder shall be delivered to
the Trustee and the Rating Agencies at their respective addresses for notices
set forth in the Pooling Agreement. All notices and communications provided
for hereunder shall be effective, (a) if personally delivered, when received,
(b) if sent by certified mail, four Business Days after having been deposited
in the mail, postage prepaid and properly addressed, (c) if transmitted by
facsimile, when sent, receipt confirmed by telephone or electronic means and
(d) if sent by overnight courier, two Business Days after having been given to
the courier unless sooner received by the addressee.
SECTION 10.3 Cumulative Remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. Without limiting
the foregoing, each Seller hereby authorizes Buyer, at any time and from time
to time, to the fullest extent permitted by law, to set-off, against any
Obligations of any Seller to Buyer that are then due and payable or that are
not then due and payable from a Seller to Buyer but have then accrued, any and
all indebtedness or other obligations at any time owing to any Seller by Buyer
to or for the credit or the account of any Seller or that are not then due and
payable from Buyer to a Seller but have then accrued.
SECTION 10.4 Binding Effect; Assignability; Survival of Provisions.
Subject to Section 1.8, this Agreement shall be binding upon and inure to the
benefit of Buyer and the Sellers and their respective successors and permitted
assigns (including, in the case of the Buyer, the Trustee). No Seller may
assign any of its rights hereunder or any interest herein without (i) the prior
written consent of Buyer and the Trustee and (ii) the satisfaction of the
Modification Condition; provided, however, that a Terminating Seller may assign
its Buyer Note as provided in Section 1.8. Except as provided in Section 1.8.
this Agreement shall create and constitute the continuing obligations of the
parties hereto in accordance with its terms, and shall remain in full force and
effect until the first date following the Purchase Termination Date, but not
later than the date on which the Trust is terminated pursuant to Section 12.1
of the Pooling Agreement, on which all Obligations shall have been finally and
fully paid and performed or such other time as the parties hereto shall agree
and as to which the Trustee (at the direction of the Majority Investors) shall
have given its prior written consent, which consent shall not be unreasonably
withheld or delayed. The rights and remedies with respect to any breach of any
representation and warranty made by a Seller pursuant to Article V and the
indemnification and payment provisions of Article IX and Section 10.6 shall be
continuing and shall survive any termination of this Agreement.
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SECTION 10.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS
OF BUYER IN THE RECEIVABLES AND THE RELATED ASSETS ARE GOVERNED BY THE LAWS OF
A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 10.6 Costs, Expenses and Taxes. In addition to the
obligations of the Sellers under Article IX, the Sellers agree jointly and
severally to pay on demand:
(a) all reasonable out-of-pocket and other costs and expenses
in connection with the enforcement of this Agreement, the Seller
Assignment Certificates or the other Transaction Documents by Buyer or
any successor in interest to Buyer, and
(b) all stamp and other taxes and fees payable or determined
to be payable in connection with the execution and delivery, and the
filing and recording, of this Agreement or the other Transaction
Documents, and agrees to indemnify each RPA Indemnified Party against
any liabilities with respect to or resulting from any delay in paying
or omission to pay the taxes and fees.
SECTION 10.7 Submission to Jurisdiction. EACH PARTY HERETO HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW
YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE
TRANSACTION DOCUMENTS, AND HEREBY (A) IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN THE STATE OR
FEDERAL COURT, (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF THE ACTION OR
PROCEEDING, AND (C) IRREVOCABLY APPOINTS CT CORPORATION SYSTEM (THE "PROCESS
AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK
10019, AS ITS AGENT TO RECEIVE ON BEHALF OF IT AND ITS PROPERTY SERVICE OF
COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS THAT MAY BE SERVED IN
ANY ACTION OR PROCEEDING. THE SERVICE MAY BE MADE BY MAILING OR DELIVERING A
COPY OF THE PROCESS TO BUYER OR THE APPLICABLE SELLER IN CARE OF THE PROCESS
AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND BUYER AND EACH SELLER HEREBY
IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT THE SERVICE ON
ITS BEHALF.
AS AN ALTERNATIVE METHOD OF SERVICE, EACH OF BUYER AND THE SELLERS
ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY ACTION
OR PROCEEDING BY THE MAILING OF COPIES OF THE PROCESS TO BUYER OR A SELLER (AS
APPLICABLE) AT ITS ADDRESS SPECIFIED HEREIN. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF ANY PARTY
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HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF ANY PARTY HERETO TO BRING ANY ACTION OR PROCEEDING AGAINST THE
OTHER PARTY OR ANY OF ITS PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 10.8 Waiver of Jury Trial. EACH PARTY HERETO WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER OR RELATING TO THE TRANSACTION DOCUMENTS OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE
DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OF EITHER OF THE
PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THE
TRANSACTION DOCUMENTS, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 10.9 Integration. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
SECTION 10.10 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which together shall constitute one and the same agreement.
SECTION 10.11 Acknowledgment and Consent. (a) The Sellers
acknowledge that, contemporaneously herewith, Buyer is selling, transferring,
assigning, setting over and otherwise conveying to the Trust all of Buyer's
right, title and interest in, to and under the Specified Assets, this Agreement
and all of the other Transaction Documents pursuant to Sections 2.1 and 2.4 of
the Pooling Agreement. The Sellers hereby consent to the sale, transfer,
assignment, set over and conveyance to the Trust by Buyer of all right, title
and interest of Buyer in, to and under the Specified Assets, and all of Buyer's
rights to payment and remedies against the Sellers (including rights and
remedies in respect of claims), under or with respect to this Agreement and the
other Transaction Documents (whether arising pursuant to the terms of this
Agreement or otherwise available at law or in equity), including (i) the right
of Buyer, at any time, to enforce this Agreement against the Sellers and the
obligations of the Sellers hereunder, and (ii) the right, at any time, to give
or withhold any and all consents, requests, notices, directions, approvals,
demands, extensions or waivers under or with respect to this Agreement, any
other Transaction Document or the obligations in respect of the Sellers
thereunder to the same extent as Buyer may do. Each of the parties hereto
acknowledges and agrees that the Trustee and the Trust are third party
beneficiaries of the rights of Buyer arising hereunder and under the other
Transaction Documents to which any Seller is a party, and that Trustee has the
rights specified in the Pooling Agreement with respect to removal and
appointment of
Page 40
<PAGE> 45
Servicer and successor Servicers. Each Seller hereby acknowledges and agrees
that it has no claim to or interest in any of the Bank Accounts or the
Transaction Accounts.
(b) The Sellers hereby agree to execute all agreements, instruments
and documents, and to take all other action, that Buyer or the Trustee
reasonably determines is necessary or appropriate to evidence its consent
described in subsection (a) above. To the extent that Buyer, individually or
through the Servicer, has granted or grants powers of attorney to the Trustee
under the Pooling Agreement, the Sellers hereby grant a corresponding power of
attorney on the same terms to Buyer. The Sellers hereby acknowledge and agree
that Buyer, in all of its capacities, shall assign to the Trustee for the
benefit of the Certificateholders the powers of attorney and other rights and
interests granted by the Sellers to Buyer hereunder and agrees to cooperate
fully with the Trustee in the exercise of the rights.
SECTION 10.12 No Partnership or Joint Venture. Nothing contained in
this Agreement shall be deemed or construed by the parties hereto or by any
third person to create the relationship of principal and agent or of
partnership or of joint venture.
SECTION 10.13 No Proceedings. Each Seller hereby agrees that it will
not institute against Buyer or the Trust, or join any other Person in
instituting against Buyer or the Trust, any insolvency proceeding (such as any
proceeding of the type referred to in the definition of Event of Bankruptcy) so
long as any Investor Certificates issued by the Trust shall be outstanding or
there shall not have elapsed one year plus one day since the last day on which
any such Investor Certificates shall have been outstanding. The foregoing
shall not limit the right of a Seller to file any claim in or otherwise take
any action with respect to any insolvency proceeding that was instituted
against Buyer or the Trust by any Person other than a Seller or any other
Related Person (provided that no such action may be taken by a Seller until
such proceeding has continued undismissed, unstayed and in effect for a period
of 10 days).
SECTION 10.14 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement or any of the
other Transaction Documents shall for any reason whatsoever be held invalid,
then the unenforceable covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants, agreements, provisions or terms
of this Agreement or the other Transaction Documents (as applicable) and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or any of the other Transaction Documents.
SECTION 10.15 Recourse to Buyer. Except to the extent expressly
provided otherwise in the Transaction Documents, the obligations of Buyer under
the Transaction Documents to which it is a party are solely the obligations of
Buyer. No recourse shall be had for payment of any fee payable by or other
obligation of or claim against Buyer that arises out of any Transaction
Document to which Buyer is a party against any director,
Page 41
<PAGE> 46
officer or employee of Buyer. The provisions of this section shall survive the
termination of this Agreement.
[Remainder of page intentionally left blank.]
Page 42
<PAGE> 47
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AVONDALE MILLS, INC., as Seller
By:
------------------------------------------
Title:
Address: 506 South Broad Street
Monroe, Georgia 30655
Attention: Chief Financial Officer
Telephone: (707) 267-2226
Facsimile: (707) 267-2543
AVONDALE RECEIVABLES COMPANY,
as the Buyer
By:
------------------------------------------
Title:
Address: 506 South Broad Street
Monroe, Georgia 30655
Attention: Treasurer
Telephone: (707) 267-2226
Facsimile: (707) 267-2543
<PAGE> 48
EXHIBITS
EXHIBIT A Form of Buyer Note
EXHIBIT B Form of Seller Assignment Certificate
SCHEDULES
SCHEDULE 1 Litigation and Other Proceedings
SCHEDULE 2 Changes in Financial Condition
SCHEDULE 3 Offices of the Sellers where Records are Maintained
SCHEDULE 4 Legal Names, Trade Names and Names Under Which the Companies Do
Business
SCHEDULE 5 Software Programs and Licenses
The registrants agree to furnish a copy of the Schedules and Exhibits
listed above to the Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 10.2
AVONDALE RECEIVABLES MASTER TRUST
POOLING AND SERVICING AGREEMENT
dated as of April 29, 1996
among
AVONDALE RECEIVABLES COMPANY,
as Transferor,
AVONDALE MILLS, INC.,
as Servicer,
and
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C>
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
CONVEYANCE OF ASSETS
SECTION 2.1 Creation of the Trust; Conveyance of Certain Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2.2 Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.3 Representations and Warranties of Transferor Relating
to the Transferred Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.4 No Assumption of Obligations Relating to Receivables,
Related Transferred Assets or Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.5 Conveyance of Purchased Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
ADMINISTRATION AND SERVICING
SECTION 3.1 Acceptance of Appointment; Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.2 Duties of Servicer and Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.3 Lockbox Accounts; Concentration Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.4 Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.5 Records of Servicer and Reports to be Prepared
by Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.6 Monthly Servicer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.7 Servicing Report of Independent Public Accountants;
SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.8 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.9 Ongoing Responsibilities of the Initial Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.10 Further Action Evidencing Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
PURCHASERS; ALLOCATIONS
SECTION 4.1 Rights of Certificateholders and Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.2 Establishment of Transaction Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.3 Trust-Level Calculations and Funds Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.4 Investment of Funds in Transaction Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.5 Attachment of Transaction Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C>
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
CONVEYANCE OF ASSETS
SECTION 2.1 Creation of the Trust; Conveyance of Certain Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2.2 Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.3 Representations and Warranties of Transferor Relating
to the Transferred Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.4 No Assumption of Obligations Relating to Receivables,
Related Transferred Assets or Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.5 Conveyance of Purchased Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
ADMINISTRATION AND SERVICING
SECTION 3.1 Acceptance of Appointment; Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.2 Duties of Servicer and Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.3 Lockbox Accounts; Concentration Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.4 Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.5 Records of Servicer and Reports to be Prepared
by Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.6 Monthly Servicer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.7 Servicing Report of Independent Public Accountants;
SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.8 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.9 Ongoing Responsibilities of the Initial Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.10 Further Action Evidencing Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
PURCHASERS; ALLOCATIONS
SECTION 4.1 Rights of Certificateholders and Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.2 Establishment of Transaction Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.3 Trust-Level Calculations and Funds Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.4 Investment of Funds in Transaction Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.5 Attachment of Transaction Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 4
ARTICLE V
DISTRIBUTIONS AND REPORTS
<TABLE>
<S> <C>
SECTION 5.1 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI
THE CERTIFICATES
SECTION 6.1 The Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.2 Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.3 Registration of Transfer and Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.5 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.6 Appointment of Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.7 Access to List of Certificateholders' Names and
Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.8 Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.9 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.10 Issuance of Additional Series of Certificates and
Sales of Purchased Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.11 Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.12 Notices to Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.13 Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.14 Letter of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VII
TRANSFEROR
SECTION 7.1 Representations and Warranties of Transferor Relating
to Transferor and the Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.2 Covenants of Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.3 Indemnification by Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII
SERVICER
SECTION 8.1 Representations and Warranties of Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.2 Covenants of Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.3 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.4 Indemnification by Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C>
SECTION 8.5 Servicer Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.6 Limitation on Liability of Servicer and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX
EARLY AMORTIZATION EVENTS; TERMINATION BY SELLERS
SECTION 9.1 Early Amortization Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.3 Additional Rights Upon the Occurrence of
Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.4 Termination By Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE X
SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.2 Trustee to Act; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 10.3 Notification of Servicer Default; Notification of
Appointment of Successor Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.4 Waiver of Servicer Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE XI
TRUSTEE
SECTION 11.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 11.2 Certain Matters Affecting Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.3 Limitation on Liability of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.4 Trustee May Deal with Other Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.5 Servicer To Pay Trustee's Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.6 Eligibility Requirements for Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.7 Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.8 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.9 Merger or Consolidation of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.10 Appointment of Co-Trustee or Separate Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.11 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.12 Trustee May Enforce Claims Without Possession
of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.13 Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.14 Rights of Required Investors To Direct Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.15 Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.16 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
</TABLE>
-iii-
<PAGE> 6
ARTICLE XII
TERMINATION
<TABLE>
<S> <C>
SECTION 12.1 Termination of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 12.2 Final Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 12.3 Rights Upon Termination of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 12.4 Optional Repurchase of Investor Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment, Waiver, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 13.2 Actions by Certificateholders and Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 13.3 Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 13.4 Limitation on Rights of Purchasers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 13.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 13.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 13.7 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 13.8 Certificates Nonassessable and Fully Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 13.9 Nonpetition Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 13.10 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 13.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 13.12 Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 13.13 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 13.14 Binding Effect; Assignability; Survival of
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 13.15 Recourse to Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 13.16 Recourse to Transferred Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 13.17 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 13.18 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 13.19 Certain Partial Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
</TABLE>
-iv-
<PAGE> 7
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
EXHIBIT A Form of Lockbox Account Letter Agreement
EXHIBIT B Form of Concentration Account Letter Agreement
EXHIBIT C Form of Monthly Servicer's Certificate
EXHIBIT D Annual Agreed-Upon Procedures
EXHIBIT E Form of Transferor Certificate
EXHIBIT F Form of Certificate to be Given by Certificate Owner
EXHIBIT G Form of Certificate to be Given by Euroclear or Cedel
EXHIBIT H Form of Certificate to be Given by Transferee of Beneficial Interest in a Regulation S Temporary
Book-Entry Certificate
EXHIBIT I Form of Transfer Certificate for Exchange or Transfer from 144A Book-Entry Certificate to
Regulation S Book-Entry Certificate
EXHIBIT J Form of Placement Agent Exchange Instructions
EXHIBIT K Form of Annual Servicer Certificate
SCHEDULES
SCHEDULE 1 Account Banks - Lockbox Banks/Concentration Banks
APPENDIX
APPENDIX A Definitions
</TABLE>
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This POOLING AND SERVICING AGREEMENT, dated as of April 29, 1996 (this
"Agreement"), is made among AVONDALE RECEIVABLES COMPANY, a Delaware
corporation ("Transferor"), AVONDALE MILLS, INC., an Alabama corporation (the
"Initial Servicer"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York
banking corporation, as Trustee.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Capitalized terms used in this Agreement
have the meanings that Appendix A assigns to them, and this Agreement shall be
interpreted in accordance with Part B of Appendix A.
ARTICLE II
CONVEYANCE OF ASSETS
SECTION 2.1 Creation of the Trust; Conveyance of Certain Assets. (a)
Transferor hereby transfers, assigns, sets over, grants and otherwise conveys
to Trustee, in its capacity as representative of the Certificateholders and the
Purchasers, without recourse (except as expressly provided herein), all of its
right, title and interest in, to and under, (i) all Receivables that have been
or are hereafter transferred (whether by sale or contribution) by the Sellers
to Transferor, (ii) all Related Assets, (iii) all of Transferor's rights to
receive payments and pursue remedies under the Seller Transaction Documents,
including without limitation the rights and remedies described in Section
10.11(a) of the Purchase Agreement (the property described in clauses (ii) and
(iii) being called the "Related Transferred Assets"), (iv) all funds from time
to time on deposit in each of the Transaction Accounts (including funds
deposited in a Transaction Account in connection with the issuance of any
prefunded Series) and all funds from time to time on deposit in each of the
Bank Accounts representing Collections on, or other proceeds of, the foregoing
and, in each case, all certificates and instruments, if any, from time to time
evidencing such funds, all investments made with such funds, all claims
thereunder or in connection therewith and all interest, dividends, monies,
instruments, securities and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the foregoing, (v) any Enhancement obtained for the benefit of any Series or
Purchased Interest and (vi) all moneys due or to become due and all amounts
received or receivable with respect to any of the foregoing and all proceeds of
the foregoing. Such property, whether now existing or hereafter acquired, shall
constitute the assets of
<PAGE> 9
the Trust (collectively, the "Transferred Assets"). The foregoing transfer,
assignment, setover, grant and conveyance to the Trust shall be made to
Trustee, on behalf of the Trust, and each reference in this Agreement to such
transfer, assignment, setover and conveyance shall be construed accordingly.
(b) In connection with the transfer described in subsection (a),
Transferor and Servicer shall record and file or cause to be recorded and
filed, as an expense of Servicer paid out of the Servicing Fee, financing
statements with respect to the Transferred Assets meeting the requirements of
applicable law in such manner and in such jurisdictions as are necessary to
perfect the transfer and assignment of the Transferred Assets to the Trust. In
connection with the transfer described in subsection (a), Transferor and
Servicer further agree to deliver to Trustee each Transferred Asset (including
any original documents or instruments included in the Transferred Assets as are
necessary to effect such transfer) in which the transfer of an interest is
perfected under the UCC or otherwise by possession. Transferor or Servicer
shall deliver each such Transferred Asset to Trustee, as an expense of Servicer
paid out of the Servicing Fee, immediately upon the transfer of any such
Transferred Asset to Trustee pursuant to subsection (a).
(c) In connection with the transfer described above in subsection (a),
Servicer shall, on behalf of Transferor, as an expense of Servicer paid out of
the Servicing Fee, on or prior to the First Issuance Date, mark the master data
processing records evidencing the Receivables with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO AVONDALE
RECEIVABLES COMPANY ("TRANSFEROR") PURSUANT TO A RECEIVABLES PURCHASE
AGREEMENT, DATED AS OF APRIL 29, 1996, AMONG AVONDALE MILLS, INC.
("PARENT") AND CERTAIN AFFILIATES OF THE PARENT, AS SELLERS, AND
TRANSFEROR, AS BUYER; AND SUCH RECEIVABLES HAVE BEEN TRANSFERRED TO THE
AVONDALE RECEIVABLES MASTER TRUST PURSUANT TO A POOLING AND SERVICING
AGREEMENT, DATED AS OF THE SAME DATE, AMONG THE TRANSFEROR, PARENT, AS
SERVICER, AND MANUFACTURERS AND TRADERS TRUST COMPANY, AS TRUSTEE."
(d) Upon the request of Transferor, Trustee will cause Certificates in
authorized denominations evidencing the entire interest in the Trust to be duly
authenticated and delivered to or upon the order of Transferor pursuant to
Section 6.2. Pursuant to the Transferor Certificate, Transferor shall be
entitled to receive current and deferred transfer payments at the times and in
the amounts specified in the various Supplements and PI Agreements executed
from time to time.
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(e) If the transfer, assignment, set-over, grant and
conveyance described in subsection (a) of this Section 2.1 are deemed to create
a security interest in the property described therein, Transferor hereby grants
to the Trustee, for the benefit of the Trustee, the Certificateholders and the
Purchasers, a security interest in that property (which shall be deemed to be a
first perfected security interest and shall secure Transferor's obligations
under the Transaction Documents, the Certificates and the Purchased Interests),
and agrees that this Agreement shall constitute a security agreement under
applicable law.
SECTION 2.2 Acceptance by Trustee. Trustee hereby acknowledges its
acceptance on behalf of the Trust of all right, title and interest to the
Transferred Assets and declares that it shall maintain such right, title and
interest, upon the trust herein set forth, for the benefit of all
Certificateholders and Purchasers, on the terms and subject to the conditions
hereinafter set forth.
SECTION 2.3 Representations and Warranties of Transferor Relating to
the Transferred Assets.
(a) Representations and Warranties. At the time that any Receivable or
other Transferred Asset is transferred by Transferor to the Trust, Transferor
hereby represents and warrants that:
(i) Quality of Title. (A) Immediately before each transfer
to be made by Transferor hereunder, each Receivable and other
Transferred Asset that was then to be transferred to the Trust
hereunder was owned by Transferor free and clear of any Adverse Claim
(other than any Permitted Adverse Claim); and, within five Business
Days after the First Issuance Date, Transferor and Servicer made, or
caused to be made, all filings and took all other action under
applicable law in each relevant jurisdiction in order to protect and
perfect the Trust's interest in such Receivables and such Transferred
Assets against all creditors of, and purchasers from, Transferor and
the Sellers.
(B) Each transfer of Receivables and other Transferred Assets
by Transferor to the Trust pursuant to this Agreement constitutes a
valid transfer and assignment to the Trustee of all right, title and
interest of Transferor in such Receivables and other Transferred
Assets, free and clear of any Adverse Claim (other than any Permitted
Adverse Claim), and constitutes either an absolute transfer of such
property to the Trust or a grant of a first priority perfected security
interest in such property to the Trust. Whenever the Trust accepts a
transfer of a Receivable or other Transferred Asset hereunder, it shall
have acquired a valid transfer and assignment or a valid and perfected
first priority security interest in such
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<PAGE> 11
Receivable or other Transferred Asset free and clear of any Adverse
Claim (other than any Permitted Adverse Claim).
(C) No effective financing statement or other instrument
similar in effect that covers all or part of any Transferred Asset is
on file in any recording office except financing statements as to which
termination statements or releases are filed within five Business Days
after the First Issuance Date and except any filings relating to any
Permitted Adverse Claim.
(D) No acquisition of any Receivable or other Transferred
Asset by Transferor or the Trust constitutes a fraudulent transfer or
fraudulent conveyance under the Bankruptcy Code or applicable state
bankruptcy or insolvency laws or is otherwise void or voidable or
subject to subordination under similar laws or principles or for any
other reason.
(ii) Governmental Approvals. With respect to each Receivable
and other Transferred Asset, all consents, licenses, approvals or
authorizations of, or notices to or registrations, declarations or
filings with, any Governmental Authority required to be obtained,
effected or made by the Sellers, Servicer or Transferor in connection
with the conveyance of the Receivable and other Transferred Asset by
the Sellers to Transferor, or by Transferor to the Trust, have been
duly obtained, effected or given and are in full force and effect.
(iii) Eligible Receivables. (A) On the date on which the
applicable Seller transfers a Receivable to Transferor, and Transferor
transfers such Receivable to the Trust, unless otherwise identified by
Servicer in the Daily Report for such date, such Receivable is an
Eligible Receivable, and (B) on the date of each Daily Report or
Monthly Report that identifies a Receivable as an Eligible Receivable,
such Receivable is an Eligible Receivable.
(b) Notice of Breach. The representations and warranties set forth in
subsection (a) shall survive the transfer of the Receivables and the other
Transferred Assets to the Trust. Upon discovery by Transferor, Servicer or
Trustee of a breach of any of the representations and warranties set forth in
subsection (a), the party discovering the breach shall give written notice to
the others within four Business Days following the discovery; provided,
however, that if such breach arises from a Seller's failure to perform its
obligations under the Purchase Agreement and such failure is of the type that
may be cured by settlement of a Seller Noncomplying Receivables Adjustment or
Seller Dilution Adjustment under Sections 3.3 and 3.5 of the Purchase
Agreement, and such settlement shall
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have (in fact) been made within the time limit specified therein, then no
breach shall be deemed to have occurred under this Agreement. Trustee's
obligations in respect of discovering any breach are limited as provided in
Section 11.3(h).
SECTION 2.4 No Assumption of Obligations Relating to Receivables,
Related Transferred Assets or Contracts. The transfer, assignment, set over,
grant and conveyance described in Section 2.1 does not constitute and is not
intended to result in a creation or an assumption by the Trust, Trustee, any
Investor Certificateholder or any Purchaser of any obligation of Servicer,
Transferor, the applicable Seller or any other Person in connection with the
Receivables or the Related Transferred Assets or under the related Contracts or
any other agreement or instrument relating thereto. None of Trustee, the Trust,
any Investor Certificateholder or any Purchaser shall have any obligation or
liability to any Obligor.
SECTION 2.5 Conveyance of Purchased Interests. Pursuant to the terms
of a PI Agreement, Trustee, on behalf of the Trust, from time to time may sell,
transfer, assign, set over and otherwise convey Purchased Interests to a
Purchaser or an Agent for the account of a Purchaser; and Trustee, on behalf of
the Trust, is authorized and directed (subject to the applicable terms of
Section 6.10), upon the written request of Transferor, to enter into one or
more PI Agreements in the form annexed to each such written request. Pursuant
to a PI Agreement, Collections allocated to Purchased Interests may be
reinvested and such Purchased Interests may be recomputed, each from time to
time as provided therein.
ARTICLE III
ADMINISTRATION AND SERVICING
SECTION 3.1 Acceptance of Appointment; Other Matters.
(a) Designation of Servicer. The servicing, administering and
collection of the Receivables and the Related Transferred Assets shall be
conducted by the Person designated as Servicer hereunder from time to time in
accordance with this Section. Transferor hereby designates the Initial
Servicer to act as Servicer until Transferor (or, under the circumstances
described in Section 10.1, Trustee) gives a Termination Notice to the Initial
Servicer pursuant to Section 10.1, and the Initial Servicer agrees to act as
Servicer.
(b) Delegation of Certain Servicing Activities. In the ordinary
course of business, Servicer may at any time delegate its duties hereunder with
respect to the Receivables and the Related Transferred Assets to any Person.
Each Person to
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whom any such duties are delegated in accordance with this Section is called a
"Sub-Servicer". Notwithstanding any such delegation, Servicer shall remain
liable for the performance of all duties and obligations of Servicer pursuant
to the terms of this Agreement and the other Transaction Documents. The fees
and expenses of any Sub-Servicers shall be as agreed between Servicer and the
Sub-Servicers from time to time and none of the Trust, Trustee, any
Certificateholder or any Purchaser shall have any responsibility therefor. Upon
any termination of a Servicer pursuant to Section 10.1, all Sub-Servicers
designated pursuant to this subsection by such Servicer shall automatically
also be terminated.
(c) Termination. The designation of Servicer (and each Sub-Servicer)
under this Agreement shall automatically terminate upon termination of the
Trust pursuant to Section 12.1.
(d) Resignation of Servicer. The Initial Servicer shall not resign as
Servicer unless it determines that (i) the performance of its duties is no
longer permissible under applicable law and (ii) there is no reasonable action
that it could take to make the performance of its duties permissible under
applicable law. If the Initial Servicer determines that it must resign for the
reasons stated above, it shall, prior to the tendering of its resignation,
deliver to Trustee an Opinion of Counsel confirming the satisfaction of the
conditions set forth in the preceding sentence. No resignation by the Initial
Servicer shall become effective until Trustee or another Successor Servicer
shall have assumed the responsibilities and obligations of Servicer in
accordance with Section 10.2. Trustee shall give prompt notice to the Rating
Agencies of the appointment of any Successor Servicer.
SECTION 3.2 Duties of Servicer and Transferor.
(a) Duties of Servicer in General. Servicer shall service the
Receivables and the Related Transferred Assets and, subject to the terms and
provisions of this Agreement, shall have full power and authority, acting alone
or through any Sub-Servicer, to do any and all things in connection with such
servicing that it may deem necessary or appropriate. Trustee shall execute and
deliver to Servicer any powers of attorney or other instruments or documents
that are prepared by Servicer and stated in an Officer's Certificate to be, and
shall furnish Servicer with any documents in its possession, necessary or
appropriate to enable Servicer to carry out its servicing duties. Servicer
shall exercise the same care and apply the same policies with respect to the
collection and servicing of the Receivables and the Related Transferred Assets
that it would exercise and apply if it owned such Receivables and Related
Transferred Assets, all in substantial compliance with applicable law and the
applicable Credit and Collection Policy.
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Servicer shall take or cause to be taken (and shall cause each
Sub-Servicer (if any) to take or cause to be taken) all such actions as
Servicer deems necessary or appropriate to collect each Receivable and Related
Transferred Asset, all in substantial compliance with applicable law and the
Credit and Collection Policy.
Without limiting the generality of the foregoing and subject to the
next preceding paragraph and Section 10.1, Servicer or its designee is hereby
authorized and empowered, unless such power and authority is revoked by Trustee
on account of the occurrence of a Servicer Default, (i) to instruct Trustee to
make withdrawals and payments from the Transaction Accounts as set forth in
this Agreement, (ii) to execute and deliver, on behalf of the Trust for the
benefit of the Certificateholders and Purchasers, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Receivables and the
Related Transferred Assets, (iii) to make any filings, reports, notices,
applications and registrations with, and to seek any consents or authorizations
from, the Securities and Exchange Commission and any state securities authority
on behalf of the Trust as may be necessary or appropriate to comply with any
Federal or state securities laws or reporting requirements or other laws or
regulations, and (iv) to the extent permitted under and in compliance with the
Credit and Collection Policy and with all applicable laws, rules, regulations,
judgments, orders and decrees of courts and other Governmental Authorities
(whether Federal, state, local or foreign) and all other tribunals, to commence
or settle collection proceedings with respect to the Receivables and otherwise
to enforce the rights and interests of the Trust and the Certificateholders and
Purchasers in, to and under the Receivables or Related Transferred Assets (as
applicable).
(b) Identification and Transfer of Collections. Servicer shall cause
Collections and all other Transferred Assets that consist of cash or cash
equivalents to be deposited into the Bank Accounts and the Transaction Accounts
pursuant to the terms and provisions of Section 3.3 and Article IV. Following
notification from any Seller to Servicer or discovery by Servicer that
collections of any receivable or other asset that is not a Collection of a
Receivable or any other Transferred Asset have been deposited into a Bank
Account or any Transaction Accounts, Servicer shall cause all such collections
to be segregated, apart and in different accounts, from the Bank Accounts and
the Transaction Accounts. Servicer and, to the extent applicable, Trustee shall
hold all such funds in trust, separate and apart from such Person's other
funds. On each Business Day, after such misdirected collections have been
reasonably identified by Servicer to Trustee, Servicer shall instruct Trustee
to, and Trustee shall, turn over to the appropriate Lockbox Bank, applicable
Seller or other applicable Related Person (or their designees) all such
misdirected collections less all reasonable and
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appropriate out-of-pocket costs and expenses, if any, incurred by Servicer or
the Trustee in collecting and otherwise administering such amounts.
All payments made by an Obligor that is obligated to make payments with
respect to both Receivables included in the Transferred Assets and Receivables
not included in the Transferred Assets shall be applied against the
Receivables, if any, that are designated by such Obligor by reference to the
applicable invoice as the Receivables with respect to which such payments
should be applied. In the absence of such designation, such payments shall be
applied first against the oldest outstanding Receivables owed by such Obligor.
Following notification from a Lockbox Bank that any item has been
returned or is uncollected and that such Lockbox Bank has not been otherwise
reimbursed pursuant to the terms of the applicable Lockbox Agreement for any
amounts it credited to the relevant Lockbox Account (and then transferred to
the Master Collection Account), Servicer shall instruct Trustee to, and Trustee
shall, turn over to such Lockbox Bank Collections in such amount from
Collections on deposit in the Master Collection Account.
(c) Modification of Receivables, Etc. So long as no Servicer Default
shall have occurred and be continuing, Servicer may adjust, and may permit each
Sub-Servicer to adjust, in accordance with Section 3.2(a) and the applicable
Credit and Collection Policy, the Unpaid Balance of any Receivable, or
otherwise modify the terms of any Receivable or amend, modify or waive any term
or condition of any Contract related thereto, all as it may determine to be
appropriate to maximize collection thereof. Servicer shall, or shall cause the
applicable Sub-Servicer to, write off Receivables from time to time in
accordance with the applicable Credit and Collection Policy.
(d) Documents and Records. At any time when the Initial Servicer is
not the Servicer, Transferor, to the extent that it is entitled to do so under
the Purchase Agreement, shall, upon the request of the then-acting Servicer,
cause the applicable Seller to deliver to Servicer, and Servicer shall hold in
trust for Transferor and Trustee in accordance with their respective interests,
all Records that evidence or relate to the Receivables and other Transferred
Assets of the applicable Seller.
(e) Certain Duties to the Sellers. Servicer, if other than the
Initial Servicer, shall, as soon as practicable after a demand by any Seller,
deliver to the Seller all documents, instruments and records in its possession
that evidence or relate to accounts receivable of the Seller or other Related
Persons that are not Receivables or other Transferred Assets, and copies of all
documents, instruments
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and records in its possession that evidence or relate to Receivables and other
Transferred Assets.
(f) Identification of Eligible Receivables. The Initial Servicer will
(i) establish and maintain such procedures as are necessary for determining no
less frequently than each Business Day whether each Receivable qualifies as an
Eligible Receivable, and for identifying, on any Business Day, all Receivables
that are not Eligible Receivables, and (ii) include in each Daily Report
information that shows whether, and to what extent, the Receivables described
in such Daily Report are Eligible Receivables.
(g) Authorization to Act as Transferor's Agent. Without limiting the
generality of subsection (a), Transferor hereby appoints Servicer as its agent
for the following purposes: (i) specifying accounts to which payments are to be
made to Transferor, (ii) making transfers among, and deposits to and
withdrawals from, all deposit accounts of Transferor for the purposes described
in the Transaction Documents, and (iii) arranging payment by Transferor of all
fees, expenses and other amounts payable by Transferor pursuant to the
Transaction Documents. Transferor irrevocably agrees that (A) it shall be bound
by all actions taken by Servicer pursuant to the preceding sentence, and (B)
Trustee and the banks holding all deposit accounts of Transferor are entitled
to accept submissions, determinations, selections, specifications, transfers,
deposits and withdrawal requests, and payments from Servicer on behalf of
Transferor.
(h) Grant of Power of Attorney. Transferor and Trustee hereby each
grant to Servicer a power of attorney, with full power of substitution, to take
in the name of Transferor and Trustee all steps that are necessary or
appropriate to endorse, negotiate, deposit or otherwise realize on any writing
of any kind held or transmitted by Transferor or transmitted or received by
Trustee (whether or not from Transferor) in connection with any Receivable or
Related Transferred Asset. The power of attorney that Transferor and Trustee
have granted to Servicer may be revoked by Trustee, and shall be revoked by
Transferor, on the date on which Trustee shall be entitled to exercise the
powers granted to Trustee pursuant to Section 3.8(b). In exercising its power
granted hereby, Servicer shall take directions from Trustee, if any, arising
out of the exercise of the rights granted under Section 11.14.
(i) Turnover of Collections. If Servicer, Transferor or any of their
respective agents or representatives shall at any time receive any cash, checks
or other payments constituting Collections, such recipient shall segregate such
payments and hold such payments in trust for Trustee and shall, promptly upon
receipt (and in any event within two Business Days following receipt), remit
all such cash, checks and other payments, duly endorsed or with duly executed
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instruments of transfer, if applicable, to a Bank Account or the Master
Collection Account.
(j) Annual Statement as to Compliance. Servicer will deliver to
Trustee and each Rating Agency on or before March 31 of each year, beginning
with March 31, 1997, an Officer's Certificate, substantially in the form of
Exhibit K, stating, as to each signer thereof, that (i) a review of the
activities of the Servicer during the preceding calendar year and of
performance under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled in all material respects its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of such obligations, specifying each such default known to such
officer and the nature and status thereof and remedies therefor being pursued.
SECTION 3.3 Lockbox Accounts; Concentration Accounts. (a) Each
Lockbox Account shall be subject to a Lockbox Agreement substantially in the
form of Exhibit A (or such other form acceptable to the Trustee). Unless
instructed otherwise by Servicer (or, after the occurrence and continuance of
an Early Amortization Event, Trustee), each Lockbox Bank shall be instructed by
Servicer to remit, on a daily basis (but subject to the Lockbox Bank's
customary funds availability schedule), all amounts deposited in the Lockbox
Accounts maintained with it to a Concentration Account or the Master Collection
Account. Any Concentration Account shall be maintained in the name of Trustee
on behalf of the Trust pursuant to a Concentration Account Agreement
substantially in the form of Exhibit B (or such other form acceptable to the
Trustee). Except as provided in this Agreement and the applicable Account
Agreements, none of any Seller, Transferor, Servicer, or any Person claiming
by, through or under any Seller, Transferor or Servicer shall have any control
over the use of, or any right to withdraw any item or amount from, any Bank
Account. Servicer and Trustee are each hereby irrevocably authorized and
empowered, as Transferor's attorney-in-fact, to endorse any item deposited in a
lockbox or presented for deposit in any Bank Account requiring the endorsement
of Transferor, which authorization is coupled with an interest and is
irrevocable. Each Bank Account shall be an Eligible Deposit Account.
(b) Servicer shall instruct (or shall cause the applicable Seller to
instruct) all Obligors to make all payments due to Transferor or the applicable
Seller relating to or constituting Collections (or any proceeds thereof) (i) to
lockboxes maintained at the Lockbox Banks for deposit in a Lockbox Account or a
Concentration Account or (ii) directly to a Lockbox Account. If Transferor or
the applicable Seller receives any Collections or any other payment of proceeds
of any Transferred Asset, Servicer shall cause such recipient to (x) segregate
such payment and hold it in trust for the benefit of Trustee, and (y) as soon
as
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practicable, but no later than the second Business Day following receipt of
such item by such Person, deposit such payment in a Bank Account or the Master
Collection Account. Servicer shall, and shall cause Transferor and the
applicable Seller to, use reasonable efforts to prevent the deposit of any
amounts other than Collections in any Bank Account. If Servicer is notified by
the applicable Seller that any amount other than Collections has been deposited
in any Bank Account, Servicer shall promptly instruct the appropriate Account
Bank and Trustee to segregate such amount, and shall direct such Account Bank
or Trustee (as appropriate) to turn over such amounts to the applicable Seller
or other Related Person (or their designees) to whom such amounts are owed.
(c)(i) Servicer may, from time to time after the First Issuance Date,
designate a new account as a Bank Account, and such account shall become a Bank
Account (and the bank at which such account is maintained shall become a
Lockbox Bank or a Concentration Account Bank for purposes of this Agreement);
provided that Trustee shall have received not less than 15 Business Days' (or
such shorter number of days as is acceptable to Trustee) prior written notice
of the account and/or the bank that are proposed to be added as a Bank Account
or an Account Bank (as applicable) and, not less than ten Business Days (or
such shorter number of days as is acceptable to Trustee) prior to the effective
date of any such proposed addition, Trustee shall have received (x)
counterparts of a Lockbox Agreement or a Concentration Account Agreement, as
applicable, with each new Account Bank, duly executed by such new Account Bank
and all other parties thereto and (y) copies of all other agreements and
documents signed by the new Account Bank or such other parties with respect to
any new Bank Account.
(ii) Servicer may, from time to time after the First Issuance Date,
terminate an account as a Bank Account or a bank as an Account Bank; provided
that (x) no such termination shall occur unless Trustee shall have received not
less than ten Business Days' (or such shorter number of days as is acceptable
to Trustee) prior written notice of the account and/or the bank that are
proposed to be terminated as a Bank Account or an Account Bank (as applicable)
and, not less than ten Business Days (or such shorter number of days as is
acceptable to Trustee) prior to the effective date of any such proposed
termination, Trustee shall have received counterparts of an agreement, duly
executed by the applicable Account Bank and reasonably satisfactory in form and
substance to Trustee, pursuant to which such Account Bank agrees that, if it
receives any funds or items that constitute Collections on or after the
effective date of the termination of the applicable Bank Account or the
effective date of its termination as an Account Bank (as the case may be), such
Account Bank or former Account Bank (as applicable) shall cause such funds and
items to be delivered in the form received to another lockbox or transferred to
another Bank Account or the Master Collection Account promptly after such
Account Bank or former Account Bank (as applicable) discovers that it
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has received any such funds or items, and (y) notwithstanding clause (x),
Transferor and Servicer may at any time establish alternative collection
procedures that do not require the use of Lockbox Accounts with the consent of
each Agent and any Enhancement Provider and upon satisfaction of the
Modification Condition.
(d) Servicer shall instruct each Concentration Account Bank (if any),
to transfer on a daily basis (subject to such Concentration Account Bank's
customary funds availability schedule) in same day funds to the Master
Collection Account all collected funds on deposit in the Concentration Account
maintained with such Concentration Account Bank. All such transfers shall be
made in accordance with the relevant Concentration Account Agreement.
SECTION 3.4 Servicing Compensation. As full compensation for its
servicing activities hereunder and under any Supplement or PI Agreement, and as
reimbursement for any expense incurred by it in connection therewith, Servicer
shall be entitled to receive a monthly servicing fee (the "Servicing Fee") in
respect of each Series and Purchased Interest, payable in arrears on each
Distribution Date in respect of each Distribution Period (or portion thereof)
during which that Series or Purchased Interest is outstanding. The Servicing
Fee in respect of any Series or Purchased Interest shall be payable solely as
provided in the related Supplement or PI Agreement.
Unless otherwise provided in the applicable Supplement or PI Agreement,
the Servicing Fee payable for any Distribution Period with respect to any
Series or Purchased Interest shall be equal to one-twelfth of the product of
(a) 1.25% multiplied by (b) the aggregate Unpaid Balance of the Receivables as
measured on the first Business Day of that Distribution Period multiplied by
(c) the applicable Series Collection Allocation Percentage. The fees, costs and
expenses of Trustee, the Paying Agent, any authenticating agent, the Lockbox
Banks, the Concentration Account Banks and the Transfer Agent and Registrar,
and certain other costs and expenses payable from the Servicing Fee pursuant to
other provisions of this Agreement, and all other fees and expenses that are
not expressly stated in this Agreement, any Series Supplement or any PI
Agreement to be payable by the Trust or Transferor, other than Federal, state,
local and foreign income and franchise taxes, if any, or any interest or
penalties with respect thereto, of the Trust, shall be paid out of the
Servicing Fee and shall be paid by Servicer from the funds that constitute the
Servicing Fee.
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SECTION 3.5 Records of Servicer and Reports to be Prepared by
Servicer.
(a) Keeping of Records and Books of Account. Servicer shall maintain
at all times accurate and complete books, records and accounts relating to the
Receivables, other Transferred Assets and Contracts of each Seller and all
Collections thereon in which timely entries shall be made. Servicer shall
maintain and implement administrative and operating procedures (including an
ability to generate duplicates of Records evidencing Receivables and the other
Transferred Assets in the event of the destruction of the originals thereof),
and shall keep and maintain all documents, books, records and other information
that Servicer deems reasonably necessary for the collection of all Receivables
and Related Transferred Assets.
(b) Receivables Reviews. Servicer shall provide Trustee access to the
documentation regarding the Receivables and other Transferred Assets when
Trustee is required, in connection with the enforcement of the rights of
Certificateholders or the Purchasers or by applicable statutes or regulations,
to review such documentation, such access being afforded without charge but
only (i) upon reasonable request, (ii) during normal business hours, (iii)
subject to Servicer's normal security and confidentiality procedures, (iv) at
reasonably accessible offices in the continental United States of America
designated by Servicer and (v) upon five Business Days' prior notice; provided
that no notice shall be required if an Early Amortization Event shall have
occurred and be continuing; and provided further, that before the occurrence
and continuance of an Early Amortization Event, the Trustee (or its agent or
representative) shall have the right to request a receivables review not more
than twice in any calendar year.
(c) Daily Reports. Prior to 11:00 a.m., New York City time, on each
Business Day, Servicer shall prepare and deliver to Trustee and any Agent a
report relating to each outstanding Series and Purchased Interest,
substantially in the form specified by the applicable Supplement or PI
Agreement or in such other form as is reasonably acceptable to Trustee and
Servicer (each such report being a "Daily Report") setting out, among other
things, the Base Amount and Series Collection Allocation Percentage for that
Series or Purchased Interest as of the end of business on the preceding
Business Day; provided that if, on any Business Day, Servicer is unable to
prepare and deliver a Daily Report to Trustee because of acts of God or the
public enemy, riots, acts of war, acts of terrorism, epidemics, fire, failure
of communication lines, equipment or power failure, computer systems failure,
flood, embargoes, weather, earthquakes or other unanticipated disruptions of
Servicer's ability to monitor the origination and/or preparation of
Receivables, then (x) the Base Amount for purposes of each outstanding Series
and Purchased Interest shall be the average of the Base Amounts shown in the
related Daily
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Reports delivered during the immediately preceding month (such amount, an
"Estimated Base Amount") and (y) the Series Collection Allocation Percentage
for that Series or Purchased Interest shall be the one most recently reported.
Servicer may use an Estimated Base Amount and the most recently reported Series
Collection Allocation Percentage to prepare the Daily Report until the earlier
to occur of (i) the day upon which such disruption no longer prevents Servicer
from preparing the Daily Report using the actual data required by the Daily
Report and delivering it to Trustee, and (ii) the sixth Business Day following
the commencement of such disruption.
(d) Monthly Report. On each Report Date, Servicer shall prepare and
deliver to Trustee and the Rating Agencies a report relating to each
outstanding Series and Purchased Interest, substantially in the form specified
by the applicable Supplement or PI Agreement or in such other form as is
reasonably acceptable to Trustee and Servicer (each such report being a
"Monthly Report").
(e) Notice of Seller Change Events; Supplements to Monthly Reports.
Sections 1.7 and 1.8 of the Purchase Agreement describe circumstances under
which (i) additional Sellers may be added to the Program and (ii) a Seller may
terminate its status as Seller under the Program (each such event being a
"Seller Change Event"). Those Sections of the Purchase Agreement require
Avondale to give written notice to Transferor of the occurrence of a Seller
Change Event not less than 30 days (or such shorter period as is acceptable to
the Trustee) prior to the occurrence thereof, and Transferor hereby agrees to
give prompt written notice of its receipt of any such notice to Trustee and the
Rating Agencies. If the notice is given to Trustee, within five Business Days
after the receipt of the notice by Trustee (or such later date, as specified in
the notice, on which the applicable Seller Change Event shall become
effective), Servicer shall deliver to Trustee and the Rating Agencies a
supplement to the Monthly Report then in effect for each outstanding Series or
Purchased Interest, which supplement shall show the calculation (complete with
the historical and/or pro forma receivables data necessary to do such
calculation) of (A) the Required Receivables and the applicable reserve ratios
(as described in each Supplement or PI Agreement) to reflect the addition of
accounts receivable originated by any Person that is being added to the Program
as a Seller, and the exclusion of any Receivables originated by any such Person
that is terminating its status as a Seller (as applicable), and (B) the Loss
Discount and the Purchase Discount for any such Person that is being added to
the Program as a Seller. For purposes of all calculations hereunder and under
the Purchase Agreement, the Required Receivables, such reserve ratios and (if
applicable) the Loss Discount and the Purchase Discount for the relevant Person
shown in such supplement shall supersede and/or supplement the calculation of
such items in the then outstanding Monthly Report, effective as of the fifth
Business Day following Trustee's receipt of such notice (or such later
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date, as specified in such notice, on which the applicable Seller Change Event
shall become effective).
SECTION 3.6 Monthly Servicer's Certificate. On each Report Date,
Servicer shall deliver to Trustee, the Paying Agent, Transferor and the Rating
Agencies a certificate of an Authorized Officer of Servicer substantially in
the form of Exhibit C, with such additions as may be required by any
Supplement.
SECTION 3.7 Servicing Report of Independent Public Accountants; SEC
Reports. (a)(i) On or before 120 days after the end of each fiscal year of
Transferor beginning with the end of Transferor's fiscal year 1996, Servicer
shall, as an expense of Servicer paid out of the Servicing Fee, cause Ernst &
Young LLP or another firm of independent certified public accountants that is
generally recognized as being among the "big six" (which may also render other
services to Servicer, the Sellers or Transferor) to furnish a report to
Trustee, Servicer, the Rating Agencies and Transferor (which report shall be
addressed to Trustee and shall relate to Transferor's most recently ended
fiscal year). The accountants' report shall set forth the results of their
performance of the procedures described in Exhibit D with respect to the
Monthly Reports and Daily Reports delivered to Trustee pursuant to Section 3.5
during the prior fiscal year.
(ii) Each accountants' report shall state that the accountants have
compared the amounts contained in the Monthly Reports and a reasonable sample
randomly selected from all Daily Reports delivered to Trustee during the period
covered by the report with the records (including computer records) from which
the amounts were derived and that, on the basis of such comparison, the amounts
are in agreement with the documents and records, except for such exceptions as
they believe to be immaterial and such other exceptions as shall be set forth
in the report. Except as provided otherwise in a Supplement, a copy of the
report may be obtained by any Investor Certificateholder or Purchaser by a
request in writing to Trustee addressed to the Corporate Trust Office.
(b) Promptly after the filing of such reports (if any) with the
Securities and Exchange Commission, Avondale shall provide the Trustee and each
of the Rating Agencies with copies of each Quarterly Report on Form 10-Q,
Annual Report on Form 10-K and Report of Form 8-K of Avondale.
SECTION 3.8 Rights of Trustee. (a) Trustee has the exclusive dominion
and control over the Bank Accounts, and Transferor shall take any action that
Trustee may reasonably request to effect or evidence such dominion and control.
At any time following the occurrence of a Servicer Default (unless such
Servicer Default has been waived in writing by Trustee), Trustee is hereby
authorized to give notice to the Account Banks, as provided in the Account
Agreements, of the
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revocation of Servicer's authority to give instructions or take any other
actions with respect to the Bank Accounts that Servicer would otherwise be
authorized to give or to take.
(b) At any time following the designation of a Servicer other than the
Initial Servicer:
(i) Trustee may direct any Obligors of Receivables to pay all
amounts payable under any Receivable or any Related Transferred Assets
directly to Trustee or its designee; provided that Trustee shall
provide the applicable Seller with a copy of such notice at least one
Business Day prior to sending it to any Obligor and consult in good
faith with the applicable Seller as to the text of the notice.
(ii) Trustee may direct any Seller to make payment of all
amounts payable to Transferor under any Transaction Document to which
the Seller is a party directly to Trustee or its designee.
(iii) Transferor and Servicer shall, at Trustee's request and
as an expense of Servicer paid out of the Servicing Fee, give notice of
the Trust's ownership of the Receivables and the other Transferred
Assets to each Obligor and direct that payments be made directly to
Trustee or its designee.
(iv) Transferor shall, and shall cause the Sellers to, at
Trustee's request, (A) assemble all of the Records that are necessary
or appropriate to collect the Receivables and other Transferred Assets,
and shall make the same available to Trustee at one or more places
selected by Trustee or its designee, (B) segregate all cash, checks and
other payments received by it from time to time constituting
Collections in a manner acceptable to Trustee and shall, promptly upon
receipt (and, subject to Section 3.2(i), in no event later than the
second Business Day following receipt), remit all such cash, checks and
other payments, duly endorsed or with duly executed instruments of
transfer, if applicable, to a Bank Account or the Master Collection
Account and (C) permit, upon not less than two Business Days' prior
written notice, any Successor Servicer and its agents, employees and
assignees access to their respective facilities and their respective
Records.
(c) Each of Transferor and Servicer hereby authorizes Trustee, from
time to time after the designation of a Servicer other than the Initial
Servicer, to take any and all steps in Transferor's name and on behalf of
Transferor and Servicer that are necessary or appropriate, in the reasonable
determination of Trustee, to collect all amounts due under any and all
Receivables or other Transferred Assets,
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including endorsing the name of Transferor or the applicable Seller on checks
and other instruments representing Collections and enforcing such Receivables
and the other Transferred Assets.
(d) Transferor hereby irrevocably appoints Trustee to act as
Transferor's attorney-in-fact, with full authority in the place and stead of
Transferor and in the name of Transferor or otherwise, from time to time after
the designation of a Servicer other than the Initial Servicer, to take (subject
to Section 11.14 hereof) any action and to execute any instrument or document
that Trustee, in its reasonable determination, may deem necessary to accomplish
the purposes of this Agreement, including:
(i) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any Receivable or any Related Transferred
Asset;
(ii) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(i);
(iii) to file any claims or take any action or institute any
proceedings that Trustee in its reasonable determination may deem
necessary or appropriate for the collection of any of the Receivables
or any other Transferred Asset or otherwise to enforce the rights of
Trustee and the Certificateholders with respect to any of the
Receivables or any other Transferred Asset; and
(iv) to perform the affirmative obligations of Transferor
under any Transaction Document.
Transferor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 3.9 Ongoing Responsibilities of the Initial Servicer. Anything
herein to the contrary notwithstanding:
(a) If at any time the Initial Servicer shall not be
Servicer, the Initial Servicer shall deliver all Collections received
or deemed received by it or its Subsidiaries to Trustee no later than
two Business Days after receipt or deemed receipt thereof and Trustee
shall distribute such Collections to the same extent as if such
Collections had actually been received from the related Obligor on the
applicable dates. So long as the Initial Servicer or any of its
Subsidiaries shall hold any Collections or deemed Collections required
to be paid to Trustee, each of them shall hold
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such amounts in trust (and separate and apart from its own funds) and
shall clearly mark its records to reflect such trust. The Initial
Servicer hereby grants to Trustee an irrevocable power of attorney,
with full power of substitution, coupled with an interest, upon the
occurrence of a Servicer Default (unless such Servicer Default has been
waived in writing by Trustee), to take in the name of the Initial
Servicer all steps necessary or appropriate to endorse, negotiate or
otherwise realize on any writing or other right of any kind held or
transmitted by the Initial Servicer or transmitted and received by
Trustee (whether or not from the Initial Servicer) in connection with
any Receivable or other Transferred Asset.
(b) In addition, if at any time the Initial Servicer shall
not be Servicer, the Initial Servicer shall act (if the Successor
Servicer so requests) as the data processing agent of Servicer and, in
such capacity, the Initial Servicer shall conduct (and shall cause any
other necessary Persons to conduct) the data processing functions of
the administration of the Receivables, the other Transferred Assets and
the Collections thereon in substantially the same way that the Initial
Servicer (or its Sub-Servicers) conducted such data processing
functions while the Initial Servicer acted as Servicer. The Initial
Servicer and each such other Person shall be entitled to reasonable
compensation for such service to be paid from the Servicing Fee.
(c) Notwithstanding any termination of the Initial Servicer
as Servicer hereunder, the Initial Servicer shall continue to indemnify
Trustee on the terms set out in Section 11.5 with respect to
circumstances existing, or actions taken or omitted, prior to such
termination.
SECTION 3.10 Further Action Evidencing Transfers. Servicer shall cause
all financing statements and continuation statements and any other necessary
documents relating to the right, title and interest of Trustee in, to and under
the Transferred Assets to be promptly recorded, registered and filed, and at
all times to be kept recorded, registered and filed, all in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the right, title and interest of Trustee hereunder in and to all property
comprising the Transferred Assets. Servicer shall deliver to Trustee
file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. Transferor shall cooperate fully with
Servicer in connection with the obligations set forth above and will execute
any and all documents that are reasonably required to fulfill the intent of
this section.
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If Transferor or Servicer fails to perform any of its agreements or
obligations under any Transaction Document and does not remedy such failure
within the applicable cure period, if any, then Trustee or its designee may
(but shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of Trustee or its designee
incurred in connection therewith shall be payable by Servicer as provided in
Section 11.5 and (if applicable) by Transferor as provided in Section 7.3.
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
PURCHASERS; ALLOCATIONS
SECTION 4.1 Rights of Certificateholders and Purchasers. Each Series
of Investor Certificates shall collectively represent a fractional undivided
beneficial interest (as to any Series, the "Series Interest") in the Trust, and
the amount of that undivided beneficial interest shall equal the Series
Collection Allocation Percentage for that Series from time to time. Each
Certificate within a Series shall represent a partial ownership interest in the
related Series Interest, representing the right to receive, to the extent
necessary to make the required payments with respect to that Certificate at the
times and in the amounts specified in this Article IV and in the related
Supplement, the portion of Collections allocable to Investor Certificateholders
of such Series pursuant to this Agreement and such Supplement, funds on deposit
in the Transaction Accounts allocable to Investor Certificateholders of such
Series and funds available pursuant to any related Enhancement. Each "Purchased
Interest" shall represent a fluctuating undivided ownership interest in the
Transferred Assets, purchased pursuant to the PI Agreement related thereto,
that shall include the right to receive, to the extent necessary to make
required payments to Purchasers at the time and in the amounts specified in the
related PI Agreement, the portion of Collections allocable to such Purchased
Interest pursuant to this Agreement and the PI Agreement, funds on deposit in
the Master Collection Account allocable to the Purchased Interest pursuant to
this Agreement and the PI Agreement and funds available pursuant to any related
Enhancement. Unless the applicable Supplement or PI Agreement provides
otherwise, the Investor Certificates of any Series or class and any Purchased
Interest shall not represent any interest in any funds allocable to, or
Enhancement for the benefit of, any other Series or Purchased Interest. The
Transferor Certificate shall represent an interest in the Trust (the
"Transferor Interest") consisting of the right to receive current and deferred
transfer payments in respect of the various Series and Purchased Interests
outstanding from time to time at the times and in the amounts specified in the
related Supplements and PI Agreements.
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SECTION 4.2 Establishment of Transaction Accounts. (a) On or prior to
the date of this Agreement, Trustee has established, and until the Trust is
terminated Trustee shall (except as expressly permitted or required below)
maintain, in the name of Trustee and for the benefit of the Certificateholders
and Purchasers, the following accounts:
(i) account no. 185620861, which shall be called the "Master
Collection Account" and into which all Collections and all other
Transferred Assets consisting of cash or cash equivalents shall be
transferred on a daily basis from the Bank Accounts;
(ii) account no. 185620952, which shall be called the
"Carrying Cost Account" and into which funds shall be allocated from
time to time to cover carrying costs of each Series and Purchased
Interest (including interest payable on, and the Servicing Fee
allocated to, each Series and Purchased Interest);
(iii) account no. 185621042, which shall be called the
"Equalization Account" and into which funds may from time to time be
transferred from the Master Collection Account to compensate for
fluctuations in the Base Amounts for the outstanding Series and
Purchased Interests; and
(iv) account no. 185621133, which shall be called the
"Principal Funding Account" and into which funds will from time to time
be transferred in anticipation of distributions to Investor
Certificateholders or Purchasers on account of their respective
principal investments.
(b) In addition, if an Early Amortization Period occurs with respect
to any Series or Purchased Interest, Trustee shall establish an additional
account which shall be called the "Holdback Account" and into which funds that
would otherwise be remitted by Trustee to the Transferor in respect of the
Transferor Certificate will be deposited to the extent so provided in the
related Supplement or PI Agreement.
(c) The Master Collection Account, the Carrying Cost Account, the
Equalization Account, the Principal Funding Account, any Holdback Account and
any additional accounts required by any Supplement or PI Agreement to be
established (unless otherwise indicated in such Supplement or PI Agreement) are
collectively called the "Transaction Accounts." Each of the Transaction
Accounts shall be established and maintained as an Eligible Deposit Account and
shall bear a designation clearly indicating that funds deposited therein are
held for the benefit of the Certificateholders and the Purchasers. If any
Transaction Account ceases to
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be an Eligible Deposit Account, Servicer shall cause Trustee to open a
substitute Transaction Account that is an Eligible Deposit Account and transfer
the funds in the existing Transaction Account to the substitute Transaction
Account, and thereafter all references in any Transaction Document to the
original Transaction Account shall be deemed instead to refer to the substitute
Transaction Account.
(d) The Master Collection Account, the Carrying Cost Account, the
Equalization Account, the Principal Funding Account and any Holdback Account
shall be held by Trustee for the benefit of all Certificateholders and
Purchasers. However, there shall be established within each of the Carrying
Cost Account, the Equalization Account, the Principal Funding Account and any
Holdback Account an administrative sub-account for each outstanding Series and
Purchased Interest. Funds allocated to the Carrying Cost Account, the
Equalization Account, the Principal Funding Account and any Holdback Account
pursuant to any Supplement or PI Agreement shall be allocated to the applicable
Series' or Purchased Interest's sub-account and shall be available solely to
the holders of the Certificates in that Series or the Purchaser of that
Purchased Interest, as applicable, except to the extent that such funds are
subsequently reallocated to another Series or Purchased Interest, or the
Transferor, in accordance with the terms of the applicable Supplement or
Purchase Agreement and this Agreement. Any additional Transaction Accounts
established pursuant to any Supplement or PI Agreement shall be held by Trustee
for the benefit of only the related Series or Purchased Interest.
(e) Trustee shall possess (for its benefit and for the benefit of the
Certificateholders and the Purchasers) all right, title and interest in and to
all funds on deposit from time to time in each of the Transaction Accounts and
in all proceeds thereof. The Transaction Accounts shall be under the sole
dominion and control of Trustee for the benefit of the applicable
Certificateholders and/or Purchasers. Each of Servicer and Trustee agrees that
it shall have no right of setoff against, and no right otherwise to deduct
from, any funds held in any of the Transaction Accounts or the Bank Accounts
for any amount owed to it by the Trust, any party hereto or any
Certificateholder or Purchaser.
SECTION 4.3 Trust-Level Calculations and Funds Allocations.
(a) Allocation of Daily Collections. On each Business Day, Servicer
shall determine the amount of collected funds received in the Master Collection
Account (other than funds that are required to be returned to Related Persons
(or their designees) pursuant to Sections 3.2(b) and 3.3(b)) since the
preceding Business Day and shall allocate to each outstanding Series and
Purchased Interest a share of such funds in an amount equal to the product of
the applicable Series Collection Allocation Percentage and the amount of such
funds. The portion of
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such funds allocated to any Series or Purchased Interest shall be further
allocated and otherwise dealt with in accordance with the terms of the related
Supplement or PI Agreement. In addition, funds initially allocated to a Series
or Purchased Interest on any Business Day that are designated as Shared
Investor Collections shall be reallocated to other Series or Purchased
Interests pro rata based upon the respective Shortfalls (if any) of the other
Series and Purchased Interests.
(b) Allocation of Write-Offs and Dilution. In each Monthly Report
relating to a Series or Purchased Interest that is in an Early Amortization
Period, Servicer shall calculate the amount of (i) Write-Offs (net of
Recoveries) and (ii) Dilutions as to which no settlement payment has been made
pursuant to Section 3.3 of the Purchase Agreement, in each case during the
related Calculation Period (or the portion of that Calculation Period falling
in the Early Amortization Period) and shall allocate to such Series or
Purchased Interest a portion of the amounts referred to in clauses (i) and (ii)
equal to the product of each such amount and the related Series Loss Allocation
Percentage.
SECTION 4.4 Investment of Funds in Transaction Accounts. On any day
when funds on deposit in any Transaction Account exceed $10,000 (after giving
effect to the allocations of such funds required by this Article IV and the
various Supplements and PI Agreements), and at such other times as investment
is practicable, Trustee, at the direction of Servicer, shall invest and
reinvest monies on deposit in such Transaction Account (in the name of Trustee)
in such Eligible Investments as are specified in a notice from Servicer,
subject to the restrictions set forth hereinafter. All Eligible Investments
made from funds in any Transaction Account, and the interest, dividends and
income received thereon and therefrom and the net proceeds realized on the sale
thereof, shall be deposited in such Transaction Account. Trustee may liquidate
an Eligible Investment prior to maturity if such liquidation would not result
in a loss of all or part of the principal portion of such Eligible Investment
or if, prior to the maturity of such Eligible Investment, a default occurs in
the payment of principal, interest or any other amount with respect to such
Eligible Investment. In the absence of negligence of Trustee or willful
misconduct by Trustee, Trustee shall have no liability in connection with
investment losses incurred on Eligible Investments. It is intended for income
tax purposes that the income earned through investment of funds in the
Transaction Accounts shall be treated as income of Transferor.
SECTION 4.5 Attachment of Transaction Accounts. If Trustee receives
written notice that any Transaction Account has or will become subject to any
writ, judgment, warrant of attachment, execution or similar process, Trustee
shall (notwithstanding any other provision of the Transaction Documents)
promptly notify Transferor, Servicer and the Certificateholders thereof, and
shall not deposit or transfer funds into such Transaction Account but shall
cause funds otherwise
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required to be deposited into such Transaction Account to be held in another
account pending distribution of such funds in the manner required by the
Transaction Documents.
ARTICLE V
DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions. DISTRIBUTIONS SHALL BE MADE, AND REPORTS
SHALL BE PROVIDED, TO CERTIFICATEHOLDERS AS SET FORTH IN THE APPLICABLE
SUPPLEMENT.
ARTICLE VI
THE CERTIFICATES
SECTION 6.1 The Certificates. The Investor Certificates in each Series
shall be substantially in the forms contemplated by the Supplements pursuant to
which the Investor Certificates are issued, and the Transferor Certificate
shall be substantially in the form of Exhibit E. Upon issuance, all
Certificates shall be executed and delivered by Transferor to Trustee for
authentication and redelivery as provided in Sections 6.2 and 6.10. Except to
the extent provided otherwise in an applicable Supplement, Investor
Certificates shall be issued in minimum denominations of $1,000,000 and in
integral multiples of $100,000 and shall not be subdivided for resale into
Certificates smaller than a Certificate, the initial offering price for which
would have been at least $1,000,000.
Each Certificate issued as a Definitive Certificate shall be executed
by manual or facsimile signature on behalf of Transferor by its President or
any Vice President or by any attorney-in-fact duly authorized to execute the
Definitive Certificate on behalf of any such officer. The Definitive
Certificates shall be authenticated on behalf of the Trust by manual signature
of a duly authorized signatory of Trustee. Definitive Certificates bearing the
manual or facsimile signature of the individual who was, at the time when the
signature was affixed, authorized to sign on behalf of Transferor or the Trust
(as applicable) shall be valid and binding, notwithstanding that the
individuals or any of them ceased to be so authorized prior to the
authentication and delivery of the Definitive Certificates or does not hold
such office on the date of issuance of such Definitive Certificates. No
Definitive Certificates shall be entitled to any benefit under this Agreement,
or be valid for any purpose, unless there appears on the Definitive Certificate
a certificate of authentication substantially in the form provided for herein
executed
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by or on behalf of Trustee by the manual signature of a duly authorized
signatory, and the certificate of authentication upon any Definitive
Certificate shall be conclusive evidence, and the only evidence, that the
Definitive Certificate has been duly authenticated and delivered hereunder and
is entitled to the benefits of this Agreement. Except as otherwise provided in
the applicable Supplement, all Definitive Certificates shall be dated the date
of their authentication.
As provided in any Supplement, Investor Certificates of any Series may
be offered and sold pursuant to an offering registered under the Securities Act
or issued and sold pursuant to an exemption from the Securities Act. Any Series
sold pursuant to a public offering registered under the Securities Act, Rule
144A, Regulation S or another exemption under the Securities Act may be
delivered in book-entry form as provided in Sections 6.11 and 6.12.
SECTION 6.2 Authentication of Certificates. Contemporaneously with the
initial assignment and transfer of Receivables and other Transferred Assets to
the Trust, Trustee shall authenticate and deliver the Transferor Certificate to
Transferor. On each Issuance Date, upon the order of Transferor, Trustee shall
authenticate and deliver to Transferor the Series of Certificates that are to
be issued originally on such Issuance Date pursuant to the applicable
Supplement.
SECTION 6.3 Registration of Transfer and Exchange of Certificates. (a)
Trustee, as agent for Transferor, shall keep, or shall cause to be kept, at the
office or agency to be maintained in accordance with the provisions of Section
11.16, a register in written form or capable of being converted into written
form within a reasonable time (the "Certificate Register") in which, subject to
such reasonable regulations as it may prescribe, a transfer agent and registrar
(which may be Trustee) (the "Transfer Agent and Registrar") shall provide for
the registration of the Certificates and of transfers and exchanges of the
Certificates as herein provided. Transferor hereby appoints Trustee as the
initial Transfer Agent and Registrar.
Transferor, or Trustee as agent for Transferor, may revoke the
appointment as Transfer Agent and Registrar and remove the then-acting Transfer
Agent and Registrar if Trustee or Transferor (as applicable) determines in its
sole discretion that the then-acting Transfer Agent and Registrar has failed to
perform its obligations under this Agreement in any material respect. The
then-acting Transfer Agent and Registrar shall be permitted to resign as
Transfer Agent and Registrar upon 30 days' prior written notice to Trustee,
Transferor and Servicer; provided that such resignation shall not be effective
and the then-acting Transfer Agent and Registrar shall continue to perform its
duties as Transfer Agent and Registrar until Trustee has appointed a successor
Transfer Agent and Registrar reasonably acceptable to Transferor and the Person
so appointed has given Trustee
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written notice that it accepts the appointment. The provisions of Sections 11.1
through 11.5 shall apply to the Transfer Agent and Registrar as if all
references to "Trustee" in the applicable provisions of Sections 11.1 through
11.5 were references to the Transfer Agent and Registrar.
It is intended that the registration of Certificates that is described
in this Section comply with the registration requirements contained in Section
163 of the Internal Revenue Code.
(b) No transfer of all or any part of the Transferor Certificate shall
be made unless (i) Transferor shall have given the Rating Agencies and Trustee
prior written notice of the proposed transfer, (ii) the Modification Condition
shall have been satisfied in connection with the proposed transfer and (iii)
Transferor shall have delivered to Trustee, the Rating Agencies, each Purchaser
and each Enhancement Provider a Tax Opinion for each outstanding Series of
Investor Certificates and Purchased Interest. Any purported transfer of the
Transferor Certificate that does not comply with the foregoing requirements
shall be void ab initio and Transferor shall continue to be treated as the
holder of the Transferor Certificate for all purposes of the Transaction
Documents.
(c) Subject to the requirements of subsection (e), if applicable,
having been fulfilled, upon surrender for registration of transfer of any
Certificate, and, in the case of Investor Certificates, at any office or agency
of the Transfer Agent and Registrar maintained for such purpose, Transferor
shall execute, and Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the
appropriate class and Series that are in authorized denominations of like
aggregate fractional interest in the related Series Interest that bear numbers
that are not contemporaneously outstanding.
At the option of an Investor Certificateholder, its Investor
Certificates may be exchanged for other Investor Certificates of the same class
and Series (and bearing the same interest rate as the Investor Certificate
surrendered for registration of exchange) of authorized denominations of like
aggregate fractional interests in the related Series Interest and bearing
numbers that are not contemporaneously outstanding, upon surrender of the
Investor Certificates to be exchanged at any such office or agency. Whenever
any Investor Certificates are so surrendered for exchange, Transferor shall
execute, and Trustee shall authenticate and deliver, the appropriate number of
Investor Certificates of the class and Series that the Investor
Certificateholder making the exchange is entitled to receive. Every Investor
Certificate presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in a form satisfactory
to Trustee or the Transfer Agent and Registrar duly executed by the
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Certificateholder thereof or his attorney-in-fact duly authorized in a writing
delivered to the Transfer Agent and Registrar.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Transfer Agent and Registrar may require the
Certificateholder to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of Investor Certificates.
All Certificates surrendered for registration of transfer and exchange
shall be cancelled and disposed of in a manner satisfactory to Trustee.
(d) Certificates may be surrendered for registration of transfer or
exchange at the office of the Transfer Agent and Registrar designated in
Section 13.6.
(e) Unless otherwise provided in the applicable Supplement,
Certificateholders holding Definitive Certificates shall not sell, transfer or
otherwise dispose of the Certificates unless (i) the sale, transfer or
disposition is being made pursuant to an exemption from the registration
requirements of the Securities Act and applicable state securities laws, (ii)
prior to the proposed sale, transfer or disposition, the Certificateholder and
the proposed transferee each provide Trustee and Transferor with
representations and, if requested by Trustee or Transferor, an Opinion of
Counsel concerning the proposed sale, transfer or disposition and the
availability of the exemption, and (iii) all other requirements for a valid
transfer specified in the applicable Supplement and Certificate Purchase
Agreement are satisfied.
(f) The Investor Certificates shall bear such restrictive legends as
shall be set forth in the applicable Supplements.
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate is surrendered to the Transfer Agent and Registrar,
or the Transfer Agent and Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate and (b) there is delivered to
the Transfer Agent and Registrar and Trustee such security or indemnity as may
be required by them and Transferor to hold each of them, the Trust and
Transferor harmless, then, in the absence of notice to Trustee that such
Certificate has been acquired by a bona fide purchaser, Transferor shall
execute and, upon the request of Transferor, Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like class, Series, tenor, terms and
principal amount and bearing a number that is not contemporaneously
outstanding. In connection with the issuance of any new Certificate under this
section, Trustee or the Transfer Agent and Registrar may require the payment by
the Certificateholder of a sum sufficient to cover any tax or
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other governmental charge that may be imposed in relation thereto and any other
expenses (including the reasonable fees and expenses of Trustee and Transfer
Agent and Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this section shall constitute conclusive and indefeasible evidence
of ownership of an interest in the Trust, as if originally issued, whether or
not the lost, stolen or destroyed Certificate shall be enforceable by anyone,
and shall be entitled to all the benefits of this Agreement equally and
proportionately with any and all Certificates of the same class and Series that
are duly issued hereunder.
SECTION 6.5 Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, Transferor, Trustee, the Paying
Agent, the Transfer Agent and Registrar and any agent of any of them may treat
the Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Article V
and for all other purposes whatsoever, and none of Transferor, Trustee, the
Paying Agent, the Transfer Agent and Registrar or any agent of any of them
shall be affected by any notice to the contrary; provided that, in determining
whether the required number or type of Holders or other Persons have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Certificates and Purchased Interests owned by Transferor, Servicer or any
Affiliate thereof shall be disregarded and deemed not to be outstanding, except
that, in determining whether Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Certificates and Purchased Interests that Trustee knows to be so owned shall be
so disregarded. Certificates and Purchased Interests so owned that have been
pledged in good faith shall not be disregarded and may be regarded as
outstanding if the pledgee establishes to the satisfaction of Trustee the
pledgee's right so to act with respect to such Certificates or Purchased
Interests and that the pledgee is not Transferor, Servicer or an Affiliate
thereof.
SECTION 6.6 Appointment of Paying Agent. The Paying Agent initially
shall be Trustee. Transferor hereby appoints the Paying Agent as its agent to
make distributions to Certificateholders pursuant to the applicable Supplements
and to report the amounts of the distributions to Trustee. Any Paying Agent
shall have the revocable power to withdraw funds from the Master Collection
Account for the purpose of making the distributions. Trustee or, at any time
when Trustee is also the Paying Agent, Transferor may revoke such power of the
Paying Agent and remove the Paying Agent if Trustee or Transferor (as
applicable) determines in its sole discretion that the Paying Agent shall have
failed to perform its obligations under this Agreement in any material respect.
The Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
prior written notice to Trustee, Transferor, Servicer and the Rating Agencies.
Any resignation or removal of the Paying Agent, and appointment of a successor
Paying Agent, shall not become effective until the appointment has been
accepted by the successor Paying Agent.
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If no successor Paying Agent shall have been appointed and shall have accepted
appointment within 30 days after the giving of the notice of resignation, the
resigning Paying Agent may petition any court of competent jurisdiction to
appoint a successor Paying Agent. In the event that Trustee shall no longer be
the Paying Agent, Trustee shall appoint a successor Paying Agent (which shall
be a bank or trust company) reasonably acceptable to Transferor, which
appointment shall be effective on the date on which the Person so appointed
gives Trustee written notice that it accepts the appointment. Trustee shall
cause the successor Paying Agent or any additional Paying Agent appointed by
Trustee to execute and deliver to Trustee an instrument in which it shall agree
with Trustee that, as Paying Agent, it will hold all sums, if any, held for
payment to the Certificateholders and Purchasers in trust for the benefit of
the Certificateholders and Purchasers entitled thereto until the sums shall be
paid to the Certificateholders and Purchasers. The Paying Agent shall return
all unclaimed funds to Trustee, and upon removal of a Paying Agent such Paying
Agent shall also return all funds in its possession to Trustee. The provisions
of Sections 11.1 through 11.5 shall apply to the Paying Agent as if all
references in the applicable provisions thereof to "Trustee" were references to
the Paying Agent.
SECTION 6.7 Access to List of Certificateholders' Names and Addresses.
Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to Transferor, Servicer, any Seller or the Paying Agent, within two
Business Days after receipt by Trustee of a written request therefor from
Servicer or the Paying Agent, a list in the form Servicer or the Paying Agent
may reasonably require of the names and addresses of the Certificateholders as
of the most recent Distribution Date. If any Holder or group of Holders of
Investor Certificates in any Series evidencing not less than 10% of the
aggregate unpaid principal amount of the Series (the "Applicant") applies in
writing to Trustee, and the application states that the Applicant desires to
communicate with other Certificateholders with respect to their rights under
this Agreement, any Supplement or the Certificates and is accompanied by a copy
of the communication that the Applicant proposes to transmit, then Trustee,
after having been adequately indemnified by the Applicant for its costs and
expenses, shall afford or shall cause the Transfer Agent and Registrar to
afford the Applicant access during normal business hours to the most recent
list of Certificateholders held by Trustee, within five Business Days after the
receipt of the application and indemnification. The list shall be as of a date
no more than 45 days prior to the date of receipt of the Applicant's request.
Every Certificateholder, by receiving and holding a Certificate, agrees
with Trustee that neither Trustee, the Transfer Agent and Registrar,
Transferor, Servicer, any Seller nor any of their respective agents shall be
held accountable by reason of the disclosure of any information as to the names
and addresses of the
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Certificateholders hereunder, regardless of the sources from which the
information was derived.
SECTION 6.8 Authenticating Agent. (a) Trustee may appoint one or
more authenticating agents with respect to the Certificates that shall be
authorized to act on behalf of Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates. Either Trustee or the authenticating agent, if
any, then appointed and acting on behalf of Trustee shall authenticate the
Certificates. Whenever reference is made in this Agreement to the
authentication of Certificates by Trustee or Trustee's certificate of
authentication, such reference shall be deemed to include authentication on
behalf of Trustee by an authenticating agent and a certificate of
authentication executed on behalf of Trustee by an authenticating agent. Each
authenticating agent must be acceptable to Transferor.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any document or any further act on the part of Trustee,
the authenticating agent or any other Person.
(c) An authenticating agent may at any time resign by giving written
notice of resignation to Trustee and Transferor. Trustee may at any time
terminate the agency of an authenticating agent by giving notice of termination
to the authenticating agent and Transferor. Upon receiving a notice of
resignation or upon a termination, or in case at any time an authenticating
agent shall cease to be acceptable to Trustee or Transferor, Trustee may
promptly appoint a successor authenticating agent. Any successor authenticating
agent, upon acceptance of its appointment, shall become vested with all the
rights, powers and duties of its predecessor, with like effect as if originally
named as an authenticating agent. No successor authenticating agent shall be
appointed unless acceptable to Trustee and Transferor.
(d) Servicer agrees to pay to each authenticating agent (if any), as
an expense of Servicer paid out of the Servicing Fee, reasonable compensation
from time to time for services performed under this section.
(e) The provisions of Sections 11.1, 11.2, 11.3 and 11.4 shall be
applicable to any authenticating agent as if the references in the applicable
provisions thereof to "Trustee" were references to the authenticating agent.
(f) Pursuant to an appointment made under this section, the
Certificates may have endorsed thereon, in lieu of Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
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"This is one of the Certificates described in the Supplement
dated as of __________ ___, 199_.
MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee
By:_________________________
as Authenticating Agent
for Trustee,
By:_________________________
Authorized Officer."
SECTION 6.9 Tax Treatment. It is the intent of Transferor and the
Investor Certificateholders that, for purposes of Federal, state and local
income and franchise taxes and other taxes measured by or imposed on income,
the Investor Certificates will be treated as evidence of indebtedness secured
by the Transferred Assets and the Trust will not be characterized as an
association taxable as a corporation. Transferor, by entering into this
Agreement, and each Investor Certificateholder, by its acceptance of its
Investor Certificate, agree to treat the Investor Certificates as indebtedness
(or, if so provided in the applicable Supplement, an interest in a partnership)
for purposes of Federal, state and local income and franchise taxes and any
other taxes measured by or imposed on income. The provisions of this Agreement
and all related Transaction Documents shall be construed to further these
intentions of the parties. In accordance with the foregoing, Transferor agrees
that it will report its income for purposes of Federal, state and local income
or franchise taxes, and any other taxes measured by or imposed on income, on
the basis that it is the owner of the Receivables. Except to the extent
otherwise required by applicable law or any Governmental Authority, Trustee
hereby agrees to treat the Trust as a security device only, and shall not file
tax returns or obtain an employer identification number on behalf of the Trust.
SECTION 6.10 Issuance of Additional Series of Certificates and Sales of
Purchased Interests. (a) Transferor may from time to time issue and direct
Trustee to authenticate one or more classes of any newly issued Series of
Investor Certificates (a "New Issuance"). In addition, to the extent permitted
for any Series of Investor Certificates as specified in the related Supplement,
the Investor
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Certificateholders of the Series may tender their Investor Certificates to
Trustee, and Transferor may allocate a portion of the Transferor Interest
pursuant to the terms and conditions set forth in the Supplement, in exchange
for one or more newly issued Series of Investor Certificates (an "Investor
Exchange"). New Issuances and Investor Exchanges collectively are referred to
as "Issuances".
(b) Transferor may direct Trustee to authenticate an Issuance by
notifying Trustee, in writing, at least five Business Days (or such shorter
period as shall be acceptable to Trustee) in advance (an "Issuance Notice") of
the date upon which the Issuance is to occur (an "Issuance Date"). Any Issuance
Notice shall state the designation of any Series to be issued on the Issuance
Date and, with respect to each class or Series: (i) its initial invested amount
(or the method for calculating the initial invested amount), (ii) its interest
rate (or the method for allocating interest payments or other cash flows to the
Series), if any, and (iii) the Enhancement Provider, if any, with respect to
the Series.
(c) On the Issuance Date, Transferor shall deliver to Trustee for
authentication under Section 6.2, and Trustee shall authenticate and deliver
any such class or classes of Series of Investor Certificates only upon delivery
to it (and, in the case of item (iv) below, each Rating Agency, Purchaser and
any Enhancement Provider) of the following:
(i) a Supplement satisfying the criteria set forth in
subsection (d) and in form reasonably satisfactory to Trustee executed
by Transferor and Servicer and specifying the principal terms of the
Series;
(ii) the applicable Enhancement, if any;
(iii) the agreement, if any, pursuant to which the
Enhancement Provider agrees to provide the Enhancement, if any;
(iv) a Tax Opinion for each outstanding Series of Investor
Certificates and Purchased Interest with respect to such Issuance;
(v) evidence that the Modification Condition has been
satisfied with respect to such Issuance (unless such Issuance occurs on
the First Issuance Date);
(vi) for any Issuance occurring after the First Issuance
Date, an Officer's Certificate of Transferor that on the Issuance Date,
after giving effect to the Issuance (and the repayment, on the date of
the Issuance Date, of any existing Investor Certificates with funds
(including proceeds of sale of the new Series) on deposit in the
Principal Funding Account), any
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requirements set out in the Supplement with respect to any
then-outstanding Series with respect to the issuance of Certificates
have been satisfied;
(vii) an Officer's Certificate of Servicer stating that no
Early Amortization Event or Unmatured Early Amortization Event has
occurred and is continuing and that there is not a substantial
likelihood that the Issuance would result in an Early Amortization
Event or an Unmatured Early Amortization Event at any time in the
future;
(viii) in the case of an Investor Exchange, any Investor
Certificates that are being exchanged in connection therewith;
(ix) any other documents, certificates and Opinions of
Counsel as may be required by the applicable Supplement; and
(x) an Officer's Certificate of Servicer to the effect that
all conditions specified in clauses (i) through (ix) of this subsection
(c) have been satisfied.
Upon satisfaction or waiver of the conditions for any Issuance, Trustee shall
cancel any Investor Certificates that are to be cancelled in connection with
such Issuance and issue, as provided above, the new Series of Investor
Certificates dated the Issuance Date. Any such Series of Investor Certificates
shall be substantially in the form specified in the related Supplement and
shall bear, upon its face, the designation for the Series to which it belongs,
as selected by Transferor. There is no limit to the number of Issuances that
may be made under this Agreement.
(d) In conjunction with an Issuance, the parties hereto shall execute
a Supplement, which shall specify the relevant terms with respect to any newly
issued Series of Investor Certificates, which may include: (i) its name or
designation, (ii) the initial invested amount or the method of calculating the
initial invested amount, (iii) the applicable interest rate (or formula for the
determination thereof), (iv) the Issuance Date, (v) the rating agency or
agencies rating the Series, if any, (vi) the name of the Clearing Agency, if
any, (vii) the interest payment date or dates and the date or dates from which
interest shall accrue, (viii) the method of allocating Collections with respect
to Receivables for the Series and, if applicable, with respect to any paired
Series and the method by which the principal amount of Investor Certificates of
the Series shall amortize or accrete and the method for allocating write-offs,
(ix) the names of any accounts to be used by the Series and the terms governing
the operation of any such account, (x) the terms of any Enhancement with
respect to the Series, (xi) the Enhancement Provider, if applicable, (xii) the
base rate applicable to the Series, (xiii) the terms on which the
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Certificates of the Series may be repurchased or remarketed to other investors,
(xiv) any deposit into any account provided for the Series, (xv) the number of
classes of the Series, and if more than one class, the rights and priorities of
each class, (xvi) whether any fees, breakage payments or early termination
payments will be included in the funds available to be paid for the Series,
(xvii) the subordination of the Series to any other Series, (xviii) whether the
Series will be a part of a group or subject to being paired with any other
Series, (xix) whether the Series will be prefunded and (xx) any other relevant
terms of the Series. The terms of the Supplement may modify or amend the terms
of this Agreement or the Purchase Agreement (including the related definitions)
solely as applied to the new Series.
(e) Except as specified in any Supplement for the related Series, all
Investor Certificates of any Series shall rank pari passu and be equally and
ratably entitled as provided herein to the benefits hereof (except that the
Enhancement provided for any Series shall not be available for any other
Series) without preference, priority or distinction on account of the actual
time or times of authentication and delivery, all in accordance with the terms
and provisions of this Agreement and the related Supplement.
(f) Transferor may from time to time direct Trustee, on behalf of the
Trust, to sell one or more Purchased Interests pursuant to, and direct Trustee
to enter into, a PI Agreement. No Purchased Interest shall represent any
interest in any Enhancement for the benefit of any Series, any class of
Investor Certificates or any other Purchased Interest, any Transaction Account
established pursuant to any Supplement or the PI Agreement relating to any
other Purchased Interest except to the extent set forth in the PI Agreement
with respect to such other Purchased Interest. Each PI Agreement may provide
that no Investor Certificateholder, Purchaser under any other PI Agreement or
Enhancement Provider shall be a third-party beneficiary thereof or have any
benefit or any legal or equitable right, remedy or claim under the PI
Agreement.
(g) On or before the date of the initial sale of a Purchased Interest
(a "Purchase Date") pursuant to a particular PI Agreement, the parties hereto
and the related Purchaser will execute and deliver a PI Agreement that will
specify the terms of the Purchased Interest. The obligation of Trustee to
execute and deliver the related PI Agreement is subject to the satisfaction or
waiver of the following conditions:
(i) on or before the tenth Business Day (or a shorter period
as shall be acceptable to the parties) immediately preceding the
related Purchase Date, Transferor shall have given Trustee, Servicer,
each Rating Agency,
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each Purchaser and each Enhancement Provider (if any) written notice of
the sale of the Purchased Interest and the Purchase Date;
(ii) Transferor shall have delivered to Trustee the related
PI Agreement, in form reasonably satisfactory to Trustee, each executed
by each party thereto other than Trustee;
(iii) the Modification Condition shall have been satisfied
with respect to the sale;
(iv) the sale will not (A) contravene any provision of this
Agreement, any Supplement, any agreement pursuant to which any
Enhancement is provided or any PI Agreement (or any agreement related
thereto) or (B) constitute, or result in (or have a substantial
likelihood that it will result, at any time in the future, in) the
occurrence of, an Early Amortization Event or an Unmatured Early
Amortization Event;
(v) Transferor shall have delivered to Trustee, each Rating
Agency, each Purchaser and any Enhancement Provider, a Tax Opinion for
each outstanding Series of Investor Certificates and Purchased
Interest, dated the Purchase Date, with respect to the sale; and
(vi) Transferor shall have delivered to Trustee an Officer's
Certificate, dated the Purchase Date for such Purchased Interest, to
the effect that all conditions set forth in clauses (i) and (iv) of
this subsection (g) for the sale of the Purchased Interest and the
execution and delivery of the related PI Agreement have been satisfied.
Upon satisfaction or waiver of the above conditions, Trustee shall execute and,
at the written direction of Transferor, deliver the related PI Agreement and
any related documents that Transferor shall reasonably request. The terms of
the PI Agreement may modify or amend the terms of this Agreement or the
Purchase Agreement (including the related definitions) solely as applied to the
new Purchased Interest.
(h) Transferor may from time to time direct Trustee to extend any PI
Agreement, subject to the satisfaction or waiver of the following conditions:
(i) on or before the tenth Business Day (or a shorter period
as shall be acceptable to the parties) immediately preceding the date
of the extension, Transferor shall have given Trustee, Servicer, the
Rating Agency and any Enhancement Provider written notice of the
extension and the date on which the extension shall occur;
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(ii) Transferor shall have delivered to Trustee the required
agreements, certificates, documents and filings, in form satisfactory
to Trustee, executed by each party thereto other than Trustee;
(iii) the extension will not (A) contravene any provision of
this Agreement, any Supplement, any agreement pursuant to which any
Enhancement is provided or any PI Agreement (or any agreement related
thereto) or (B) constitute, or result in the occurrence of, an Early
Amortization Event or an Unmatured Early Amortization;
(iv) Transferor shall have delivered to the Trustee, the
Rating Agency, each Purchaser and any Enhancement Provider a Tax
Opinion for each outstanding Series of Investor Certificates and
Purchased Interest, dated the date of the extension, with respect to
the extension;
(v) Transferor shall have delivered to Trustee an Officer's
Certificate, dated the date of the extension, to the effect that all
conditions set forth in clauses (i) and (iii) of this subsection (h)
for the extension of such PI Agreement and the execution and delivery
of the related documents has been satisfied; and
(vi) the Modification Condition shall have been satisfied.
SECTION 6.11 Book-Entry Certificates. (a) If provided in any
Supplement, the Investor Certificates of any Series, upon original issuance,
will be issued in the form of one or more Book-Entry Certificates, to be
delivered to the applicable Clearing Agency, by, or on behalf of, Transferor.
The Investor Certificates in any Series that are issued as Book-Entry
Certificate shall initially be registered on the Certificate Register in the
name of the nominee of the Clearing Agency, and no Certificate Owner will
receive a Definitive Certificate representing such Certificate Owner's interest
in the Investor Certificates, except as provided in Section 6.13. To the extent
a Supplement provides that Investor Certificates of a Series will be originally
issued in the form of one or more Book-Entry Certificates, then unless and
until Definitive Certificates have been issued to Certificate Owners pursuant
to Section 6.13:
(i) the provisions of this section shall be in full force
and effect;
(ii) Transferor, Servicer, the Paying Agent, the Transfer
Agent and Registrar and Trustee may deal with the Clearing Agency and
the Clearing Agency Participants for all purposes (including the making
of distributions on the Investor Certificates) as the authorized
representatives of the Certificate Owners;
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(iii) to the extent that the provisions of this section
conflict with any other provisions of this Agreement, the provisions of
this section shall control; and
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and
shall be limited to those established by law and agreements between the
Certificate Owners and the Clearing Agency and/or the Clearing Agency
Participants. Unless and until Definitive Certificates are issued
pursuant to Section 6.13, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit distributions of principal and interest on the Investor
Certificates to the Clearing Agency Participants.
(b) Certificates sold to Qualified Institutional Buyers in reliance on
Rule 144A under the Securities Act shall be represented by one or more
Book-Entry Certificates (the "144A Book-Entry Certificates"), in registered
form, without coupons, which will be deposited upon the order of Transferor on
the Issuance Date with Trustee as custodian for and registered in the name of a
nominee of the Clearing Agency.
(c) Certificates sold in offshore transactions in reliance on
Regulation S shall be represented initially by temporary Book-Entry
Certificates (the "Regulation S Temporary Book-Entry Certificates"). The
Regulation S Temporary Book-Entry Certificates shall be exchanged on the later
of (i) 40 days after the later of (A) the Issuance Date and (B) the completion
of the distribution of the Certificates, as certified by the Lead Placement
Agent and (ii) the date on which the requisite certifications are due to and
provided to Trustee (the later of clauses (i) and (ii) is referred to as the
"Exchange Date") for permanent Book-Entry Certificates (the "Unrestricted
Book-Entry Certificates," and together with the Regulation S Temporary
Book-Entry Certificates, the "Regulation S Book-Entry Certificates"). The
Regulation S Temporary Book-Entry Certificates shall be issued in registered
form, without coupons, and deposited upon the order of Transferor with Trustee
as custodian for and registered in the name of a nominee of the Clearing Agency
for credit to the account of the depositaries for Euroclear and Cedel, which
depositaries shall, on behalf of Euroclear and Cedel, hold the interests on
behalf of account holders (each a "Member Organization"), which have rights in
respect of the Certificates credited to their securities accounts with
Euroclear or Cedel from time to time.
(d) A Certificate Owner holding an interest in a Regulation S
Temporary Book-Entry Certificate may receive payments in respect of the
Certificates on the Regulation S Temporary Book-Entry Certificate only after
delivery to Euroclear or
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Cedel, as the case may be, of a written certification substantially in the form
of a certification in the form set forth in Exhibit F, and upon delivery by
Euroclear or Cedel, as the case may be, to the Transfer Agent and Registrar of
a certification or certifications substantially in the form set forth in
Exhibit G. The delivery by a Certificate Owner of the certification referred to
above shall constitute its irrevocable instruction to Euroclear or Cedel, as
the case may be, to arrange for the exchange of the Certificate Owner's
interest in the Regulation S Temporary Book-Entry Certificate for a beneficial
interest in the Unrestricted Book-Entry Certificate after the Exchange Date in
accordance with the paragraph below.
After (i) the Exchange Date and (ii) receipt by the Transfer Agent and
Registrar of written instructions from Euroclear or Cedel, as the case may be,
directing the Transfer Agent and Registrar to credit or cause to be credited to
either Euroclear's or Cedel's, as the case may be, depositary's account a
beneficial interest in the Unrestricted Book- Entry Certificate in a principal
amount not greater than that of the beneficial interest in the Regulation S
Temporary Book-Entry Certificate, the Transfer Agent and Registrar shall
instruct the Clearing Agency to reduce the principal amount of the Regulation S
Temporary Book-Entry Certificate and increase the principal amount of the
Unrestricted Book- Entry Certificate, by the principal amount of the beneficial
interest in the Regulation S Temporary Book-Entry Certificate to be so
transferred, and to credit or cause to be credited to the account of Euroclear,
Cedel or a Person who has an account with the Clearing Agency (a "Clearing
Agency Participant"), as the case may be, a beneficial interest in the
Unrestricted Book-Entry Certificate having a principal amount of the Regulation
S Temporary Book-Entry Certificate that was reduced upon the transfer.
Upon return of the entire principal amount of the Regulation S
Temporary Book-Entry Certificate to Trustee in exchange for beneficial
interests in the Unrestricted Book-Entry Certificate, Trustee shall cancel the
Regulation S Temporary Book-Entry Certificate by perforation and shall
forthwith destroy it.
(e) Transfers within a single Series between different Book-Entry
Certificates shall be made in accordance with this Section.
(i) For transfer of an interest in an Unrestricted Book-Entry
Certificate for an interest in the 144A Book-Entry Certificate, if the
Certificateholder of a beneficial interest in an Unrestricted
Book-Entry Certificate deposited with the Clearing Agency wishes at any
time to exchange its interest in the Unrestricted Book-Entry
Certificate, or to transfer its interest in the Unrestricted Book-Entry
Certificate to a Person who wishes to take delivery thereof in the form
of an interest in the 144A Book-Entry Certificate, the
Certificateholder may, subject to the rules and
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procedures of Euroclear or Cedel and the Clearing Agency, as the case
may be, give directions for the Transfer Agent and Registrar to
exchange or cause the exchange or transfer or cause the transfer of the
interest for an equivalent beneficial interest in the 144A Book-Entry
Certificate. Upon receipt by the Transfer Agent and Registrar of
instructions from Euroclear or Cedel (based on instructions from a
Member Organization) or from a Clearing Agency Participant, as
applicable, or the Clearing Agency, as the case may be, directing the
Transfer Agent and Registrar to credit or cause to be credited a
beneficial interest in the 144A Book-Entry Certificate equal to the
beneficial interest in the Unrestricted Book-Entry Certificate to be
exchanged or transferred (such instructions to contain information
regarding the Clearing Agency Participant account to be credited with
the increase, and, with respect to an exchange or transfer of an
interest in the Unrestricted Book-Entry Certificate, information
regarding the Clearing Agency Participant account to be debited with
the decrease), the Transfer Agent and Registrar shall instruct the
Clearing Agency to reduce the Unrestricted Book-Entry Certificate by
the aggregate principal amount of the beneficial interest in the
Unrestricted Book-Entry Certificate to be exchanged or transferred, and
the Transfer Agent shall instruct the Clearing Agency, concurrently
with the reduction, to increase the principal amount of the 144A
Book-Entry Certificate by the aggregate principal amount of the
beneficial interest in the Unrestricted Book-Entry Certificate to be so
exchanged or transferred, and to credit or cause to be credited to the
account of the Person specified in the instructions a beneficial
interest in the 144A Book-Entry Certificate equal to the reduction in
the principal amount of the Unrestricted Book-Entry Certificate.
(ii) For transfers of an interest in the 144A Book-Entry
Certificate for an interest in a Regulation S Book-Entry Certificate,
if a Certificate Owner holding a beneficial interest in the 144A
Book-Entry Certificate wishes at any time to exchange its interest in
the 144A Book-Entry Certificate for an interest in a Regulation S
Book-Entry Certificate, or to transfer its interest in the 144A
Book-Entry Certificate to a Person who wishes to take delivery thereof
in the form of an interest in the Regulation S Book-Entry Certificate,
the Certificateholder may, subject to the rules and procedures of the
Clearing Agency, give directions for the Transfer Agent and Registrar
to exchange or cause the exchange or transfer or cause the transfer of
the interest for an equivalent beneficial interest in the Regulation S
Book-Entry Certificate. Upon receipt by the Transfer Agent and
Registrar of (A) instructions given in accordance with the Clearing
Agency's procedures from a Clearing Agency Participant directing the
Transfer Agent and Registrar to credit or cause to be credited a
beneficial interest in the Regulation S Book-Entry Certificate in an
amount equal to
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the beneficial interest in the 144A Book-Entry Certificate to be
exchanged or transferred, (B) a written order given in accordance with
the Clearing Agency's procedures containing information regarding the
account of the depositaries for Euroclear or Cedel or another Clearing
Agency Participant, as the case may be, to be credited with the
increase and the name of the account and (C) certificates in the forms
of Exhibits H and I, respectively, given by the Certificate Owner and
the proposed transferee of the interest, the Transfer Agent and
Registrar shall instruct the Clearing Agency to reduce the 144A
Book-Entry Certificate by the aggregate principal amount of the
beneficial interest in the 144A Book-Entry Certificate to be so
exchanged or transferred and the Transfer Agent and Registrar shall
instruct the Clearing Agency, concurrently with the reduction, to
increase the principal amount of the Regulation S Book-Entry
Certificate by the aggregate principal amount of the beneficial
interest in the 144A Book-Entry Certificate to be so exchanged or
transferred, and to credit or cause to be credited to the account of
the Person specified in the instructions a beneficial interest in the
Regulation S Book-Entry Certificate equal to the reduction in the
principal amount of the 144A Book-Entry Certificate.
(iii) Notwithstanding any other provisions of this section, a
placement agent for the Investor Certificates may exchange beneficial
interests in the Regulation S Temporary Book-Entry Certificate held by
it for interests in the 144A Book-Entry Certificate only after delivery
by the placement agent of instructions for the exchange substantially
in the form of Exhibit J. Upon receipt of the instructions provided in
the preceding sentence, the Transfer Agent and Registrar shall instruct
the Clearing Agency to reduce the principal amount of the Regulation S
Temporary Book-Entry Certificate to be so transferred and shall
instruct the Clearing Agency to increase the principal amount of the
144A Book-Entry Certificate and credit or cause to be credited to the
account of the placement agent a beneficial interest in the 144A
Book-Entry Certificate having a principal amount equal to the amount by
which the principal amount of the Regulation S Temporary Book-Entry
Certificate was reduced upon the transfer pursuant to the instructions
provided in the first sentence of this subclause.
(iv) If a Book-Entry Certificate is exchanged for a Definitive
Certificate, the Certificates may be exchanged or transferred for one
another only in accordance with such procedures as are substantially
consistent with the provisions of clauses (i) through (iii) above
(including the certification requirements intended to ensure that the
exchanges or transfers comply with Rule 144 or Regulation S under the
Securities Act, as the case may be) and as may be from time to time
adopted by Trustee.
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SECTION 6.12 Notices to Clearing Agency. Whenever notice or other
communication to the Investor Certificateholders of any Series represented by
Book-Entry Certificates is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Owners pursuant to
Section 6.13, Trustee, Servicer and the Paying Agent shall give all such notices
and communications specified herein to be given to the Investor
Certificateholders of the Series to the Clearing Agency.
SECTION 6.13 Definitive Certificates. If (a)(i) Transferor advises
Trustee in writing that the Clearing Agency is no longer willing or able to
discharge properly its responsibilities under any Letter of Representations,
and (ii) Transferor is unable to locate a qualified successor, (b) Transferor,
at its option, advises Trustee in writing that, with respect to any Series, it
elects to terminate the book-entry system through the Clearing Agency or (c)
after the occurrence of a Servicer Default, Certificate Owners representing
beneficial interests aggregating not less than 50% of the Invested Amount of
the Series advise Trustee and the Clearing Agency through the Clearing Agency
Participants in writing that the continuation of a book-entry system through
the Clearing Agency is no longer in the best interests of the Certificate
Owners of the Series, Trustee shall notify the Clearing Agency of the
occurrence of any such event and of the availability of Definitive Certificates
of the Series to Certificate Owners of the Series requesting the same. Upon
surrender to Trustee of the Investor Certificates of the Series by the Clearing
Agency accompanied by registration instructions from the Clearing Agency for
registration, Trustee shall authenticate and deliver Definitive Certificates of
the Series. Neither Transferor, the Transfer Agent and Registrar nor Trustee
shall be liable for any delay in delivery of the instructions and may
conclusively rely on, and shall be protected in relying on, the instructions.
Upon the issuance of Definitive Certificates of any Series, all references
herein to obligations with respect to the Series imposed upon or to be
performed by the Clearing Agency shall be deemed to be imposed upon and
performed by Trustee, to the extent applicable with respect to the Definitive
Certificates and Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.
SECTION 6.14 Letter of Representations. Notwithstanding anything to
the contrary in this Agreement or any Supplement, the parties hereto shall
comply with the terms of each Letter of Representations.
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ARTICLE VII
TRANSFEROR
SECTION 7.1 Representations and Warranties of Transferor Relating to
Transferor and the Transaction Documents. On the date hereof and on each
Issuance Date and Purchase Date, Transferor hereby represents and warrants for
the benefit of the Trustee, the Certificateholders, the Purchasers and the
Enhancement Providers that:
(a) Organization and Good Standing. Transferor is a
corporation duly organized and validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all
necessary corporate power and authority to acquire, own and transfer
the Receivables and the Related Transferred Assets.
(b) Due Qualification. Transferor is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt
from such requirements), and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of
property or the conduct of its business requires qualification,
licenses or approvals and where the failure so to qualify, to obtain
the licenses and approvals or to preserve and maintain the
qualification, licenses or approvals would have a substantial
likelihood of having a Material Adverse Effect.
(c) Power and Authority. Transferor has all necessary
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents to
which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each
other Transaction Document to which Transferor is a party when executed
and delivered will constitute, a legal, valid and binding obligation of
Transferor, enforceable against it in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity,
regardless of whether enforceability is considered in a proceeding in
equity or at law.
(e) Authorization; No Conflict or Violation. The execution,
delivery and performance of, and the consummation of the transactions
contemplated by, this Agreement and the other Transaction Documents to
be signed by Transferor and the fulfillment of the terms hereof and
thereof have been duly authorized by all necessary action and will not
(i) conflict
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with, violate, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time or both) a
default under, (A) its Certificate of Incorporation or Bylaws or (B)
any indenture, loan agreement, mortgage, deed of trust or other
material agreement or instrument to which Transferor is a party or by
which it or any of its properties is bound, (ii) result in the creation
or imposition of any Adverse Claim upon any of its properties pursuant
to the terms of any such contract, indenture, loan agreement, mortgage,
deed of trust, or other agreement or instrument, other than this
Agreement and the other Transaction Documents, or (iii) conflict with
or violate any federal, state, local or foreign law or any decision,
decree, order, rule or regulation applicable to it or any of its
properties of any court or of any federal, state, local or foreign
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over it or any of its properties,
which conflict, violation, breach, default or Adverse Claim,
individually or in the aggregate, would have a substantial likelihood
of having a Material Adverse Effect.
(f) Litigation and Other Proceedings. (i) There is no
action, suit, proceeding or investigation pending or, to the best
knowledge of Transferor, threatened against it before any court,
regulatory body, arbitrator, administrative agency or other tribunal or
governmental instrumentality and (ii) it is not subject to any order,
judgment, decree, injunction, stipulation or consent order of or with
any court or other government authority that, in the case of clauses
(i) and (ii), (A) asserts the invalidity of this Agreement or any other
Transaction Document, (B) seeks to prevent the transfer of any
Receivables or Related Transferred Assets to the Trust, the issuance of
the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any other Transaction Document, (C)
seeks any determination or ruling that would materially and adversely
affect the performance by Transferor of its obligations under this
Agreement or any other Transaction Document or the validity or
enforceability of this Agreement or any other Transaction Document, (D)
seeks to affect materially and adversely the income tax attributes of
the transfers hereunder or the Trust under the United States Federal
income tax system or any state income tax system or (E) individually or
in the aggregate for all such actions, suits, proceedings and
investigations would have a substantial likelihood of having a Material
Adverse Effect.
(g) Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority or other
Person that are required to be obtained by Transferor, and all notices
to and filings with any Governmental Authority or other Person, that
are required to be made
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by it, in the case of each of the foregoing in connection with the
transfer of Receivables and Related Transferred Assets to the Trust or
the execution, delivery and performance by it of this Agreement and any
other Transaction Documents to which it is a party and the consummation
of the transactions contemplated by this Agreement, have been obtained
or made and are in full force and effect, except where the failure to
obtain or make any such authorization, consent, order, approval, notice
or filing, individually or in the aggregate for all such failures,
would not have a substantial likelihood of having a Material Adverse
Effect.
(h) Offices. Transferor's principal place of business and
chief executive office is, and since the date of its incorporation has
been, located at the address set forth under Transferor's signature
hereto (or at such other locations, notified to Servicer and Trustee in
accordance with Section 7.2(c), in jurisdictions where all action
required by Section 7.2(c) has been taken and completed).
(i) Account Banks. The names and addresses of all the Account
Banks are specified in Schedule 1 or, after the First Issuance Date,
have been provided by Servicer to Trustee pursuant to Section 3.3(c),
and the account numbers of the Bank Accounts at such Account Banks have
been specified in a letter provided on or prior to the First Issuance
Date to Trustee or, after the First Issuance Date, have been provided
by Servicer to Trustee pursuant to Section 3.3(c). The Account
Agreements to which Transferor is a party constitute the legal, valid
and binding obligations of Transferor enforceable against Transferor in
accordance with their respective terms subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws
affecting creditors' rights generally and general equitable principles.
(j) Investment Company Act. Transferor is not, and is not
controlled by, an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended.
The representations and warranties set forth in this section shall
survive the transfer and assignment of the Receivables and the other
Transferred Assets to the Trust. Upon discovery by Transferor, Servicer or
Trustee of a breach of any of the foregoing representations and warranties, the
party discovering the breach shall give written notice to the other parties to
this Agreement within three Business Days following the discovery; provided,
however, that if such breach arises from a Seller's failure to perform its
obligations under the Purchase Agreement and such failure is of the type that
may be cured by settlement of a Seller Noncomplying Receivables Adjustment or
Seller Dilution Adjustment under Sections 3.3 and 3.5
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of the Purchase Agreement, and such settlement shall have (in fact) been made
within the time limit specified under such sections, then no breach shall be
deemed to have occurred under this Agreement. Trustee's obligations in respect
of discovering any breach are limited as provided in Section 11.2(g).
SECTION 7.2 Covenants of Transferor. So long as any Investor
Certificates or Purchased Interests remain outstanding (other than any Investor
Certificates or Purchased Interests payment for which has been duly provided
for in accordance with this Agreement), Transferor shall:
(a) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations, judgments,
decrees and orders (including those relating to the Receivables, the
Related Transferred Assets, the funds in the Transaction Accounts and
the related Contracts and any other agreements related thereto), in
each case to the extent the failure to comply, individually or in the
aggregate for all such failures, would have a substantial likelihood of
having a Material Adverse Effect.
(b) Preservation of Corporate Existence. Preserve and
maintain its corporate existence, rights, franchises and privileges in
the jurisdiction of its incorporation, and qualify and remain qualified
in good standing as a foreign corporation in each jurisdiction where
the failure to preserve and maintain such existence, rights,
franchises, privileges and qualifications would have a substantial
likelihood of having a Material Adverse Effect.
(c) Location of Offices. Keep its principal place of business
and chief executive office at the address referred to in Section 7.1(h)
or, upon not less than 30 days' (or such shorter number of days as is
acceptable to the Servicer and Trustee) prior written notice given by
Transferor to Servicer and Trustee, at such other location in a
jurisdiction where all action required pursuant to Section 3.10 shall
have been taken and completed. Transferor will at all times maintain
its principal place of business and chief executive offices within the
United States of America.
(d) Reporting Requirements of Transferor. Unless Trustee and
the Required Investors shall otherwise consent in writing, furnish to
Trustee, the Investor Certificateholders and the Rating Agencies:
(i) Early Amortization Events. As soon as possible,
and in any event within five Business Days after an Authorized
Officer of Transferor has obtained knowledge of the occurrence
of any Early Amortization Event or any Unmatured Early
Amortization Event, a written statement of an Authorized
Officer of Transferor describing
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the event and the action that Transferor proposes to take with
respect thereto, in each case in reasonable detail,
(ii) Material Adverse Effect. As soon as possible
and in any event within five Business Days after an Authorized
Officer of Transferor has knowledge thereof, written notice
that describes in reasonable detail any Adverse Claim, other
than any Permitted Adverse Claim, against the Transferred
Assets or any other event or occurrence that, individually or
in the aggregate for all such events or occurrences, has had,
or would have a substantial likelihood of having, in the
reasonable, good faith judgment of Transferor, a Material
Adverse Effect,
(iii) Proceedings. As soon as possible and in any
event within five Business Days after an Authorized Officer of
Transferor has knowledge thereof, written notice of (A) any
litigation, investigation or proceeding of the type described
in Section 7.1(f) not previously disclosed to Trustee and (B)
any material adverse development that has occurred with
respect to any such previously disclosed litigation,
investigation or proceeding,
(iv) Other. Promptly, from time to time, any other
information, documents, records or reports respecting the
Receivables or the Related Transferred Assets or any other
information respecting the condition or operations, financial
or otherwise, of Transferor, in each case as Trustee may from
time to time reasonably request in order to protect the
interests of Trustee, the Trust or the Investor
Certificateholders under or as contemplated by this Agreement.
(e) Adverse Claims. Except for any conveyances under the
Transaction Documents, not permit to exist any Adverse Claim (other
than Permitted Adverse Claims) to or in favor of any Person upon or
with respect to, or cause to be filed any financing statement or
equivalent document relating to perfection that covers, any Transferred
Asset or any interest therein. Transferor shall defend the right, title
and interest of the Trust in, to and under the Transferred Assets,
whether now existing or hereafter created, against all claims of third
parties claiming through or under Transferor.
(f) Extension or Amendment of Receivables; Change in Credit
and Collection Policy or Contracts. Not (i) extend, amend or otherwise
modify the terms of any Receivable or Contract (except as permitted by
the Credit
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and Collection Policy) in a manner that would have a Material Adverse
Effect, or (ii) permit any Seller to make any change in its Credit and
Collection Policy that would have a Material Adverse Effect, provided
that Transferor or Servicer, as applicable, may change the terms and
provisions of the Credit and Collection Policy if (A) with respect to
any material change of collection policies, the change is made with the
prior written approval of each Agent, if any, and the Modification
Condition is satisfied with respect thereto, (B) with respect to any
material change of collection procedures, the change is made with prior
written notice to each Agent and no material adverse effect on any
Series or Purchased Interest would result, and (C) with respect to any
material change in accounting policies relating to Write-Offs, the
change is made in accordance with GAAP.
(g) Mergers, Acquisitions, Sales, Etc. Not:
(i) except pursuant to the Transaction Documents (A)
be a party to any merger or consolidation, or directly or
indirectly purchase or otherwise acquire all or substantially
all of the assets or any stock of any class of, or any
partnership or joint venture interest in, any other Person, or
(B) directly or indirectly, sell, transfer, assign, convey or
lease, whether in one transaction or in a series of
transactions, all or substantially all of its assets, or sell
or assign with or without recourse any Receivables or Related
Transferred Assets (other than as provided in the Transaction
Documents) unless:
(x)(1) the corporation formed by the consolidation
or into which Transferor is merged or the Person that
acquires by conveyance or transfer the properties and
assets of Transferor substantially as an entirety
shall be, if Transferor is not the surviving entity,
organized and existing under the laws of the United
States of America or any state thereof or the
District of Columbia, and shall expressly assume, by
an agreement supplemental hereto, executed and
delivered to Trustee, in form reasonably satisfactory
to Trustee and each Agent, the performance of every
covenant and obligation of Transferor hereunder,
including its obligations under Section 7.3, under
each Supplement and under each PI Agreement, and (2)
Transferor has delivered to Trustee an Officer's
Certificate stating that the consolidation, merger,
conveyance or transfer and the supplemental agreement
comply with this section and an Opinion of Counsel to
the effect that the supplemental agreement is a valid
and binding
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obligation of the surviving entity enforceable
against it in accordance with its terms, except as
such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights
generally from time to time in effect and except as
such enforceability may be limited by general
principles of equity (whether considered in a suit at
law or in equity), and
(y) the Modification Condition shall have been
satisfied with respect to the consolidation, merger,
conveyance or transfer, and the Transferor's
independent director shall have approved such
consolidation, merger, conveyance or transfer, and
(z) Transferor shall have delivered to Trustee, each
Rating Agency, each Purchaser and each Enhancement
Provider a Tax Opinion and a Bankruptcy Opinion for
each outstanding Series of Investor Certificates and
Purchased Interest, dated the date of the
consolidation, merger, conveyance or transfer, with
respect thereto, or
(ii) except as contemplated in the Purchase
Agreement in connection with Transferor's purchases of
Receivables and Related Assets from the Sellers, (A) make,
incur or suffer to exist an investment in, equity contribution
to, or payment obligation in respect of the deferred purchase
price of property or services from, any Person, or (B) make
any loan or advance to any Person other than loans or advances
to Avondale or the Sellers (which loans shall be made in
accordance with Section 3.3 of the Purchase Agreement).
(h) Change in Name. Not change its corporate name or the name
under or by which it does business, or permit any Seller to change its
corporate name or the name under or by which it does business, unless
prior to the change in name, Transferor shall have filed (or shall have
caused to be filed) any financing statements or amendments as Servicer
or Trustee determines may be necessary to continue the perfection of
the Trust's interest in the Receivables, the Related Transferred Assets
and the proceeds thereof.
(i) Amendment of Certificate of Incorporation; Change in
Business. Not amend its Certificate of Incorporation, or engage in any
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business other than as contemplated by the Transaction Documents,
unless the Modification Condition has been satisfied in connection with
the amendment or change in Transferor's business.
(j) Amendments to Purchase Agreement. Except as expressly
provided otherwise in this Agreement, make no amendment to the Purchase
Agreement that would adversely affect in any material respect the
interests of the Investor Certificateholders, the Purchasers or any
Enhancement Provider.
(k) Enforcement of Purchase Agreement. Perform all its
obligations under and otherwise comply with the Purchase Agreement in
all material respects and, if requested by Trustee, enforce, for the
benefit of the Trust, the covenants and agreements of any Seller in the
Purchase Agreement.
(l) Other Indebtedness. Not (i) create, incur or permit to
exist any Indebtedness, Guaranty or liability or (ii) cause or permit
to be issued for its account any letters of credit or bankers'
acceptances, except for (A) Indebtedness incurred pursuant to the Buyer
Notes, (B) other liabilities specifically permitted to be created,
incurred or owed by Transferor pursuant to or in connection with the
Transaction Documents, and (C) other liabilities for expenses or tax
sharing arrangements that are owed to a Related Person, which are
evidenced by a written agreement containing provisions substantially
similar to the provisions of the Buyer Notes.
(m) Separate Corporate Existence. Hereby acknowledge that
Trustee and the Investor Certificateholders are, and will be, entering
into the transactions contemplated by the Transaction Documents in
reliance upon Transferor's identity as a legal entity separate from any
Seller, Servicer and any other Person. Therefore, from and after the
First Issuance Date, Transferor shall take all reasonable steps to
maintain its existence as a corporation separate and apart from
Servicer, each Seller and any other Related Person. Without limiting
the generality of the foregoing, Transferor shall take such actions as
shall be reasonably required in order that:
(i) Transferor will not incur any material indirect
or overhead expenses for items shared between Transferor and
any Related Person that are not reflected in the Servicing
Fee, other than shared items of expenses not reflected in the
Servicing Fee, such as legal, auditing and other professional
services, that will be allocated to the extent practical on
the basis of actual use or the
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value of services rendered, and otherwise on a basis
reasonably related to the actual use or the value of services
rendered, it being understood that Avondale will pay all
expenses owing by Transferor or any Related Person relating to
the preparation, negotiation, execution and delivery of the
Transaction Documents, including, without limitation, legal,
commitment, agency and other fees.
(ii) Transferor will account for and manage its
liabilities separately from those of every other Related
Person, including payment of all payroll and administrative
expenses and taxes (other than taxes that are determined or
required to be determined on a consolidated or combined basis)
from its own assets.
(iii) Transferor will conduct its business at an
office segregated from the offices of each Related Person,
which office of Transferor may consist of office space shared
with a Related Person, a portion of which is allocated solely
to Transferor.
(iv) Transferor will maintain corporate records,
books of account and stationery separate from those of every
Related Person.
(v) Any annual financial statements of any Related
Person that are made publicly available and which are
consolidated to include Transferor will contain footnotes
stating that Avondale and, if applicable, certain other
Subsidiaries of Avondale have sold Receivables and indicating
that the assets of Transferor will not be available to
Avondale or such Subsidiaries unless Transferor's liabilities
have been paid in full.
(vi) Transferor's assets will be maintained in a
manner that facilitates their identification and segregation
from those of any Related Person.
(vii) Transferor shall not, directly or indirectly,
be named and shall not enter into an agreement to be named as
a direct or contingent beneficiary or loss payee on any
insurance policy with respect to any loss relating to the
property of a Related Person, other than with respect to
credit insurance issued with respect to Receivables.
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(viii) Any transaction between Transferor and any
Related Person will be the type of transaction which would be
entered into by a prudent Person in the position of Transferor
with a Related Person, and will be on terms that are at least
as favorable as may be obtained from a Person that is not a
Related Person (it being understood and agreed that the
transactions contemplated in the Transaction Documents meet
the requirements of this clause).
(ix) Neither Transferor nor any Related Person will
be or will hold itself out to be responsible for the debts of
the other, except as expressly provided in the Transaction
Documents.
(x) Transferor will operate, conduct its business
and otherwise act in a manner that is consistent in all
material respects with the factual assumptions in each
Bankruptcy Opinion delivered in connection with any Series.
(n) Taxes. File or cause to be filed, and cause each Person
with whom it shares consolidated tax liability to file, all Federal,
state and local tax returns that are required to be filed by it, except
where the failure to file such returns would not have a substantial
likelihood of having a Material Adverse Effect, and pay or cause to be
paid all taxes shown to be due and payable on such returns or on any
assessments received by it, other than any taxes or assessments, the
validity of which are being contested in good faith by appropriate
proceedings and with respect to which Transferor shall have set aside
adequate reserves on its books in accordance with GAAP and which
proceedings would not have a substantial likelihood of having a
Material Adverse Effect.
The covenants set forth in this section shall survive the transfer and
assignment of the Receivables and the other Transferred Assets to the Trust.
Upon discovery by an Authorized Officer of Transferor or Servicer or by Trustee
of a breach of any of the foregoing covenants, the party discovering the breach
shall give written notice to the other parties to this Agreement within three
Business Days following such discovery; provided, however that if such breach
arises from a Seller's failure to perform its obligations under the Purchase
Agreement and such failure is of the type that may be cured by settlement of a
Seller Noncomplying Receivables Adjustment or Seller Dilution Adjustment under
Sections 3.3 and 3.5 of the Purchase Agreement, and such settlement shall have
(in fact) been made within the time limit specified under such sections, then
no breach shall be deemed to have occurred under this Agreement. Trustee's
obligation in respect of discovering any breach are limited as provided in
Section 11.2(g).
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SECTION 7.3 Indemnification by Transferor. (a) Transferor hereby
agrees to indemnify the Trust, Trustee and each of the successors, permitted
transferees and assigns of any such Person and all officers, directors,
shareholders, controlling Persons, employees, affiliates and agents of any of
the foregoing (each of the foregoing Persons individually being called an
"Indemnified Party"), forthwith on demand, from and against any and all
damages, losses, claims (whether on account of settlement or otherwise, and
whether or not the relevant Indemnified Party is a party to any action or
proceeding that gives rise to any Indemnified Losses (as defined below)),
judgments, liabilities and related reasonable costs and expenses (including
reasonable attorneys' fees and disbursements) (all of the foregoing
collectively being called "Indemnified Losses") awarded against or incurred by
any of them that arise out of or relate to Transferor's performance of, or
failure to perform, any of its obligations under or in connection with any
Transaction Document.
Notwithstanding the foregoing, in no event shall any Indemnified Party
be indemnified against any Indemnified Losses (a) resulting from gross
negligence or willful misconduct on the part of such Indemnified Party (or the
gross negligence or willful misconduct on the part of any of its officers,
directors, employees, affiliates or agents), or the breach by such Indemnified
Party of its obligations under any Transaction Document, (b) to the extent they
include Indemnified Losses in respect of Receivables and reimbursement therefor
that would constitute credit recourse to Transferor for the amount of any
Receivable or Related Transferred Asset not paid by the related Obligor, (c) to
the extent they are or result from lost profits, (d) to the extent they are or
result from taxes (including interest and penalties thereon) asserted with
respect to (i) distributions on the Investor Certificates, (ii) franchise or
withholding taxes imposed on any Indemnified Party other than the Trust or
Trustee in its capacity as Trustee or (iii) federal or other income taxes on or
measured by the net income of the Indemnified Party and costs and expenses in
defending against the same, or (e) to the extent that they constitute
consequential, special or punitive damages.
If any action, suit, proceeding or investigation is commenced, as to
which an Indemnified Party proposes to demand indemnification, it shall notify
the Transferor with reasonable promptness; provided, however, that any failure
by such Indemnified Party to notify the Transferor shall not relieve the
Transferor from its obligations hereunder (except to the extent that the
Transferor is prejudiced by such failure to promptly notify). The Transferor
shall be entitled to assume the defense of any such action, suit, proceeding or
investigation, including the employment of counsel reasonably satisfactory to
the Indemnified Party. The Indemnified Party shall have the right to counsel of
its own choice to represent it, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Party unless: (a) the Transferor has
failed promptly to assume the
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defense and employ counsel reasonably satisfactory to the Indemnified Party in
accordance with the preceding sentence, or (b) the Indemnified Party shall have
been advised by counsel that there exists an actual or potential conflict of
interests among the Transferor and such Indemnified Party, including situations
in which one or more legal defenses may be available to such Indemnified Party
that are inconsistent with those available to the Transferor; provided,
however, that the Transferor shall not, in connection with any one such action
or proceeding or separate but substantially similar actions or proceedings
arising out of the same general allegations, be liable for fees and expenses of
more than one separate firm of attorneys (other than local counsel) at any time
for all Indemnified Parties; and such counsel shall, to the extent consistent
with its professional responsibilities, cooperate with the Transferor and any
counsel designated by the Transferor.
The Transferor further agrees that it will not, without the prior
written consent of the applicable Indemnified Party, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not any Indemnified Party is an actual or potential party
to such claim, action, suit or proceeding) unless such settlement, compromise
or consent includes an unconditional release of each Indemnified Party from all
liability and obligations arising therefrom.
If for any reason the indemnification provided in this Section is
unavailable to an Indemnified Party or is insufficient to hold it harmless,
then Transferor shall contribute to the amount paid by the Indemnified Party as
a result of any loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnified Party on the one hand and Transferor on the other hand, but also
the relative fault of the Indemnified Party (if any) and Transferor and any
other relevant equitable consideration.
Notwithstanding any provisions contained in any Transaction Document to
the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless funds are allocated for such payment
pursuant to the provisions of a Supplement or PI Agreement governing the
allocation of funds in the Master Collection Account. Any amount which
Transferor does not pay pursuant to the operation of the preceding sentence
shall not constitute a claim (as defined in Section 101 of the Bankruptcy Code)
against or corporate obligation of Transferor for any such insufficiency.
(b) Transferor shall be liable to all creditors of the Trust (other
than the Trust, Trustee, Investor Certificateholders or Purchasers in their
capacities as such) for all liabilities of the Trust to the same extent as it
would be if the Trust constituted a partnership under the Revised Uniform
Limited Partnership Act as
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adopted and in effect in Delaware and Transferor were a general partner thereof
(to the extent Transferred Assets remaining after Investor Certificateholders
and Purchasers have been paid in full are insufficient to pay such losses,
claims, damages or liabilities). Notwithstanding anything to the contrary
herein, any such creditor shall be a third party beneficiary of this Section
7.3. Nothing in this provision shall be construed as waiving any rights or
claims (including rights of recoupment or subrogation) which the Transferor may
have against any third party under this Agreement or applicable laws.
ARTICLE VIII
SERVICER
SECTION 8.1 Representations and Warranties of Servicer. On the date
hereof and on each Issuance Date and Purchase Date, Servicer hereby makes, and
any Successor Servicer also shall be deemed to make by its acceptance of its
appointment hereunder, the following representations and warranties for the
benefit of Trustee, the Certificateholders, the Purchasers and the Enhancement
Providers:
(a) Organization and Good Standing. Servicer is a corporation
duly organized and validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all necessary corporate
power and authority to own its properties and to conduct its business
as the properties presently are owned and as the business presently is
conducted.
(b) Due Qualification. Servicer is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt
from such requirements), and has obtained all necessary licenses and
approvals, in all jurisdictions in which the servicing of the
Receivables and the Related Transferred Assets as required by this
Agreement requires qualification, licenses or approvals and where the
failure so to qualify, to obtain the licenses and approvals or to
preserve and maintain the qualification, licenses or approvals would
have a substantial likelihood of having a material adverse effect on
its ability to perform its obligations as Servicer under this Agreement
or a Material Adverse Effect.
(c) Power and Authority. Servicer has all necessary corporate
power and authority to execute, deliver and perform its obligations
under this Agreement and the other Transaction Documents to which it is
a party.
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(d) Binding Obligations. This Agreement constitutes, and each
other Transaction Document to which Servicer is a party when executed
and delivered will constitute, a legal, valid and binding obligation of
Servicer, enforceable against it in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity,
regardless of whether enforceability is considered in a proceeding in
equity or at law.
(e) Authorization; No Conflict or Violation. The execution
and delivery by Servicer of this Agreement and the other Transaction
Documents to which it is a party, the performance by it of its
obligations hereunder and thereunder and the fulfillment by it of the
terms hereof and thereof that are applicable to it have been duly
authorized by all necessary action and will not (i) conflict with,
violate, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under, (A) its Certificate of Incorporation or Bylaws or (B) any
indenture, loan agreement, mortgage, deed of trust, or other material
agreement or instrument to which it is a party or by which it or any of
its properties is bound (excluding any such agreement that is
terminated on or before the First Issuance Date or under which Servicer
has obtained all necessary consents) or (ii) conflict with or violate
any federal, state, local or foreign law or any decision, decree,
order, rule or regulation applicable to it or any of its properties of
any court or of any federal, state, local or foreign regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over it or any of its properties, which conflict,
violation, breach or default described, individually or in the
aggregate, would have a substantial likelihood of having a Material
Adverse Effect.
(f) Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority or other
Person that are required to be obtained by Servicer, and all notices to
and filings with any Governmental Authority or other Person that are
required to be made by it, in the case of each of the foregoing in
connection with the execution, delivery and performance by it of this
Agreement and any other Transaction Documents to which it is a party
and the consummation of the transactions contemplated by this
Agreement, have been obtained or made and are in full force and effect
(other than the filing of the UCC financing statements referred to in
Section 2.3(a)(ii)(A), all of which, at the time required in Section
2.3(a)(ii)(A), will be duly made), except where the failure to obtain
or make such authorization, consent, order, approval,
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notice or filing, individually or in the aggregate for all such
failures, is not likely to have a Material Adverse Effect.
(g) Litigation and Other Proceedings. (i) There is no
action, suit, proceeding or investigation pending or, to the best
knowledge of Servicer, threatened against it before any court,
regulatory body, arbitrator, administrative agency or other tribunal or
governmental instrumentality and (ii) it is not subject to any order,
judgment, decree, injunction, stipulation or consent order of or with
any court or other government authority that, in the case of clauses
(i) and (ii), (A) seeks to affect adversely the income tax attributes
of the transfers hereunder or the Trust under the United States federal
income tax system or any state income tax system or (B) individually or
in the aggregate for all such actions, suits, proceedings and
investigations would have a substantial likelihood of having a Material
Adverse Effect.
The representations and warranties set forth in this section shall
survive the transfer and assignment of the Receivables and the other
Transferred Assets to the Trust. Upon discovery by an Authorized Officer of
Transferor or Servicer or by Trustee of a breach of any of the foregoing
representations and warranties, the party discovering the breach shall give
written notice to the other parties to this Agreement within three Business
Days following the discovery. Trustee's obligations in respect of discovering
any breach are limited as provided in Section 11.2(g).
SECTION 8.2 Covenants of Servicer. So long as any Investor
Certificates or Purchased Interests remain outstanding (other than any Investor
Certificates or Purchased Interests payment for which has been duly provided
for in accordance with this Agreement), Servicer shall:
(a) Compliance with Laws, Etc. Maintain in effect all
qualifications required under applicable law in order to service
properly the Receivables and shall comply in all material respects with
all applicable laws, rules, regulations, judgments, decrees and orders,
in each case to the extent the failure to comply, individually or in
the aggregate for all such failures, would have a substantial
likelihood of having a Material Adverse Effect.
(b) Preservation of Corporate Existence. Preserve and
maintain its corporate existence, rights, franchises and privileges in
the jurisdiction of its incorporation, and qualify and remain qualified
in good standing as a foreign corporation in each jurisdiction where
the failure to preserve and maintain such existence, rights,
franchises, privileges and qualification would have a substantial
likelihood of having a Material Adverse Effect.
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(c) Notice. As soon as possible (and in any event within five
Business Days after an Authorized Officer has knowledge thereof),
furnish to Transferor, Trustee, the Investor Certificateholders and the
Rating Agencies notice of any of the events described in clauses (i),
(ii) and (iii) of Section 7.2(d).
(d) Location of Offices. Maintain at all times its principal
place of business and chief executive office in the United States of
America.
The covenants set forth in this section shall survive the transfer and
assignment of the Transferred Assets to the Trust. Upon discovery by an
Authorized Officer of Transferor or Servicer or by the Trustee of a breach of
any of the foregoing covenants, the party discovering the breach shall give
written notice to the other parties to this Agreement within three Business
Days following the discovery. Trustee's obligations in respect of discovering
any breach are limited as provided in Section 11.2(g).
SECTION 8.3 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Servicer shall not consolidate with or merge into
any other Person or convey, transfer or sell all or substantially all of its
properties and assets to any Person, unless (a) Servicer is the surviving
entity or, if it is not the surviving entity, the Person formed by the
consolidation or into which Servicer is merged or the Person that acquires by
conveyance, transfer or sale all or substantially all of the properties and
assets of Servicer shall be a corporation organized and existing under the laws
of the United States of America or any State thereof or the District of
Columbia and such corporation shall expressly assume, by an agreement
supplemental hereto, executed and delivered to Trustee and in form and
substance reasonably satisfactory to Trustee, the performance of every covenant
and obligation of Servicer hereunder and under the other Transaction Documents
to which Servicer is a party, and (b) Servicer shall have delivered to Trustee
an Officer's Certificate stating that the consolidation, merger, conveyance,
transfer or sale and the supplemental agreement comply with this Section and an
Opinion of Counsel to the effect that the supplemental agreement is a valid and
binding obligation of the surviving entity enforceable against it in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity.
SECTION 8.4 Indemnification by Servicer. Servicer hereby agrees to
indemnify each Indemnified Party forthwith on demand, from and against any and
all Indemnified Losses awarded against or incurred by any of them that arise
out of or relate to Servicer's performance of, or failure to perform, any of
its obligations under or in connection with any Transaction Document.
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Notwithstanding the foregoing, in no event shall any Indemnified Party
be indemnified against any Indemnified Losses (a) resulting from gross
negligence or willful misconduct on the part of such Indemnified Party (or the
gross negligence or willful misconduct on the part of any of its officers,
directors, employees, affiliates or agents), or the breach by such Indemnified
Party of its obligations under any Transaction Document, (b) to the extent they
include Indemnified Losses in respect of Receivables and reimbursement therefor
that would constitute credit recourse to Servicer for the amount of any
Receivable or Related Transferred Asset not paid by the related Obligor, (c) to
the extent they are or result from lost profits, (d) to the extent they are or
result from taxes (including interest and penalties thereon) asserted with
respect to (i) distributions on the Investor Certificates, (ii) franchise or
withholding taxes imposed on any Indemnified Party other than the Trust or
Trustee in its capacity as Trustee or (iii) federal or other income taxes on or
measured by the net income of the Indemnified Party and costs and expenses in
defending against the same, or (e) to the extent that they constitute
consequential, special or punitive damages.
If for any reason the indemnification provided in this section is
unavailable to an Indemnified Party or is insufficient to hold it harmless,
then Servicer shall contribute to the amount paid by the Indemnified Party as a
result of any loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnified Party on the one hand and Servicer on the other hand, but also the
relative fault of the Indemnified Party (if any) and Servicer and any other
relevant equitable consideration.
If any action, suit, proceeding or investigation is commenced, as to
which an Indemnified Party proposes to demand indemnification, it shall notify
the Servicer with reasonable promptness; provided, however, that any failure by
such Indemnified Party to notify the Servicer shall not relieve the Servicer
from its obligations hereunder (except to the extent that the Servicer is
prejudiced by such failure to promptly notify). The Servicer shall be entitled
to assume the defense of any such action, suit, proceeding or investigation,
including the employment of counsel reasonably satisfactory to the Indemnified
Party. The Indemnified Party shall have the right to counsel of its own choice
to represent it, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless: (a) the Servicer has failed promptly
to assume the defense and employ counsel reasonably satisfactory to the
Indemnified Party in accordance with the preceding sentence, or (b) the
Indemnified Party shall have been advised by counsel that there exists an
actual or potential conflict of interests among the Servicer and such
Indemnified Party, including situations in which one or more legal defenses may
be available to such Indemnified Party that are inconsistent with those
available to the Servicer; provided, however, that the Servicer shall not, in
connection with any one such action or proceeding or separate but substantially
similar actions or
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proceedings arising out of the same general allegations, be liable for fees and
expenses of more than one separate firm of attorneys (other than local counsel)
at any time for all Indemnified Parties; and such counsel shall, to the extent
consistent with its professional responsibilities, cooperate with the Servicer
and any counsel designated by the Servicer.
The Servicer further agrees that it will not, without the prior written
consent of the applicable Indemnified Party, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not any Indemnified Party is an actual or potential party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Party from all liability
and obligations arising therefrom.
SECTION 8.5 Servicer Liability. Servicer shall be liable in
accordance with this Agreement only to the extent of the obligations
specifically undertaken by Servicer in such capacity herein and as set forth
herein.
SECTION 8.6 Limitation on Liability of Servicer and Others. Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its duties to service the Receivables in
accordance with this Agreement or any Supplement that in its reasonable opinion
may involve it in any expense or liability. Servicer may, in its sole
discretion, undertake any legal action relating to the servicing, collection or
administration of Receivables and Related Transferred Assets that it may
reasonably deem necessary or appropriate for the benefit of the
Certificateholders and the Purchasers with respect to this Agreement and the
rights and duties of the parties hereto and the interests of the
Certificateholders hereunder.
ARTICLE IX
EARLY AMORTIZATION EVENTS; TERMINATION BY SELLERS
SECTION 9.1 Early Amortization Events. The Early Amortization Events
with respect to each Series and Purchased Interest shall be specified in the
related Supplement or PI Agreement.
SECTION 9.2 Remedies. Upon the occurrence of an Early Amortization
Event, Trustee shall have, in addition to all other rights and remedies
available to Trustee under this Agreement or otherwise, (a) the right to apply
Collections as provided herein, and (b) all rights and remedies provided under
all other applicable
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laws, which rights, in the case of each and all of the foregoing, shall be
cumulative. Trustee shall exercise the rights at the direction of the Investor
Certificateholders pursuant to (and subject to the limitations specified in)
Section 11.14.
SECTION 9.3 Additional Rights Upon the Occurrence of Certain Events.
(a) If a Bankruptcy Event shall occur with respect to Transferor (a "Trigger
Event"), this Agreement (other than this Section 9.3) and the Trust shall be
deemed to have terminated on the day of the Trigger Event. Within seven
Business Days of the date of written notice to Trustee of the Trigger Event,
Trustee shall:
(i) publish a notice in an Authorized Newspaper that a
Bankruptcy Event has occurred with respect to Transferor, that the
Trust has terminated, and that Trustee intends to sell, dispose of or
otherwise liquidate the Receivables and the Related Transferred Assets
pursuant to this Agreement in a commercially reasonable manner and on
commercially reasonable terms, which shall include the solicitation of
competitive bids (a "Disposition"), and
(ii) send written notice to the Investor Certificateholders
and Purchasers describing the provisions of this section and requesting
each Investor Certificateholder and Purchaser to advise Trustee in
writing whether (A) it wishes Trustee to instruct Servicer not to
effectuate a Disposition, (B) it refuses to advise Trustee as to the
specific action Trustee shall instruct Servicer to take or (C) it
wishes Servicer to effect a Disposition.
If, after 60 days from the day notice pursuant to subsection (a)(i) is
first published (the "Publication Date"), Trustee shall not have received the
written instruction described in subsection (a)(ii)(A) from Holders
representing at least a majority in interest within the meaning of Internal
Revenue Service Revenue Procedure 94-46 (or subsequent authority promulgated by
the Internal Revenue Service), determined as if the Trust were classified as a
partnership for Federal income tax purposes (a "majority in interest"), of all
outstanding Series of Investor Certificates and Purchased Interests, Trustee
shall instruct Servicer to effectuate a Disposition, and Servicer shall proceed
to consummate a Disposition. If, however, Holders representing at least a
majority of interest of all Series of Investor Certificates and Purchased
Interests instruct Trustee not to effectuate a Disposition, the Trust shall be
reconstituted and continue pursuant to the terms of this Agreement.
(b) Notwithstanding the termination of this Agreement and the Trust
pursuant to subsection (a), the proceeds from any Disposition of the
Receivables
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and the Related Transferred Assets pursuant to subsection (a) shall be treated
as Collections on the Receivables and shall be allocated and deposited in
accordance with the provisions of Article IV.
(c) Trustee may appoint an agent or agents to assist with its
responsibilities pursuant to this section with respect to competitive bids.
(d) Transferor or any of its Affiliates shall be permitted to bid for
the Receivables and the Related Transferred Assets. Trustee may obtain a prior
determination from any bankruptcy trustee, receiver or liquidator that the
terms and manner of any proposed Disposition are commercially reasonable.
(e) Notwithstanding the termination of this Agreement and the Trust
pursuant to subsection (a), Trustee shall continue to have the rights described
in Section 9.2 and Article XI, and be subject to direction on terms consistent
with those set out in Section 11.14, pending the completion of any Disposition
and/or the reconstitution of the Trust.
SECTION 9.4 Termination By Sellers. If the Sellers have notified the
Trustee in writing of their election to terminate their agreements to sell
Receivables under the Purchase Agreement (as provided in Section 8.1 of the
Purchase Agreement), (i) the Trustee shall notify the Certificateholders of all
Series and all Purchasers within five Business Days of its receipt of such
notice and (ii) Transferor shall cause each Series of Certificates and
Purchased Interest to be repaid out of Collections as early as is practicable
in accordance with the applicable Supplement or PI Agreement.
ARTICLE X
SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults. Any of the following events shall
constitute a "Servicer Default":
(a) any failure by Servicer in its capacity as Servicer to
make any payment, transfer or deposit required by any Transaction
Document to be made by it or to give instructions or to give notice to
Trustee to make such payment, transfer or deposit, which failure
continues unremedied for three Business Days,
(b) failure on the part of Servicer in its capacity as
Servicer duly to observe or perform in any material respect any other
covenants or
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agreements of Servicer set forth in this Agreement or any other
Transaction Document, which failure has a Material Adverse Effect and
continues unremedied for a period of 30 days after the date on which
written notice of the failure, requiring the same to be remedied, shall
have been given to Servicer by Trustee, or to Servicer and Trustee by
any Investor Certificateholder or Purchaser,
(c) Servicer shall assign its duties under this Agreement,
except as permitted by Sections 3.1(b) and 8.3,
(d) any Daily Report or Monthly Report shall fail to have
been correct in any material respect when made or delivered, or shall
not have been delivered when required under the terms hereof, and in
either case such condition continues unremedied for a period of three
Business Days; or any other representation, warranty or certification
made by Servicer in any Transaction Document or in any certificate or
other document or instrument delivered pursuant to any Transaction
Document shall fail to have been correct in any material respect when
made or delivered, which failure has a Material Adverse Effect and
which Material Adverse Effect continues unremedied for a period of 15
Business Days after the date on which written notice of failure,
requiring the same to be remedied, shall have been given to Servicer
and Trustee by any Investor Certificateholder or Purchaser, or
(e) any Bankruptcy Event shall occur with respect to
Servicer.
In the event of any Servicer Default, so long as such Servicer Default shall
not have been remedied, Transferor may (and, at the direction of Trustee or the
Required Investors, shall), by notice then given in writing to Servicer (a
"Termination Notice"), terminate all (but not less than all) the rights and
obligations of Servicer as Servicer under this Agreement and in and to the
Receivables, the Related Transferred Assets and the proceeds thereof; provided
that if Trustee or the Required Investors shall have instructed Transferor to
give a Termination Notice and Transferor shall not have done so within one
Business Day, Trustee shall be entitled to give such Termination Notice.
As soon as possible, and in any event within five Business Days, after
an Authorized Officer of Servicer has obtained knowledge of the occurrence of
any Servicer Default, Servicer shall furnish Transferor, Trustee, each Agent
and the Rating Agencies, and Trustee shall promptly furnish each Investor
Certificateholder, notice of such Servicer Default.
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Notwithstanding the foregoing, a delay in or failure in performance
referred to in subsection (a) for a period of ten Business Days after the
applicable grace period, or in subsection (b) or (d) for a period of 30
Business Days after the applicable grace period, shall not constitute a
Servicer Default if the delay or failure could not have been prevented by the
exercise of reasonable diligence by Servicer and the delay or failure was
caused by an act of God or the public enemy, riots, acts of war, acts of
terrorism, epidemics, flood, embargoes, weather, landslides, fire, earthquakes
or similar causes. The preceding sentence shall not relieve Servicer from using
its best efforts to perform its obligations in a timely manner in accordance
with the terms of the Transaction Documents, and Servicer shall promptly give
Trustee, each Agent and Transferor an Officer's Certificate notifying them of
its failure or delay.
SECTION 10.2 Trustee to Act; Appointment of Successor. (a) On and
after Servicer's receipt of a Termination Notice pursuant to Section 10.1,
Servicer shall continue to perform all servicing functions under this Agreement
until the date specified in the Termination Notice or otherwise specified by
Transferor (acting upon the instruction of Trustee) in writing or, if no such
date is specified in the Termination Notice, or otherwise specified by
Transferor (acting upon the instruction of Trustee), until a date mutually
agreed upon by Servicer and Transferor (acting upon the instruction of
Trustee). Transferor (acting upon the instruction of Trustee) shall, as
promptly as possible after the giving of a Termination Notice, nominate an
Eligible Servicer as successor servicer (the "Successor Servicer"); provided
that (a) in so appointing any Successor Servicer, Trustee shall give due
consideration to any Successor Servicer proposed by any Agent and (b) the
Successor Servicer shall accept its appointment by a written assumption in a
form acceptable to Trustee and each Agent. Any Person who is nominated to be a
Successor Servicer shall accept its appointment by a written assumption in form
and substance acceptable to Trustee. In the event that a Successor Servicer has
not been appointed or has not accepted its appointment at the time when
Servicer ceases to act as Servicer, Trustee without further action shall
automatically be appointed the Successor Servicer. Trustee may delegate any of
its servicing obligations to an affiliate or agent in accordance with Section
3.1(b). If Trustee is prohibited by applicable law from performing the duties
of Servicer hereunder, Trustee may appoint, or may petition a court of
competent jurisdiction to appoint, a Successor Servicer hereunder. Trustee
shall give prompt notice to the Rating Agencies and each Investor
Certificateholder upon the appointment of a Successor Servicer. If Trustee
shall have given Transferor any instructions with respect to any action to be
taken pursuant to this Section 10.2 and Transferor shall not have complied with
such instructions within one Business Day, Trustee shall be entitled to take
such action, with the same effect as if such action were taken by Transferor.
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(b) After Servicer's receipt of a Termination Notice, and on the date
that a Successor Servicer shall have been appointed by Transferor (acting upon
the instruction of Trustee) and shall have accepted the appointment pursuant to
subsection (a), all authority and power of Servicer under this Agreement shall
pass to and be vested in the Successor Servicer (a "Service Transfer"); and,
without limitation, Trustee is hereby authorized and empowered to execute and
deliver, on behalf of Servicer, as attorney-in-fact or otherwise, all documents
and instruments, and to do and accomplish all other acts or things that Trustee
reasonably determines are necessary or appropriate to effect the purposes of
the Service Transfer. Upon the appointment of the Successor Servicer and its
acceptance thereof, Servicer agrees that it will terminate its activities as
Servicer hereunder in a manner that Trustee indicates will facilitate the
transition of the performance of such activities to the Successor Servicer.
Servicer agrees that it shall use reasonable efforts to assist the Successor
Servicer in assuming the obligations to service and administer the Receivables
and the Related Transferred Assets, on the terms and subject to the conditions
set forth herein, and to effect the termination of the responsibilities and
rights of Servicer to conduct servicing hereunder, including the transfer to
such Successor Servicer of all authority of Servicer to service the Receivables
and Related Transferred Assets provided for under this Agreement and all
authority over all cash amounts that shall thereafter be received with respect
to the Receivables or the Related Transferred Assets. Servicer shall, within
five Business Days after the designation of a Successor Servicer, transfer its
electronic records (and any related software and software licenses,
appropriately assigned and prepaid) relating to the Receivables, the related
Contracts and the Related Transferred Assets to the Successor Servicer in such
electronic form as the Successor Servicer may reasonably request and shall
promptly transfer to the Successor Servicer all other records, correspondence
and documents necessary for the continued servicing of the Receivables and the
Related Transferred Assets in the manner and at such times as the Successor
Servicer shall request. To the extent that compliance with this Section shall
require Avondale or any Servicer to disclose to the Successor Servicer
information of any kind that Avondale reasonably deems to be confidential,
prior to the transfer contemplated by the preceding sentence the Successor
Servicer shall be required to enter into such licensing and confidentiality
agreements as Avondale shall reasonably deem necessary to protect its interest.
All reasonable costs and expenses (including attorneys' fees and disbursements)
incurred in connection with transferring the Receivables, the Related
Transferred Assets and all related Records (including the related Contracts) to
the Successor Servicer and amending this Agreement and the other Transaction
Documents to reflect the succession as Servicer pursuant to this Section shall
be paid by the predecessor Servicer (or, if Trustee serves as Successor
Servicer on an interim basis, the preceding Servicer) within 15 days after
presentation of reasonable documentation of the costs and expenses.
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(c) Upon its appointment and acceptance thereof, the Successor
Servicer shall be the successor in all respects to Servicer with respect to
servicing functions under this Agreement and shall be subject to all the
responsibilities and duties relating thereto placed on Servicer by the terms
and provisions hereof (and shall carry out such responsibilities and duties in
accordance with standards of reasonable commercial prudence), and all
references in this Agreement to Servicer shall be deemed to refer to the
Successor Servicer.
(d) All authority and power granted to Servicer or the Successor
Servicer under this Agreement shall automatically cease and terminate upon
termination of the Trust pursuant to Section 12.1, and shall pass to and be
vested in Transferor and, without limitation, Transferor is hereby authorized
and empowered, on and after the effective date of such termination, to execute
and deliver, on behalf of the Servicer or the Successor Servicer, as attorney-
in-fact or otherwise, all documents and other instruments and to do and
accomplish all other acts or things that Transferor reasonably determines are
necessary or appropriate to effect the purposes of such transfer of servicing
rights. The Servicer or Successor Servicer agrees to cooperate with Transferor
in effecting the termination of the responsibilities and rights of the Servicer
or Successor Servicer to conduct servicing of the Receivables and the Related
Transferred Assets. The Servicer or Successor Servicer shall, within five
Business Days after such termination, transfer its electronic records relating
to the Receivables and the Related Transferred Assets to Transferor in such
electronic form as Transferor may reasonably request and shall transfer all
other records, correspondence and documents relating to the Receivables and the
Related Transferred Assets to Transferor in the manner and at such times as
Transferor shall reasonably request. To the extent that compliance with this
Section shall require the Servicer or Successor Servicer to disclose to
Transferor information of any kind that the Servicer or Successor Servicer
deems to be confidential, Transferor shall be required to enter into such
customary licensing and confidentiality agreements as the Servicer or Successor
Servicer shall reasonably deem necessary to protect its interests. All
reasonable costs and expenses (including attorneys' fees and disbursements)
incurred by Trustee, in its capacity as Successor Servicer, in connection with
the termination shall be paid by Transferor within 15 days after presentation
of reasonable documentation of the costs and expenses.
Notwithstanding any provisions contained in any Transaction Document to
the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless funds are allocated for such payment
pursuant to the provisions of a Supplement or PI Agreement governing the
allocation of funds in the Master Collection Account. Any amount which
Transferor does not pay pursuant to the operation of the preceding sentence
shall not constitute a claim (as
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defined in Section 101 of the Bankruptcy Code) against or corporate obligation
of Transferor for any such insufficiency.
SECTION 10.3 Notification of Servicer Default; Notification of
Appointment of Successor Servicer. Within four Business Days after an
Authorized Officer of Servicer becomes aware of any Servicer Default, Servicer
shall give written notice thereof to Transferor, Trustee and the Rating
Agencies, and Trustee shall, promptly upon receipt of the written notice, give
notice to the Investor Certificateholders at their respective addresses
appearing in the Certificate Register and to the Purchasers. Upon any
termination or appointment of a Successor Servicer pursuant to this Article X,
Trustee shall give prompt written notice thereof to the Investor
Certificateholders at their respective addresses appearing in the Certificate
Register and to the Purchasers and the Rating Agencies.
SECTION 10.4 Waiver of Servicer Defaults. The Required Investors may,
on behalf of the Transferor and all the Holders of each Series, waive in
writing any Servicer Default hereunder and its consequences. Upon any such
waiver of a Servicer Default, such Servicer Default shall cease to exist, and
shall be deemed to have been remedied for every purpose of this Agreement. No
such waiver shall extend to any subsequent or other Servicer Default or impair
any right consequent thereon except to the extent expressly so waived.
ARTICLE XI
TRUSTEE
SECTION 11.1 Duties of Trustee. (a) Trustee undertakes to perform
the duties and only the duties as are specifically set forth in this Agreement.
Except as otherwise expressly provided herein, the provisions of this Article
XI shall apply to Trustee solely in its capacity as Trustee, and not to Trustee
in its capacity as Servicer if it is acting as Servicer. Following the
occurrence of a Servicer Default of which a Responsible Officer has actual
knowledge, Trustee shall exercise such of the rights and powers vested in it by
this Agreement and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs; provided that if Trustee shall assume the duties of
Servicer pursuant to Section 10.2, Trustee in performing the duties shall use
the degree of skill and attention customarily exercised by a servicer with
respect to trade receivables that it services for itself or others. Trustee
shall have no power to create, assume or incur indebtedness or other
liabilities in the name of the Trust other than as contemplated in, or
incidental to the performance of its duties under, the Transaction Documents.
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(b) Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to Trustee that are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they are
substantially in the form required by this Agreement. Trustee shall give
written notice to the Person who furnished any item of the type listed in the
preceding sentence of any lack of substantial conformity of any such item to
the applicable requirements of this Agreement. In addition, Trustee shall give
prompt written notice to the Investor Certificateholders and each Agent of any
lack of substantial conformity of any such instrument to the applicable
requirements of this Agreement discovered by Trustee that would entitle a
specified percentage of the Investor Certificateholders or the Holders of any
Series of Certificates or Purchasers or Agents to take any action pursuant to
this Agreement. Within two Business Days of its receipt of any Monthly Report,
Trustee shall verify the mathematical computations contained therein and shall
notify Servicer and each of the Rating Agencies of the accuracy of such
computations or of any discrepancies therein (provided that the rounding of
numbers will not constitute a discrepancy), whereupon Servicer shall deliver to
the Rating Agencies within 5 Business Days thereafter a certificate describing
the nature and cause of such discrepancies and the action that Servicer
proposes to take with respect thereto. During the first week of each year,
Trustee shall provide the Rating Agencies with a certificate, signed by a
Responsible Officer, to the effect that Trustee is not aware of any Early
Amortization Event (or, if it is aware of any Early Amortization Event,
specifying the nature of that event).
(c) Subject to subsection (a), no provision of this Agreement shall be
construed to relieve Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct; provided that:
(i) Trustee shall not be liable for an error of judgment made
in good faith by a Responsible Officer or Responsible Officers of
Trustee, unless it shall be proved that Trustee was negligent in
ascertaining the pertinent facts,
(ii) Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in
accordance with the direction (as applicable) of the Required
Investors, all Investors, any Agent, or the Required Series Holders
relating to the time, method and place of conducting any proceeding for
any remedy available to Trustee, or exercising any trust or power
conferred upon Trustee, under this Agreement,
(iii) Trustee shall not be charged with knowledge of (A) any
failure by Servicer to comply with the obligations of Servicer referred
to in
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subsections (a), (b) or (c) of Section 10.1, (B) any breach of the
representations and warranties of Transferor set forth in Section 2.3
or 7.1 or the representations and warranties of Servicer set forth in
Section 8.1, (C) any breach of the covenants of Transferor set forth in
Section 7.2 or the covenants of Servicer set forth in Section 8.2 or
(D) the ownership of any Certificate or Purchased Interest for purposes
of Section 6.5, in each case unless a Responsible Officer of Trustee
obtains actual knowledge of the matter or Trustee receives written
notice of the matter from Servicer or from any Holder,
(iv) the duties and obligations of Trustee shall be
determined solely by the express provisions of this Agreement, Trustee
shall not be liable except for the performance of the duties and
obligations that specifically shall be set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement
against Trustee and, in the absence of bad faith on the part of
Trustee, Trustee may conclusively rely on the truth of the statements
and the correctness of the opinions expressed in any certificates or
opinions that are furnished to Trustee and that conform to the
requirements of this Agreement, and
(v) without limiting the generality of this section or
Section 11.2, Trustee shall have no duty (A) to see to any recording,
filing, or depositing of this Agreement or any agreement referred to
herein or any financing statement evidencing a security interest in the
Receivables or the Related Transferred Assets, or to see to the
maintenance of any such recording or filing or depositing or to any
rerecording, refiling or redepositing of any thereof (except that
Trustee (x) shall note in its records the date of filing of each UCC
financing statement identified to it in writing as having been filed in
connection with the Transaction Documents, or filed in connection with
a predecessor receivables securitization and amended and/or assigned in
connection with the Transaction Documents, and naming Trustee as
secured party or assignee of the secured party and (y) shall, unless it
shall have received an Opinion of Counsel to the effect that no such
filing is necessary to continue the perfection of Transferor's or
Trustee's interests in the Receivables and the Related Assets, cause
continuation statements to be filed with respect to each such financing
statement not less than four years and six months and not more than
five years after (1) its filing date and (2) the date of filing of any
prior continuation statement), (B) to see to the payment or discharge
of any tax, assessment, or other governmental charge or any Adverse
Claim or encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Trust, (C) to confirm or verify the
contents of any reports or certificates of Servicer delivered to
Trustee pursuant to this Agreement that are believed by Trustee to be
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genuine and to have been signed or presented by the proper party or
parties or (D) to ascertain or inquire as to the performance or
observance of any of Transferor's or Servicer's representations,
warranties or covenants or Servicer's duties and obligations as
Servicer.
(d) Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if Trustee
reasonably believes that the repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it, and none of the
provisions contained in this Agreement shall in any event require Trustee to
perform, or be responsible for the manner of performance of, any obligations of
Servicer under this Agreement except during the time, if any, that Trustee
shall be the successor to, and be vested with the rights, duties, powers and
privileges of, Servicer in accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement, Trustee
shall take no action reasonably likely to impair the interests of the Trust in
any Transferred Asset now existing or hereafter created or to impair the value
of any Transferred Asset now existing or hereafter created.
(f) Except to the extent expressly provided otherwise in this
Agreement, Trustee shall have no power to vary the Transferred Assets.
(g) In the event that the Paying Agent or the Transfer Agent and
Registrar shall fail to perform any obligation, duty or agreement in the manner
or on the day on which such obligation, duty or agreement is required to be
performed by the Paying Agent or the Transfer Agent and Registrar, as the case
may be, under this Agreement, Trustee shall be obligated, promptly upon its
actual knowledge thereof, to perform the obligation, duty or agreement in the
manner so required.
SECTION 11.2 Certain Matters Affecting Trustee. Except as otherwise
provided in Section 11.1:
(a) Trustee may rely on and shall be protected in acting on,
or in refraining from acting in accordance with, any resolution,
Officer's Certificate, opinion of counsel, certificate of auditors or
any other certificate, statement, instrument, instruction, opinion,
report, notice, request, consent, order, appraisal, bond or other paper
or document and any information contained therein believed by it to be
genuine and to have been signed or presented to it pursuant to this
Agreement by the proper party or parties including, but not limited to,
reports and records required by Article III,
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(b) Trustee may consult with counsel and any opinion of
counsel rendered by counsel reasonably satisfactory to Transferor shall
be full and complete authorization and protection in respect of any
action taken or permitted or omitted by it hereunder in good faith and
in accordance with such opinion of counsel,
(c) Trustee (including in its role as Successor Servicer, if
it ever acts in that capacity) shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation or other proceeding
hereunder or in relation hereto, at the request, order or direction of
any of the Certificateholders, the Purchasers or any Agent, pursuant to
the provisions of this Agreement, unless such Certificateholders, the
Purchasers or Agent shall have offered to Trustee reasonable security
or indemnity against the costs, expenses and liabilities that may be
incurred therein or thereby; provided that nothing contained herein
shall relieve Trustee of the obligations, upon the occurrence and
continuance of a Servicer Default that has not been cured, to exercise
such of the rights and powers vested in it by this Agreement and to use
the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his or
her own affairs,
(d) Trustee shall not be personally liable for any action
taken, permitted or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred
upon it by this Agreement,
(e) Trustee shall not be bound to make any investigation into
the facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so
by the Required Investors; provided that if the payment within a
reasonable time to Trustee of the costs, expenses, or liabilities
likely to be incurred by it in connection with making such
investigation shall be, in the opinion of Trustee, not reasonably
assured to Trustee by the security afforded to it by the terms of this
Agreement, Trustee may require reasonable indemnity against such cost,
expense, or liability as a condition to proceeding with the
investigation. The reasonable expense of every examination shall be
paid by Servicer or, if paid by Trustee, shall be reimbursed by
Servicer upon demand,
(f) Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through
agents,
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representatives, attorneys or a custodian, and Trustee shall not be
responsible for any misconduct or negligence on the part of any agent,
representative, attorney or custodian appointed with due care by it
hereunder,
(g) except as may be required by Sections 11.1(b) and
11.1(c)(v) hereof, Trustee shall not be required to make any initial or
periodic examination of any documents or records related to the
Transferred Assets for the purpose of establishing the presence or
absence of defects or for any other purpose,
(h) whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the
liability of or affording protection to Trustee shall be subject to the
provisions of this section,
(i) Trustee shall have no liability with respect to the acts
or omissions of Servicer (except and to the extent Servicer is
Trustee), including, but not limited to, acts or omissions in
connection with: (A) the servicing, management or administration of the
Receivables or the Related Transferred Assets, (B) calculations made by
Servicer whether or not reported to Trustee, and (C) deposits into or
withdrawals from any Bank Accounts or Transaction Accounts established
pursuant to the terms of this Agreement, and
(j) in the event that Trustee is also acting as Paying Agent
or Transfer Agent and Registrar hereunder, the rights and protections
afforded to Trustee pursuant to this Article XI shall also be afforded
to Trustee acting as Paying Agent or as Transfer Agent and Registrar.
SECTION 11.3 Limitation on Liability of Trustee. Trustee shall at no
time have any responsibility or liability for or with respect to the
correctness of the recitals contained herein or in the Certificates (other than
the certificate of authentication on the Certificates) or the Purchased
Interests. Except as set forth in Section 11.15, Trustee makes no
representations as to the validity or sufficiency of this Agreement, any PI
Agreement, any Supplement, the Certificates (other than the certificate of
authentication on the Certificates) or the Purchased Interests, any other
Transaction Document or any Transferred Asset or related document. Trustee
shall not be accountable for the use or application (i) by Transferor of any of
the Certificates or the Purchased Interests or of the proceeds of such
Certificates or the Purchased Interests, or (ii) for the use or application of
any funds paid to Transferor or to Servicer (other than to Trustee in its
capacity as Servicer) in respect of the Transferred Assets or deposited by
Servicer in or
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withdrawn by Servicer from the Bank Accounts, the Transaction Accounts or any
other accounts hereafter established to effectuate the transactions
contemplated herein or in the other Transaction Documents and in accordance
with the terms hereof or thereof.
Except as provided in Section 11.1(c)(v), Trustee shall at no time have
any responsibility or liability for or with respect to the legality, validity,
or enforceability of any ownership or security interest in any Transferred
Asset, or the perfection or priority of such a security interest or the
maintenance of any such perfection or priority, or for the generation of the
payments to be distributed to Certificateholders or Purchasers under this
Agreement, including: (a) the existence and substance of any Transferred Asset
or any related Record or any computer or other record thereof, (b) the validity
of the transfer of any Transferred Asset to the Trust or of any preceding or
intervening transfer, (c) the performance or enforcement of any Transferred
Asset, (d) the compliance by Transferor or Servicer with any warranty or
representation made under this Agreement or in any other Transaction Document
and the accuracy of any such warranty or representation prior to Trustee's
receipt of actual notice of any noncompliance therewith or any breach thereof,
(e) any investment of monies pursuant to Section 4.4 or any loss resulting
therefrom, (f) the acts or omissions of Transferor, Servicer or any Obligor,
(g) any action of Servicer taken in the name of Trustee, or (h) any action by
Trustee taken at the instruction of Servicer; provided that the foregoing shall
not relieve Trustee of its obligation to perform its duties (including but not
limited to its duties, if any, to act as Servicer in accordance with Section
10.2) under the Agreement in accordance with the terms hereof.
Except with respect to a claim based on the failure of Trustee to
perform its duties under this Agreement or based on Trustee's negligence or
willful misconduct, no recourse shall be had against Trustee in its individual
capacity for any claim (a "Non-Recourse Claim") based on any provision of this
Agreement, any other Transaction Document, the Certificates, the Purchased
Interests, any Transferred Asset or any assignment thereof. Trustee shall not
have any personal obligation, liability, or duty whatsoever to any
Certificateholder, any Purchaser or any other Person with respect to any
Non-Recourse Claim, and any such claim shall be asserted solely against the
Trust or any indemnitor who shall furnish indemnity to the Trust or Trustee as
provided in this Agreement.
SECTION 11.4 Trustee May Deal with Other Parties. Subject to any
restrictions that may otherwise be imposed by Section 406 of ERISA or Section
4975(e) of the Internal Revenue Code, Trustee in its individual or any other
capacity may deal with the other parties hereto (other than Transferor) and
their respective affiliates, with the same rights as it would have if it were
not Trustee.
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SECTION 11.5 Servicer To Pay Trustee's Fees and Expenses. (a) To the
extent not paid by Servicer to Trustee from funds constituting the Servicing
Fee, Servicer covenants and agrees to pay to Trustee from time to time, and
Trustee shall be entitled to receive, such reasonable compensation as is agreed
upon in writing between Trustee and Servicer (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust) for all services rendered by it in connection with the Transaction
Documents and in the exercise and performance of any of the powers and duties
hereunder of Trustee, and Servicer will pay or reimburse Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or
made by Trustee in accordance with any of the provisions of the Transaction
Documents to which it is a party (including the reasonable fees and expenses of
its agents, any co- Trustee and counsel) except any expense, disbursement or
advance that may arise from Trustee's negligence or willful misconduct.
(b) In addition, Servicer agrees to indemnify Trustee from, and hold
it harmless against, any and all losses, liabilities, damages, claims or
expenses incurred by Trustee in connection with the Transaction Documents or in
the exercise or performance of any of the powers or duties of Trustee
hereunder, other than those resulting from the negligence or willful misconduct
of Trustee.
(c) If Trustee is appointed Successor Servicer pursuant to Section
10.2, the provisions of this section shall not apply to expenses, disbursements
and advances made or incurred by Trustee in its capacity as Successor Servicer,
which shall be paid out of the Servicing Fee. Servicer's covenant to pay the
fees, expenses, disbursements and advances provided for in this section shall
survive the resignation or removal of Trustee and the termination of this
Agreement.
(d) Trustee shall look solely to Servicer for payment of amounts
described in this Section 11.5, and Trustee shall have no claim for payment of
such amounts against Transferor or the Transferred Assets.
SECTION 11.6 Eligibility Requirements for Trustee. Trustee hereunder
shall at all times: (a) be (i) a banking institution organized under the laws
of the United States, (ii) a member bank of the Federal Reserve System or (iii)
any other banking institution or trust company, incorporated and doing business
under the laws of any State or of the United States, a substantial portion of
the business of which consists of receiving deposits or exercising fiduciary
powers similar to those permitted to national banks under the authority of the
Comptroller of the Currency, and that is supervised and examined by a state or
federal authority having supervision over banks, (b) not be an Enhancement
Provider, (c) have, in the case of an entity that is subject to risk-based
capital adequacy requirements, risk-based capital of at least $250,000,000 or,
in the case of an entity that is not
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subject to risk-based capital adequacy requirements, a combined capital and
surplus of at least $250,000,000 and (d) have an unsecured long-term debt
rating of at least "A" or its equivalent from each Rating Agency. If such
corporation or association publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then, for the purpose of this section, the combined
capital and surplus of the corporation or association shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time Trustee shall cease to be eligible in
accordance with the provisions of this section, Trustee shall resign
immediately in the manner and with the effect specified in Section 11.7.
SECTION 11.7 Resignation or Removal of Trustee. (a) Trustee may at
any time resign and be discharged from its obligations hereunder by giving 30
days' prior written notice thereof to Transferor, Servicer, the Rating
Agencies, the Investor Certificateholders and the Agents. Upon receiving the
notice of resignation, Transferor shall promptly appoint, subject to
satisfaction of the Modification Condition, a successor Trustee who meets the
eligibility requirements set forth in Section 11.6 by written instrument, in
duplicate, one copy of which shall be delivered to the resigning Trustee and
one copy to the successor Trustee. If no successor Trustee shall have been so
appointed and shall have accepted appointment within 30 days after the giving
of the notice of resignation, the resigning Trustee, upon notice to each Agent,
may petition any court of competent jurisdiction to appoint a successor
Trustee.
(b) If at any time Trustee shall cease to be eligible to be Trustee
hereunder in accordance with the provisions of Section 11.6 hereof and shall
fail to resign promptly after its receipt of a written request therefor by
Servicer, or if at any time Trustee shall be legally unable to act, or shall be
adjudged bankrupt or insolvent, or if a receiver for Trustee or of its property
shall be appointed, or any public officer shall take charge or control of
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then Servicer may remove Trustee and, subject to
the consent of each Agent (which consent shall not be unreasonably withheld or
delayed) and satisfaction of the Modification Condition, promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which shall
be delivered to Trustee so removed and one copy to the successor Trustee.
(c) Any resignation or removal of Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this section shall not
become effective until (i) acceptance of appointment by the successor Trustee
as provided in Section 11.8 hereof, and (ii) such successor Trustee shall have
agreed in writing to be bound by any Intercreditor Agreements then in effect.
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SECTION 11.8 Successor Trustee. (a) Any successor Trustee appointed
as provided in Section 11.7 shall execute, acknowledge and deliver to
Transferor, Servicer, the Investor Certificateholders, the Purchasers and the
predecessor Trustee an instrument accepting such appointment hereunder and an
instrument pursuant to which it agrees to be bound by any existing
Intercreditor Agreement, and thereupon the resignation or removal of the
predecessor Trustee shall, upon payment of its fees and expenses and other
amounts owed to it pursuant to Section 11.5, become effective and the successor
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Trustee herein. The
predecessor Trustee shall deliver to the successor Trustee, at the expense of
Servicer, all documents or copies thereof and statements held by it hereunder;
and Transferor and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully
vesting and confirming in the successor Trustee all such rights, powers, duties
and obligations. Servicer shall promptly give notice to the Rating Agencies
upon the appointment of a successor Trustee.
(b) No successor Trustee shall accept appointment as provided in this
section unless at the time of the acceptance the successor Trustee shall be
eligible to become Trustee under the provisions of Section 11.6.
(c) Upon acceptance of appointment by a successor Trustee as provided
in this section, the successor Trustee shall mail notice of the succession
hereunder to all Investor Certificateholders at their addresses as shown in the
Certificate Register and to each Rating Agency.
SECTION 11.9 Merger or Consolidation of Trustee. Any Person into
which Trustee may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
Trustee shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of Trustee, shall be the successor of Trustee
hereunder, if the Person meets the requirements of Section 11.6, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. Servicer shall
promptly give notice to the Rating Agencies upon any merger or consolidation of
Trustee.
SECTION 11.10 Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust may at the time be located, Trustee shall have the power and may
execute and deliver all instruments to appoint one or more Persons (who may be
an employee or employees of Trustee) to act as a co-Trustee or co-Trustees, or
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separate Trustee or separate Trustees, with respect to all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders and the Purchasers, such title to the Trust,
or any part thereof, and, subject to the other provisions of this section, such
powers, duties, obligations, rights and trusts as Trustee may consider
necessary or appropriate; provided, that such appointment shall be subject to
the prior written consent of Transferor unless an Early Amortization Event or
Servicer Termination Event is continuing; and provided further, that in any
event Trustee will give Transferor and Servicer prior written notice of such
appointment. No co-Trustee or separate Trustee shall be required to meet the
terms of eligibility as a successor Trustee under Section 11.6 and no notice to
Certificateholders, Agents or Purchasers of the appointment of any co-Trustee
or separate Trustee shall be required under Section 11.8.
(b) Every separate Trustee and co-Trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon Trustee shall be conferred or imposed upon and exercised
or performed by Trustee and the separate Trustee or co-Trustee jointly
(it being understood that the separate Trustee or co-Trustee is not
authorized to act separately without Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to Servicer hereunder), Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such separate Trustee or
co-Trustee, but solely at the direction of Trustee,
(ii) no Trustee or co-Trustee hereunder shall be personally liable
by reason of any act or omission of any other Trustee or co-Trustee
hereunder, and
(iii) Trustee may at any time accept the resignation of or remove
any separate Trustee or co-Trustee.
(c) Any notice, request or other writing given to Trustee shall be
deemed to have been given to each of the then separate Trustees and
co-Trustees, as effectively as if given to each of them. Every instrument
appointing any separate Trustee or co-Trustee shall refer to this Agreement and
the conditions of this Article XI. Each separate Trustee and co-Trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of
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appointment, either jointly with Trustee or separately, as may be provided
therein, subject to all the provisions of this Agreement, specifically
including every provision of this Agreement relating to the conduct of,
affecting the liability of, or affording protection or indemnity to, Trustee.
Every such instrument shall be filed with Trustee and a copy thereof given to
Servicer.
(d) Any separate Trustee or co-Trustee may at any time constitute
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Agreement or any other Transaction Document on its behalf and in its name. If
any separate Trustee or co-Trustee shall die, become incapable of acting,
resign or be removed, all its estates, properties, rights, remedies and trusts
shall vest in and be exercised by Trustee, to the extent permitted by law,
without the appointment of a new or successor Trustee or co-Trustee.
SECTION 11.11 Tax Returns. No Federal income tax return shall be
filed on behalf of the Trust unless required by applicable law or any
Governmental Authority. In the event the Trust shall be required to file tax
returns, Servicer shall prepare or shall cause to be prepared any tax returns
required to be filed by the Trust and shall remit the returns to Trustee for
signature at least five Business Days before the returns are due to be filed.
Trustee shall promptly sign and deliver the returns to Servicer and Servicer
shall promptly file the returns. Subject to the responsibilities of Trustee set
forth in any Supplement, Servicer, in accordance with that Supplement, shall
also prepare or shall cause to be prepared all tax information required by law
to be made available to Certificateholders and Purchasers and shall deliver the
information to Trustee at least five Business Days prior to the date it is
required by law to be made available to the Certificateholders and Purchasers.
Trustee, upon request, will furnish Servicer with all the information known to
Trustee as may be reasonably required in connection with the preparation of all
tax returns of the Trust and shall, upon request, execute such returns as
Trustee determines are appropriate.
SECTION 11.12 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement, the
Certificates, the Purchased Interests or the other Transaction Documents may be
prosecuted and enforced by Trustee without the possession of any of the
Certificates or Purchased Interests or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by Trustee shall be
brought in its own name as Trustee. Any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of Trustee, its agents and counsel, be distributed
to the Certificateholders or Purchasers in respect of which such judgment has
been obtained in accordance with the related Supplement or PI Agreement.
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SECTION 11.13 Suits for Enforcement. If an Early Amortization Event
or a Servicer Default shall occur and be continuing, Trustee, in its discretion
may, subject to the provisions of Sections 11.1 and 11.14, proceed to protect
and enforce its rights and the rights of the Certificateholders or Purchasers
under this Agreement by suit, action or proceeding in equity or at law or
otherwise, whether for the specific performance of any covenant or agreement
contained in this Agreement or any other Transaction Document or in aid of the
execution of any power granted in this Agreement or any other Transaction
Document or for the enforcement of any other legal, equitable or other remedy
as Trustee, being advised by counsel, shall deem most effectual to protect and
enforce any of the rights of Trustee or the Certificateholders or Purchasers.
Nothing herein contained shall be deemed to authorize Trustee to authorize or
consent to or accept or adopt on behalf of any Certificateholder or Purchaser
any plan of reorganization, arrangement, adjustment or composition affecting
the Investor Certificates or the rights of any Holder thereof, any Purchased
Interests or any Purchaser, or to authorize Trustee to vote in respect of the
claim of any Investor Certificateholder or Purchaser in any such proceeding.
SECTION 11.14 Rights of Required Investors To Direct Trustee. The
Required Investors shall have the right to direct the time, method, and place
of conducting any proceeding for any remedy available to Trustee, or exercising
any trust or power conferred on Trustee; provided that, subject to Section
11.1, Trustee may decline to follow any such direction if Trustee, being
advised by counsel, determines that the action so directed may not be taken
lawfully, or if a Responsible Officer or Responsible Officers of Trustee shall
determine, in good faith, that the proceedings so directed would be illegal or
involve Trustee in personal liability or be unduly prejudicial to the rights of
the Investor Certificateholders or Purchasers not giving such direction; and
provided further, that nothing in this Agreement shall impair the right of
Trustee to take any action deemed proper by Trustee and that is not
inconsistent with such direction of the Required Investors.
SECTION 11.15 Representations and Warranties of Trustee. Trustee
represents and warrants that:
(a) it is a banking corporation organized, existing and in
good standing under the laws of the State of New York,
(b) it has full power, authority and right to execute,
deliver and perform the Transaction Documents to which it is a party,
and has taken all necessary action to authorize the execution, delivery
and performance by it of the Transaction Documents,
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(c) the Transaction Documents to which it is a party have been
duly executed and delivered by Trustee and, in the case of all such
Transaction Documents, are legal, valid and binding obligations of
Trustee, enforceable in accordance with their respective terms, except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding
in equity or at law, and
(d) it satisfies the requirements of Section 11.6.
SECTION 11.16 Maintenance of Office or Agency. Trustee will maintain,
at its address designated pursuant to Section 13.6, an office, offices, agency
or agencies where notices and demands to or upon Trustee in respect of the
Certificates, the Purchased Interests and the Transaction Documents to which it
is a party may be served. Trustee will give prompt written notice to Servicer
and to the Certificateholders and Agents of any change in the location of the
Certificate Register or any such office or agency.
ARTICLE XII
TERMINATION
SECTION 12.1 Termination of Trust. (a) If not earlier terminated
pursuant to Section 9.3, the Trust and the respective obligations and
responsibilities of Transferor, Servicer and Trustee created hereby (other than
the obligation of Trustee to make payments to Certificateholders or Purchasers
as hereinafter set forth and the obligations of Servicer contained in Section
11.11) shall terminate, except with respect to the duties and obligations
described in Sections 3.9(c), 7.3, 8.4, 11.5, 12.2(b), 13.9, 13.15 and 13.16
upon the earliest to occur of (i) the day on which the Investor
Certificateholders, the Purchasers and Trustee shall have been paid all amounts
required to be paid to them pursuant to this Agreement and Trustee has disposed
of all property held hereunder (including pursuant to Section 12.3) and (ii)
the day which is 21 years less one day after the death of the officers and the
last survivor of all the lineal descendants of every officer of the Trustee who
are living on the date hereof.
(b) Notwithstanding the foregoing, the last payment of the principal
of and interest on the Investor Certificates of any Series or any Purchased
Interests shall be due and payable no later than the Final Scheduled Payment
Date for such Series or Purchased Interests. If, on the Distribution Date
immediately prior to the Final Scheduled Payment Date for any Series or
Purchased Interests, Servicer
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determines that the Invested Amount for such Series or Purchased Interests on
such Final Scheduled Payment Date (after giving effect to all changes therein
on such date) will exceed zero, Servicer shall solicit bids for the sale of
undivided interests in the Transferred Assets for a purchase price equal to
110% of the Base Amount (or comparable amount) for such Series or Purchased
Interests on the Final Scheduled Payment Date for such Series or Purchased
Interests (after giving effect to all distributions required to be made on the
Final Scheduled Payment Date for the Series or Purchased Interests); provided,
that the undivided interests so transferred shall not exceed the Series
Collection Allocation Percentage for such Series or Purchased Interest of the
Transferred Assets held by the Trust as of the date of transfer. Transferor
shall be entitled to participate in and to receive notice of each bid submitted
in connection with the bidding process. Upon the expiration of the period,
Servicer shall determine (x) the Highest Bid and (y) the Available Final
Distribution Amount for such Series or Purchased Interests. Servicer shall sell
such undivided interests in the Transferred Assets on the Final Scheduled
Payment Date for such Series or Purchased Interests to the bidder with the
Highest Bid and shall deposit the proceeds of such sale in the Master
Collection Account for allocation (together with the Available Final
Distribution Amount for such Series or Purchased Interests) to the
Certificateholders of such Series or the Purchasers of such Purchased
Interests.
SECTION 12.2 Final Distribution. (a) Servicer shall give Trustee at
least ten days' prior written notice of the date on which the Trust is expected
to terminate in accordance with Section 12.1(a). The notice shall be
accompanied by a certificate of an Authorized Officer of Servicer setting forth
the information specified in Section 3.6 covering the period during the then
current calendar year through the date of the notice. Upon receiving the
notification from Servicer, Trustee shall give the Certificateholders and/or
the Agents (as applicable) written notice as soon as practicable after
Trustee's receipt of notice from Servicer, which notice shall specify (i) the
Distribution Date (the "Final Distribution Date") upon which final payment with
respect to the Certificates is expected to be made and (ii) the amount of any
such final payment. Trustee shall give the notice to the Transfer Agent and
Registrar and the Paying Agent at the time such notice is given to
Certificateholders. On the Final Distribution Date, Trustee shall, based upon
the Daily Report relating to the Final Distribution Date, cause to be
distributed to the Certificateholders the amounts distributable to them on the
Final Distribution Date pursuant to the applicable Supplement. Each
Certificateholder shall present its Certificate to Trustee and surrender its
Certificate for cancellation at the address of Trustee set forth in Section
13.6 not more than ten Business Days after the Final Distribution Date upon
which final payment with respect to the Certificates has been made.
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(b) Notwithstanding the termination of the Trust pursuant to Section
12.1(a), all funds then on deposit in the Master Collection Account shall
continue to be held in trust for the benefit of the Certificateholders and the
Purchasers and the Paying Agent or Trustee shall pay such funds to the
Certificateholders and the Purchasers at the time set forth in Section 12.1(a).
If any Certificateholder or Purchaser does not claim the portion of such funds
to which it is entitled to receive on the Final Distribution Date, interest
shall cease to accrue on its Certificate or Purchased Interest (as applicable)
and Trustee shall hold such funds in trust for such Person, subject to the
further provisions of this Section. In the event that any of the
Certificateholders shall not have claimed their final payment with respect to
their Certificates within six months after the Final Distribution Date, Trustee
shall give a second written notice to the remaining Certificateholders
concerning payment of the final distribution with respect thereto and surrender
of their Certificates for cancellation. If within one year after the second
notice all the Certificates shall not have been surrendered for cancellation,
Trustee may take appropriate steps, or may appoint an agent to take appropriate
steps, to contact the remaining Certificateholders concerning surrender of
their Certificates, and the cost thereof shall be paid out of the funds in the
Master Collection Account held for the benefit of such Certificateholders.
Trustee and the Paying Agent shall pay to Transferor any monies held by them
for the payment of principal of or interest on the Certificates that remains
unclaimed for two years after the termination of the Trust pursuant to Section
12.1(a). After payment of the monies to Transferor, Certificateholders
entitled to the money must look to Transferor for payment as unsecured general
creditors unless an applicable abandoned property law designates another
Person.
SECTION 12.3 Rights Upon Termination of the Trust. Upon the
termination of the Trust pursuant to Section 12.1 and the surrender of the
Transferor Certificate by Transferor to Trustee, Trustee shall transfer,
assign, set over and otherwise convey to Transferor (without recourse,
representation or warranty other than as set forth in a Limited Warranty
Assignment), all right, title and interest of the Trust in the Receivables,
whether then existing or thereafter created, the Related Transferred Assets and
all of the other property and rights previously conveyed to Trustee hereunder,
except for amounts held by Trustee pursuant to Section 12.2(b) and except for
the rights of RPA Indemnified Parties (other than Transferor and its officers,
directors, shareholders, controlling Persons, employees and agents) to
indemnification and contribution under Section 9.1 of the Purchase Agreement.
Trustee shall execute and deliver the instruments of transfer and assignment
(including any document necessary to release the security interest in favor of
Trustee (for the benefit of the Certificateholders and the Purchasers) in such
Receivables and Related Transferred Assets, to release any filing evidencing or
perfecting such security interest and to terminate all powers of attorney
created by the Transaction Documents), in each case without recourse,
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representation or warranty (other than as set forth in a Limited Warranty
Assignment), that shall be reasonably requested by Transferor to vest in
Transferor all right, title and interest that Trustee had in the Transferred
Assets.
SECTION 12.4 Optional Repurchase of Investor Interests. Any
Supplement may provide that on any Distribution Date occurring on or after the
date that the Invested Amount of the Series governed by such Supplement is
reduced to 10% or less of the initial aggregate principal amount of the
Investor Certificates of such Series, Transferor shall have the option, upon
the giving of ten days' prior written notice to Servicer, Trustee and the
Rating Agencies, to repurchase the undivided interest of such Series in the
Trust by depositing into the Principal Funding Account, on such Distribution
Date (the "Repurchase Distribution Date") an amount (the "Repurchase Amount")
equal to the unpaid Invested Amount of the Series plus accrued and unpaid
interest on the unpaid principal amount of the Series (and accrued and unpaid
interest with respect to interest amounts that were due but not paid on a prior
Distribution Date) through the day preceding such Distribution Date at the
Certificate Rate applicable to such Series. Upon tender of all outstanding
Certificates of the Series owned by a Certificateholder, Trustee shall then
distribute to such Certificateholder the portion of such amounts owed to such
Certificateholder, together with all other amounts on deposit in the Principal
Funding Account with respect to that Series that are owed to such
Certificateholder, on the next Distribution Date in repayment of the principal
amount and all accrued and unpaid interest owing to such Certificateholder.
Following the Repurchase Distribution Date, the Certificateholders of the
Series shall have no further rights with respect to the Transferred Assets and
Trustee shall execute and deliver the instruments of transfer and assignment
(including any document necessary to release the security interest in favor of
Trustee (for the benefit of the Certificateholders) in the Transferred Assets
and to release any filing evidencing or perfecting the security interest), in
each case without recourse, representation or warranty, as shall be reasonably
requested by Transferor to vest in Transferor all right, title and interest
that Trustee had in the Transferred Assets. In the event that Transferor fails
for any reason to deposit the Repurchase Amount for in accordance with the
terms of this Agreement, payments shall continue to be made to the
Certificateholders of the Series in accordance with the terms of this
Agreement. The provisions, if any, in respect of the optional repurchase of any
Purchased Interest shall be set forth in the applicable PI Agreement.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment, Waiver, Etc. (a) This Agreement and any
Supplement may be amended from time to time by Servicer, Transferor and Trustee
by a written instrument signed by each of them, without the consent of any of
the Certificateholders, the Purchasers or the Agents; provided that such action
shall not adversely affect in any material respect the interests of any
Certificateholder or Purchaser; and provided further, that any amendment of
this Agreement to effect any modification of the Bank Account arrangements
pursuant to Section 3.3(c)(ii)(y) shall not require the consent of any of the
Certificateholders or the Purchasers. This Agreement and any Supplement may
not be amended unless Transferor shall have delivered the proposed amendment to
each Agent and the Rating Agencies at least ten Business Days (or such shorter
period as shall be acceptable to each of them) prior to the execution and
delivery thereof and the Modification Condition has been satisfied with respect
to such amendment; provided, however, that the Modification Condition shall not
apply to proposed amendments the purpose of which is to correct any ambiguities
or inconsistencies in this Agreement or such Supplement.
(b) Any PI Agreement with respect to a Purchased Interest may be
amended from time to time in accordance with the terms thereof but without the
consent of any Investor Certificateholder; provided that any amendment will not
adversely affect in any material respect the interests of the Holders of any
Series or other Purchased Interest, as evidenced by an Officer's Certificate of
Servicer; provided further, that any amendment of this Agreement to effect any
modification of the Bank Account arrangements pursuant to Section 3.3(c)(ii)(y)
shall not require the consent of any of the Certificateholders, the Purchasers
or the Agents. No PI Agreement may be amended unless Transferor shall have
delivered the proposed amendment to each Agent and the Rating Agencies at least
ten Business Days (or such shorter period as shall be acceptable to each of
them) prior to the execution and delivery thereof and the Modification
Condition has been satisfied with respect to such amendment; provided, however,
that the Modification Condition shall not apply to proposed amendments the
purpose of which is to correct any ambiguities or inconsistencies in such PI
Agreement.
(c) The provisions of this Agreement, any Supplement and any PI
Agreement may also be amended, modified or waived from time to time by
Servicer, Transferor and Trustee with the consent of: (A) the Required Series
Holders of each affected Series and (B) if any Purchased Interest shall or
would be adversely affected, each Agent of the Purchaser that holds such
Purchased Interest; provided that no amendment shall (w) reduce in any manner
the amount of or
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delay the timing of any distributions to be made to Investor Certificateholders
or deposits of amounts to be so distributed or the amount available under any
Enhancement without the consent of each affected Certificateholder, (x) change
the definition of or the manner of calculating the interest of any Investor
Certificateholder without the consent of each affected Investor
Certificateholder, (y) reduce the aforesaid percentage required to consent to
any amendment without the consent of each Investor Certificateholder or (z)
adversely affect the rating of any Series or class by any Rating Agency without
the consent of the Holders of Investor Certificates of the Series or class
evidencing not less than 66 2/3% of the aggregate unpaid principal amount of
the Investor Certificates of the Series or class. It is understood that the
consent of the Required Series Holders of any Series or the Agent of a
Purchaser shall not be required for any amendment, modification or waiver if
all amounts owed to the Holders of such Series or such Purchaser (as the case
may be) will be paid (and any commitments of such Holders or Purchaser will
terminate) prior to, or contemporaneously with, the effectiveness of such
amendment, modification or waiver. No PI Agreement may be amended unless
Transferor shall have delivered the proposed amendment to each Agent and the
Rating Agencies at least ten Business Days (or such shorter period as shall be
acceptable to each of them) prior to the execution and delivery thereof and the
Modification Condition has been satisfied with respect to such amendment;
provided, however, that the Modification Condition shall not apply to proposed
amendments the purpose of which is to correct any ambiguities or
inconsistencies in such PI Agreement.
Transferor or Trustee shall establish a record date for determining
which Certificateholders may give such waivers and consents. No waiver of any
Early Amortization Event or other default hereunder given at any time shall
apply to any other prior or subsequent Early Amortization Event or default.
(d) Promptly after the execution of any amendment, consent or waiver
described in subsection (b) or (c), Trustee shall furnish written notification
of the substance of the amendment, consent or waiver to each Investor
Certificateholder and each Agent, and Servicer shall furnish written
notification of the substance of the amendment or consent to the Rating Agency
and each Enhancement Provider.
(e) It shall not be necessary for any waiver or consent given by the
Certificateholders or Purchasers under this section to approve the particular
form of any proposed consent, waiver or amendment, but it shall be sufficient
if the substance thereof has been approved. The manner of obtaining any waiver,
consent or amendment and of evidencing the authorization of the execution
thereof by the Certificateholders or Purchasers shall be subject to such
reasonable requirements as Trustee may prescribe.
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(f) Notwithstanding anything in this section to the contrary, no
amendment may be made to this Agreement, any Supplement or any PI Agreement
that would adversely affect in any material respect the interests of any
Enhancement Provider without the consent of the Enhancement Provider.
(g) Any Supplement or PI Agreement executed in accordance with the
provisions of Section 6.10 shall not be considered an amendment to this
Agreement for the purposes of this section.
(h) Prior to the execution of any amendment to this Agreement, Trustee
shall be entitled to receive and rely upon an Opinion of Counsel to the effect
that the execution of the amendment is authorized or permitted by this
Agreement and that all conditions precedent to the execution and delivery have
been satisfied. Trustee may, but shall not be obligated to, enter into any
amendment that affects Trustee's own rights, duties or immunities under this
Agreement.
(i) Notwithstanding anything in this Section to the contrary, no
amendment may be made to this Agreement unless the Transferor shall have
delivered to the Trustee, the Rating Agencies, each Agent and each Enhancement
Provider a Tax Opinion with respect to such amendment.
SECTION 13.2 Actions by Certificateholders and Purchasers. (a) By its
acceptance of Certificates pursuant to this Agreement and the applicable
Supplement, each Certificateholder acknowledges and agrees that, wherever in
this Agreement a provision states that an action may be taken or a notice,
demand or instruction given by any Series of Investor Certificateholders, any
class of Investor Certificateholders or the Investor Certificateholders, the
action, notice or instruction may be taken or given by any Holder of an
Investor Certificate of the Series or class or by any Investor
Certificateholder, respectively, unless the provision requires a specific
percentage of the Series or class of Investor Certificateholders or of all
Investor Certificateholders. By its acceptance of Purchased Interests pursuant
to this Agreement and the applicable PI Agreement, each Purchaser acknowledges
and agrees that wherever in this Agreement a provision states that an action
may be taken or a notice, demand or instruction given by any Purchasers, the
action, notice or instruction may be taken or given by any Purchaser, unless
the provision requires a specific percentage of the Purchasers.
(b) By its acceptance of Certificates pursuant to this Agreement and
the applicable Supplement, each Certificateholder acknowledges and agrees that
any request, demand, authorization, direction, notice, consent, waiver or other
act by the Holder of a Certificate shall bind the Holder and every subsequent
Holder of the Certificate and of any Certificate issued upon the registration
of transfer
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thereof or in exchange therefor or in lieu thereof in respect of anything done
or omitted to be done by Trustee or Servicer in reliance thereon, whether or
not notation of the action is made upon such Certificate. By its acceptance of
a Purchased Interest pursuant to this Agreement and the applicable PI
Agreement, each Purchaser acknowledges and agrees that any request, demand,
authorization, direction, notice, consent, waiver or other act by a Purchaser
in respect of such Purchased Interest shall bind the Purchaser and every
subsequent Purchaser of such Purchased Interest in respect of anything done or
omitted to be done by the Trustee or the Servicer in reliance thereon.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement, any Supplement or any PI
Agreement to be given or taken by Certificateholders or any Agent for a
Purchaser may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by the Certificateholders or any Agent for a
Purchaser in person or by agent duly appointed in writing; and except as herein
otherwise expressly provided, the action shall become effective when the
instrument or instruments are delivered to Trustee (including by way of
facsimile transmission) and, when required, to Servicer. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement, any Supplement or any PI
Agreement and conclusive in favor of Trustee and Servicer, if made in the
manner provided in this section.
(d) The fact and date of the execution by any Certificateholder or any
Agent for a Purchaser of any such instrument or writing may be proved in any
reasonable manner that Trustee deems sufficient.
SECTION 13.3 Limitation on Rights of Certificateholders. (a) The
death or incapacity of any Certificateholder shall not operate to terminate
this Agreement, any Supplement or the Trust, nor shall the death or incapacity
entitle such Certificateholder's legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in any court for a
partition or winding up of the Trust, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
(b) No Certificateholder shall have any right to vote (except as
expressly provided otherwise in this Agreement) or in any manner otherwise to
control the operation and management of the Trust, or the obligations of the
parties hereto, nor shall any Certificateholder be under any liability to any
third Person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
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(c) No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to the Transaction Documents
(except to the extent any Supplement or related certificate purchase agreement
creates independent and non-duplicative rights), unless the Certificateholder
previously shall have given to Trustee, and unless the Required Investors shall
have made, written request upon Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and Trustee, for 30 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder, every Purchaser and
Trustee, that no one or more Certificateholders or Purchasers shall have any
right in any manner whatever by virtue of, or by availing itself or themselves
of, any provisions of a Transaction Document to affect, disturb or prejudice
the rights of any other Investor Certificateholder or Purchaser, or to obtain
or seek to obtain priority over or preference to any such other Investor
Certificateholder or Purchaser, except to the extent provided in the
Transaction Documents, or to enforce any right under the Transaction Documents,
except in the manner herein provided and for the equal, ratable and common
benefit of, all Investor Certificateholders and Purchasers (subject to the
priorities set forth in the Transaction Documents). For the protection and
enforcement of the provisions of this section, each and every
Certificateholder, each and every Purchaser and Trustee shall be entitled to
such relief as can be given either at law or in equity.
(d) By their acceptance of Certificates pursuant to this Agreement and
the applicable Supplement, the Certificateholders agree to the provisions of
this section.
SECTION 13.4 Limitation on Rights of Purchasers. (a) The death or
incapacity of any Purchaser shall not operate to terminate this Agreement, any
PI Agreement or the Trust, nor shall the death or incapacity entitle such
Purchaser's legal representatives or heirs to claim an accounting or to take
any action or commence any proceeding in any court for a partition or winding
up of the Trust, nor otherwise affect the rights, obligations and liabilities
of the parties hereto or any of them.
(b) No Purchaser shall have any right to vote, (except provided
otherwise in this Agreement) or in any manner otherwise to control the
operation and management of the Trust, or the obligations of the parties
hereto, nor shall any Purchaser be under any liability to any third Person by
reason of any action taken by the parties to this Agreement pursuant to any
provision hereof.
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(c) No Purchaser shall have any right by virtue of any provisions of
this Agreement to institute any suit, action or proceeding in equity or at law
upon or under or with respect to any Transaction Document (except to the extent
a PI Agreement creates independent and non-duplicative rights, unless such
Purchaser previously shall have given to Trustee, and unless the Required
Investors shall have made, written request upon Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and Trustee,
for 30 days after its receipt of such notice, request and offer of indemnity,
shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Purchaser with every other Purchaser, every Certificateholder and Trustee,
that no one or more Purchasers or Certificateholders shall have any right in
any manner whatever by virtue of, or by availing itself or themselves of, any
provisions of a Transaction Document to affect, disturb or prejudice the rights
of any other Investor Certificateholder or a Purchaser, or to obtain or seek to
obtain priority over or preference to any such other Investor Certificateholder
or Purchaser, except to the extent provided in the Transaction Documents, or to
enforce any right under the Transaction Documents, except in the manner herein
provided and for the ratable and common benefit of all Investor
Certificateholders and Purchasers (subject to the priorities set forth in the
Transaction Documents). For the protection and enforcement of the provisions
of this section, each and every Certificateholder, each and every Purchaser and
Trustee shall be entitled to such relief as can be given either at law or in
equity.
(d) By their acceptance of Purchased Interests pursuant to this
Agreement and the applicable Supplement, the Purchasers agree to the provisions
of this Section.
SECTION 13.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
SECTION 13.6 Notices. All demands, notices, instructions and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered, four Business Days after mailing if mailed
by registered mail, return receipt requested, or sent by facsimile transmission
(a) in the case of Transferor, to its address set forth below its signature
hereto, (b) in the case of the Initial Servicer, to its address set forth below
its signature hereto, and (c) in the case of Trustee, the Paying Agent or the
Transfer Agent and Registrar,
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<PAGE> 95
to the address of Trustee set forth on the signature pages hereof; or, as to
each party, at such other address or facsimile number as shall be designated by
it in a written notice to each other party given in accordance with this
section. Except to the extent expressly provided otherwise in an applicable
Supplement, any notice required or permitted to be mailed to a
Certificateholder shall be sent by first-class mail, postage prepaid, to the
address of such Certificateholder as shown in the Certificate Register. Except
to the extent expressly provided otherwise in the applicable PI Agreement, any
notice required to be mailed to a Purchaser shall be sent by first-class mail,
postage prepaid, to the address of such Purchaser as shown in the applicable PI
Agreement or at such other address designated by such Purchaser. Except to the
extent expressly provided otherwise in an applicable Supplement or PI
Agreement, any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given on the fourth Business
Day after the notice is so mailed, whether or not a Certificateholder or
Purchaser receives the notice. Servicer shall deliver or make available to the
Rating Agencies each certificate and report required to be prepared, forwarded
or delivered pursuant to Section 3.5 (excluding the Daily Reports) or 3.6 and a
copy of any amendment, consent or waiver to this Agreement, at the address of
the Rating Agency set forth above or at the other address as shall be
designated by the Rating Agency in a written notice to Servicer.
SECTION 13.7 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement or any of the
other Transaction Documents shall for any reason whatsoever be held invalid,
then the unenforceable covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants, agreements, provisions or terms
of this Agreement or the other Transaction Documents (as applicable) and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement, the Certificates, the Purchased Interests or any of the other
Transaction Documents or the rights of the Certificateholders or the
Purchasers.
SECTION 13.8 Certificates Nonassessable and Fully Paid. Except to the
extent otherwise expressly provided in Section 7.3 with respect to Transferor,
it is the intention of the parties to this Agreement that the
Certificateholders shall not be personally liable for obligations of the Trust,
that the interests in the Trust represented by the Certificates shall be
nonassessable for any losses or expenses of the Trust or for any reason
whatsoever and that Certificates upon authentication thereof by Trustee
pursuant to Section 6.2 are and shall be deemed fully paid.
SECTION 13.9 Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, each of Trustee, Servicer, Transferor, the
Paying Agent, the Authenticating Agent and the Transfer Agent and Registrar
(and each Investor Certificateholder or Purchaser by its acceptance of a
Certificate or
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<PAGE> 96
Purchased Interest) agrees that it shall not, with respect to the Trust or
Transferor, institute or join any other Person in instituting any proceeding of
the type referred to in the definition of "Bankruptcy Event" so long as any
Certificates or Purchased Interests issued by the Trust shall be outstanding or
there shall not have elapsed one year plus one day since the last day on which
any such Certificates or Purchased Interests shall have been outstanding. The
foregoing shall not limit the right of Servicer, Transferor, the Paying Agent,
the Authenticating Agent and the Transfer Agent and Registrar to file any claim
in or otherwise take any action with respect to any such insolvency proceeding
that was instituted against Transferor or the Trust by any Person other than
Servicer, Transferor, the Paying Agent, the Authenticating Agent or the
Transfer Agent and Registrar. In addition, each of Servicer, the Paying Agent,
the Authenticating Agent, the Transfer Agent and Registrar and (as to the
Trust) Transferor agree that all amounts owed to them by the Trust or
Transferor shall be payable solely from amounts that become available for such
payment pursuant to this Agreement and the Receivables Purchase Agreement, and
no such amounts shall constitute a claim against the Trust or Transferor to the
extent that they are in excess of the amounts available for their payment.
SECTION 13.10 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of Trustee, the Investor
Certificateholders or the Purchasers, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power
or privilege. The rights, remedies, powers and privileges herein provided are
cumulative and are not exhaustive of any rights, remedies, powers and
privileges provided by law.
SECTION 13.11 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.
SECTION 13.12 Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto and the
Certificateholders, the Purchasers, the Enhancement Providers and their
respective successors and permitted assigns. Except as otherwise expressly
provided in this Agreement, nothing contained in this Agreement shall confer
any rights upon any Person that is not a party to, or a permitted assignee of a
party to, this Agreement.
SECTION 13.13 Integration. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall
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<PAGE> 97
together constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof, superseding all prior oral or written
understandings.
SECTION 13.14 Binding Effect; Assignability; Survival of Provisions.
This Agreement shall be binding upon and inure to the benefit of Transferor,
Servicer and Trustee and their respective successors and permitted assigns;
provided, that Transferor shall not delegate any of its obligations hereunder
without the satisfaction of the requirements of Section 6.3(b). This Agreement
shall create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until the
termination of the Trust pursuant to Section 12.1. The rights and remedies with
respect to (a) any breach of any representation and warranty made by Transferor
in Section 2.3 or Section 7.1, (b) any breach of any representation and
warranty made by Servicer in Section 8.1 and (c) the indemnification and
payment provisions in Sections 3.9, 7.3, 8.4, 11.5 and 12.2(b) shall be
continuing and shall survive any termination of this Agreement.
SECTION 13.15 Recourse to Transferor. Payments to be made by
Transferor pursuant to this Agreement shall be paid to the extent that funds
are available to make the payments after all amounts to be paid to the
Certificateholders and the Purchasers pursuant to the applicable Supplement and
PI Agreement shall have been paid, and there shall be no recourse to Transferor
for all or any part of any amounts payable pursuant to any Transaction Document
if the funds are at any time insufficient to make all or part of any such
payments. The provisions of this section shall survive the termination of this
Agreement.
SECTION 13.16 Recourse to Transferred Assets. The Certificates do not
represent an obligation of, or an interest in, Transferor, any Seller,
Servicer, Trustee or any Affiliate of any of them. Except as expressly provided
otherwise in this Agreement, the Certificates and Purchased Interests are
limited in right of payment to the Transferred Assets.
SECTION 13.17 Submission to Jurisdiction. EACH PARTY HERETO HEREBY
IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK
STATE OR FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK, NEW YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE
TRANSACTION DOCUMENTS, (B) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF THE
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN THE STATE OR FEDERAL COURT,
(C) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF THE ACTION OR
PROCEEDING, AND (D) IN THE CASE OF TRANSFEROR AND THE INITIAL SERVICER,
IRREVOCABLY APPOINTS THE PROCESS AGENT AS ITS AGENT TO RECEIVE ON BEHALF OF IT
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<PAGE> 98
AND ITS PROPERTY SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER
PROCESS THAT MAY BE SERVED IN ANY ACTION OR PROCEEDING. The service may be made
by mailing or delivering a copy of the process to Transferor or the Initial
Servicer in care of the Process Agent at the Process Agent's address, and
Transferor hereby irrevocably authorizes and directs the Process Agent to
accept the service on its behalf. As an alternative method of service, each of
Transferor and Servicer also irrevocably consents to the service of any and all
process in any action or proceeding by the mailing of copies of the process to
Transferor or Servicer (as applicable) at its address specified herein. Nothing
in this section shall affect the right of any party hereto to serve legal
process in any other manner permitted by law or affect the right of any party
hereto to bring any action or proceeding against any or all of the other
parties hereto or any of their respective properties in the courts of any other
jurisdiction.
SECTION 13.18 Waiver of Jury Trial. EACH PARTY HERETO WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER OR RELATING TO THE TRANSACTION DOCUMENTS, OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE
DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), ACTIONS OF ANY OF THE PARTIES
HERETO OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THE TRANSACTION
DOCUMENTS, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE
A COURT AND NOT BEFORE A JURY.
SECTION 13.19 Certain Partial Releases. (a) If any Seller is
discontinued as a Seller pursuant to Section 1.8(a) or 1.8(c) of the Purchase
Agreement, Trustee shall, upon the request (and at the expense) of Transferor,
execute and deliver to the Transferor such statements of partial release and/or
amendment relating to the UCC-1 financing statements filed against such Seller
pursuant to the Purchase Agreement as shall be prepared by the Transferor and
provided to Trustee to evidence such termination; provided that Trustee shall
have received (i) an Officer's Certificate of Servicer to the effect that all
conditions to such termination specified in subclauses (i), (ii) and (iii) of
such Section 1.8(a) have been satisfied (and shall not have received notice
from any Investor Certificateholder, Purchaser or Agent to the contrary) and
(ii) an Opinion of Counsel to the effect that the filing of such statements of
partial release and/or amendment will not impair the validity, perfection or
priority of the Transferor's or Trustee's rights in and to (A) any Receivables
or Related Assets conveyed prior to the effective date of such termination or
(B) any Receivables or Related Assets generated by any remaining Seller on or
after the effective date of such termination. In addition, after a termination
that complies with the requirements set out in the preceding sentence, Trustee
shall, upon the request (and at the expense) of the Transferor, execute and
deliver to the Transferor the termination statements
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relating to the UCC-1 financing statements filed against the Seller pursuant to
the Purchase Agreement as shall be prepared by the Transferor and provided to
Trustee to evidence the termination; provided that Trustee shall have received
an Officer's Certificate of Servicer to the effect that Trustee no longer holds
any right, title or interest in the Receivables generated by the terminated
Seller. In connection with a termination described in Section 1.8(c) of the
Purchase Agreement, Trustee shall, if demanded by the Transferor, convey all of
its right, title and interest in all (but not less than all) of the Receivables
(and Related Assets with respect thereto) originated by the terminating Seller
to a Person designated by the terminating Seller, provided that such conveyance
by Trustee shall be pursuant to a Limited Warranty Assignment and shall be made
only against receipt by Trustee from the purchaser, in cash, of a release price
negotiated in good faith by the terminating Seller (but in no event shall such
release price be less than the lesser of (i) 102% of the price the Transferor
paid for such Receivables and Related Assets with respect thereto) and (ii) the
aggregate Unpaid Balance of such Receivables). No such release and conveyance
by Trustee shall, however, be permitted if as a result thereof any Related
Person would acquire the released Receivables.
(b) If (i) Servicer shall have filed a claim under any applicable
credit insurance policy with respect to an Obligor that does not owe, at the
time of such claim, any Eligible Receivables, (ii) arrangements shall have been
made to remit the proceeds of such claim to Trustee for deposit in the Master
Collection Account, and (iii) if the aggregate Unpaid Balance of Receivables
owed by such Obligor exceeds $500,000, Trustee shall have consented to the
submission of such claim, then Trustee shall, upon the request (and at the
expense) of Transferor, convey to Transferor all of Trustee's right, title and
interest in Receivables originated by such Obligor, and related partial
releases and/or amendments relating to UCC-1 financing statements prepared by
Transferor, provided that such release shall be a Limited Warranty Assignment.
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IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
AVONDALE RECEIVABLES COMPANY,
as Transferor
By:
Name:
--------------------------------------
Title:
-------------------------------------
Address: 506 South Broad Street
Monroe, Georgia 30655
Attention: Treasurer
Telephone: (707)267-2226
Facsimile: (707)267-2543
AVONDALE MILLS, INC.,
as initial Servicer
By:
------------------------------------------
Name:
--------------------------------------
Title:
Address: 506 South Broad Street
Monroe, Georgia 30655
Attention: Chief Financial Officer
Telephone: (707)267-2226
Facsimile: (707)267-2543
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
By:
------------------------------------------
Name:
Title:
Address: 1 M&T Plaza, 7th Floor
Buffalo, New York 14203-2399
Attention: Anita K. Spann
Corporate Trust Department
Telephone: (716)842-5217
<PAGE> 101
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
EXHIBIT A Form of Lockbox Account Letter Agreement
EXHIBIT B Form of Concentration Account Letter Agreement
EXHIBIT C Form of Monthly Servicer's Certificate
EXHIBIT D Annual Agreed-Upon Procedures
EXHIBIT E Form of Transferor Certificate
EXHIBIT F Form of Certificate to be Given by Certificate Owner
EXHIBIT G Form of Certificate to be Given by Euroclear or Cedel
EXHIBIT H Form of Certificate to be Given by Transferee of Beneficial Interest in a Regulation S Temporary
Book-Entry Certificate
EXHIBIT I Form of Transfer Certificate for Exchange or Transfer from 144A Book-Entry Certificate to
Regulation S Book-Entry Certificate
EXHIBIT J Form of Placement Agent Exchange Instructions
EXHIBIT K Form of Annual Servicer Certificate
SCHEDULES
SCHEDULE 1 Account Banks - Lockbox Banks/Concentration Banks
APPENDIX
APPENDIX A Definitions
</TABLE>
The registrants agree to furnish a copy of the Schedule, Exhibits and
Appendix listed above to the Securities and Exchange Commission upon request.
-v-
<PAGE> 1
EXHIBIT 10.3
================================================================================
SERIES 1996-1 SUPPLEMENT
TO POOLING AND SERVICING AGREEMENT
dated as of April 29, 1996
among
AVONDALE RECEIVABLES COMPANY,
as Transferor,
AVONDALE MILLS, INC.,
as Servicer,
and
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS
<S> <C> <C>
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Modification Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.3 Incorporation of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 1.4 Bill and Hold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 1.5 Lockbox Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II
DESIGNATION
SECTION 2.1 Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE III
CONDITIONS TO ISSUANCE
SECTION 3.1 Conditions to Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV
PAYMENTS AND ALLOCATIONS
SECTION 4.1 Interest; Additional Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.2 Daily Calculations and Series Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.3 Allocations of Daily Series Collections (Other Than in an Early Amortization Period) . . . . . 20
SECTION 4.4 Allocations of Daily Series Collections During an Early Amortization Period . . . . . . . . . . 22
SECTION 4.5 Withdrawals from the Equalization Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.6 Available Subordinated Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.7 Write-Offs and Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.8 Certain Dilution in an Early Amortization Period . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.9 Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.10 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE V
DISTRIBUTIONS AND REPORTS
<S> <C> <C>
SECTION 5.1 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.2 Special Distributions on the Refinancing Date . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.3 Payments in Respect of Transferor Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.4 Monthly Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.5 Annual Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.6 Periodic Perfection Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.7 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.8 Servicing Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI
EARLY AMORTIZATION EVENTS
SECTION 6.1 Early Amortization Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.2 Early Amortization Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII
OPTIONAL REDEMPTION; INDEMNITIES
SECTION 7.1 Optional Redemption of Investor Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 7.2 Indemnification by Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 7.3 Indemnification by Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.2 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.3 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.4 Amendment, Waiver, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.5 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.6 Instructions in Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.7 Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.8 Supplemental Ratings Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
<PAGE> 4
EXHIBITS
EXHIBIT A Form of Series 1996-1 Certificate
EXHIBIT B Form of Daily Report
Part 1. For Use other than in Early Amortization
Period
Part 2. For Use in Early Amortization Period
EXHIBIT C Form of Cash Flow Report
EXHIBIT D Form of Monthly Report
Part 1. For Use other than in Early Amortization
Period
Part 2. For Use in Early Amortization Period
EXHIBIT E Form of Seller Guaranty
<PAGE> 5
This SERIES 1996-1 SUPPLEMENT, dated as of April 29, 1996 (this
"Supplement"), is made among AVONDALE RECEIVABLES COMPANY, a Delaware
corporation, as Transferor, AVONDALE MILLS, INC., an Alabama corporation, as
the Initial Servicer, and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York
banking corporation, as Trustee.
Pursuant to the Pooling and Servicing Agreement, dated as of the date
hereof, (as it may be amended, supplemented or otherwise modified from time to
time, and as supplemented hereby, the "Pooling Agreement"), among Transferor,
Servicer and Trustee, Transferor may from time to time issue, and direct
Trustee to authenticate, on behalf of the Trust, one or more Series of
Certificates representing undivided interests in the Transferred Assets.
Certain terms applicable to a Series are to be set forth in a Supplement. This
Supplement is a "Supplement" as that term is defined in the Pooling Agreement.
Pursuant to this Supplement, Transferor and Trustee shall create a
Series of Certificates ("Series 1996-1") and specify certain of their terms.
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS
SECTION 1.1 Definitions. (a) Capitalized terms used and not otherwise
defined herein are used as defined in Appendix A to the Pooling Agreement. This
Supplement shall be interpreted in accordance with the conventions set forth in
Part B of that Appendix A.
(b) Each reference in this Supplement to funds on deposit in the
Carrying Cost Account, the Equalization Account or the Principal Funding
Account (or similar phrase) refers only to funds in the administrative
sub-accounts of those Accounts that are allocated to Series 1996-1. Unless the
context otherwise requires, in this Supplement: (i) each reference to a "Daily
Report" or "Monthly Report" refers to a Daily Report or Monthly Report for the
Series 1996-1 Certificates; (ii) each reference to the "Servicing Fee" refers
to the Servicing Fee allocable to Series 1996-1; (iii) each reference to the
"Series Collection Allocation Percentage" or the "Series Loss Allocation
Percentage" refers to the Series Collection Allocation Percentage or Series
Loss Allocation Percentage for the Series 1996-1 Certificates; and (iv) each
reference to the Transaction Documents shall include a reference to the
Certificate Purchase Agreement.
(c) Each capitalized term defined below relates only to the Series
1996-1 Certificates and to no other Series of Certificates. Whenever used in
this Supplement, the following words and phrases shall have the following
meanings:
<PAGE> 6
"ABR Tranche" means, at any time, the portion of the Invested Amount
that is designated by Transferor in accordance with the Certificate Purchase
Agreement to accrue interest based on the Alternate Base Rate.
"Acquisition Amount" means, on any day, the Invested Amount plus the
Deferred Portion (it being understood that the Acquisition Amount may vary from
day to day); provided that the Acquisition Amount shall be fixed on the last
day of the Revolving Period.
"Additional Amounts" means amounts payable pursuant to Sections 4.2,
4.3, 4.5, 4.6 and 10.5 of the Certificate Purchase Agreement.
"Adjusted Eligible Receivables" means, on any Business Day, the result
of (a) the aggregate Unpaid Balance of Eligible Receivables held by the Trust
on that day, minus (b) the Unapplied Cash held by the Trust on that day, plus
(c) the Aggregate Retained Balances, in each case as reflected in the Daily
Report for that day.
"Aged Receivables Ratio" means, as calculated in each Monthly Report
as of the Cut-Off Date for the related Calculation Period, a fraction
(expressed as a percentage) having (a) a numerator that is the sum of (i) the
aggregate Unpaid Balance of Receivables that remained outstanding 61 to 90 days
after their respective due dates, as determined as of the Cut-Off Date for such
Calculation Period, plus (ii) the aggregate Unpaid Balance of Receivables that
were written off as uncollectible during the most recently ended Calculation
Period and that, if not so written off, would have been outstanding not more
than 60 days after their respective due dates, as determined as of that Cut-Off
Date and (b) a denominator that is the aggregate amount payable pursuant to
invoices giving rise to Receivables that were generated by the Sellers during
the Calculation Period that occurred three Calculation Periods prior to the
most recently ended Calculation Period, as determined as of the Cut-Off Date
for such prior Calculation Period.
"Agent" means The First National Bank of Chicago ("FNBC"), in its
capacity as Agent under the Certificate Purchase Agreement, together with its
successors in that capacity. The Agent is an "Agent" for purposes of the
Pooling Agreement.
"Aggregate Retained Balances" means, on any Business Day, the
aggregate of the balances retained in Lockbox Accounts or Concentration
Accounts for items in the process of collection but for which funds have not
been made available by the related Lockbox Bank or Concentration Account Bank,
provided that (i) no notice of insufficient funds or similar situation shall
exist with respect thereto and (ii) the Unpaid Balance of Receivables shall
have been reduced by an amount equal to such balances.
"Alternate Base Rate" means, on any day, a fluctuating rate of
interest per annum equal to the higher of:
page 2
<PAGE> 7
(a) the rate of interest announced, from time to time, by the
Agent as its prime commercial rate for United States dollar loans made
in the United States for any day, and
(b) the Federal Funds Rate.
Any change in the interest rate resulting from a change in the prime commercial
rate announced by the Agent shall become effective without prior notice to
Transferor or Servicer as of 12:01 a.m., New York City time, on the Business
Day on which each change in the prime commercial rate is announced by the
Agent. The prime commercial rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged by the Agent to any
customer. The Agent may make commercial loans or other loans at rates of
interest at, above or below the prime commercial rate.
"Amortization Period" means the period (x) beginning on the earlier of
(i) the date on which a termination notice is given by the Sellers pursuant to
Section 8.1 of the Purchase Agreement and (ii) May 1, 2001, and (y) ending on
the earlier of (i) the Expected Final Payment Date and (ii) the date, if any,
on which an Early Amortization Period commences.
"Applicable Ratings Factor" means 2.00.
"Applicable Reserve Ratio" means, during any Distribution Period, the
greater of (a) the Minimum Required Reserve Ratio and (b) the Required Reserve
Ratio, in each case as calculated in the Monthly Report required to be
delivered on the Report Date immediately prior to the start of that
Distribution Period, provided that during the period from the Closing Date to
the first Distribution Date thereafter, the Applicable Reserve Ratio shall be
22.98%.
"Approval Condition" means, with respect to any specified event or
change in the terms applicable to this Supplement or the Series 1996-1
Certificates, (i) if the Series 1996-1 Certificates have been rated, the
Modification Condition shall be satisfied with respect to such event or change,
and (ii) such event or change shall have been approved in writing, prior to
becoming effective, by the Agent.
"ASA Measuring Period" means, for any Cut-Off Date falling in an Early
Amortization Period, the Calculation Period ending on that Cut-Off Date (or the
portion thereof falling after the Early Amortization Calculation Date, in the
case of the first Cut-Off Date falling in the Early Amortization Period).
"Available Subordinated Amount" means, at any time during an Early
Amortization Period, the amount calculated pursuant to Section 4.6.
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"Avondale Credit Agreement" means the Amended and Restated Credit
Agreement dated as of April 29, 1996 among Avondale, the financial institutions
named therein, Wachovia Bank of Georgia, N.A., as Agent, and FNBC, as
Documentation Agent.
"BA Box" is defined in Section 1.5.
"BofA" is defined in Section 1.5.
"Base Amount" means, on any Business Day, the result of the following
formula:
[NER x SCAP x (100%-ARR)] - CCRR
where:
ARR = the Applicable Reserve Ratio in effect for that
Business Day;
CCRR = the Carrying Cost Receivables Reserve for that
Business Day;
NER = the Net Eligible Receivables for that Business Day;
and
SCAP = the Series Collection Allocation Percentage for that
Business Day;
provided that: from and after the date upon which Transferor gives notice of
prepayment of the Series 1996-1 Certificates pursuant to Section 4.9, the Base
Amount shall equal the lower of (i) the Base Amount as calculated above and
(ii) the Base Amount as calculated for purposes of any Series of Certificates
being issued in connection with that prepayment.
"Carrying Cost Cash Required Amount" means, on any Business Day, an
amount equal to the Current Carrying Costs.
"Carrying Cost Receivables Reserve" means, on any Business Day, the
result of:
(a) the Current Carrying Costs; plus
(b) the product of (i) the Invested Amount, multiplied by (ii)
1.50 times the Certificate Rate, multiplied by (iii) a fraction the
numerator of which is the product of 2 and the number of Turnover Days
and the denominator of which is 360; plus
(c) the product of (i) the Series Collection Allocation
Percentage on the next preceding Distribution Date, multiplied by (ii)
the aggregate Unpaid Balance of Receivables held by Trustee on the
next preceding Distribution Date, multiplied by (iii) 1.25%,
multiplied by (iv) a fraction the numerator of which is the product of
2 multiplied by the number of Turnover Days and the denominator of
which is 360; minus
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<PAGE> 9
(d) the balance on deposit in the Carrying Cost Account at the
beginning of that Business Day.
"Cash Flow Report" means a report of the type described in Section
4.2(b).
"Certificate Purchase Agreement" means the Certificate Purchase
Agreement dated as of the Closing Date among Transferor, Servicer, the
purchasers of the Series 1996-1 Certificates, and the Agent. The Certificate
Purchase Agreement is hereby designated a "Transaction Document" for purposes
of the Pooling Agreement.
"Certificate Rate" means, at any time, the interest rate on the Series
1996-1 Certificates.
"Certificate Spread" means (i) with respect to the Eurodollar Tranche,
0.625% per annum, and (ii) with respect to the ABR Tranche, 0% per annum.
"Chemical" is defined in Section 1.5(d).
"Closing Date" means April 29, 1996.
"Concentration Factor" means, as of any Cut-Off Date, the greatest of:
(i) the "Benchmark Percentage" for purposes of clause (c) of
the definition of "Excess Concentration Balances,"
(ii) two times the "Benchmark Percentage" for purposes of
clause (d) of that definition, and
(iii) four times the "Benchmark Percentage" for purposes of
clause (e) of that definition.
"Current Carrying Costs" means, at any time, the amount of interest on
the Series 1996-1 Certificates and the amount of the Servicing Fee that will be
payable on the next Distribution Date.
"Daily Series Collections" is defined in Section 4.2.
"Deferred Portion" means, on any day the portion of the Acquisition
Amount as to which payment is deferred, which portion shall equal the sum of
the following amounts (as shown in the Daily Report for such day); (i) the
Excess Concentration Balances, plus (ii) the aggregate unpaid balance of
Receivables that are not Eligible Receivables, plus (iii) the Excess Bill and
Hold Balance, plus (iv) the Carrying Cost Receivables Reserve, plus (v) the
Applicable Reserve Ratio times the Net Eligible Receivables (it being
understood that the
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<PAGE> 10
Deferred Portion may vary from day to day); provided that the Deferred Portion
shall be fixed as of the last day of the Revolving Period.
"Dilution Horizon Variable" means, at any time, a fraction having (a)
a numerator equal to the sum of the aggregate amounts payable pursuant to
invoices giving rise to Receivables and generated by the Sellers during the
three Calculation Periods ending on the most recent Cut-Off Date (as of that
Cut-Off Date) and (b) a denominator equal to the Net Eligible Receivables as of
the most recent Cut-Off Date.
"Dilution Ratio" means, as calculated in each Monthly Report as of the
most recent Cut-Off Date, a fraction (expressed as a percentage) having (a) a
numerator equal to the aggregate amount of Dilution on the Receivables
occurring during the Calculation Period ending on the most recent Cut-Off Date,
and (b) a denominator equal to the aggregate amounts payable pursuant to
invoices giving rise to Receivables that were generated by the Seller during
the third preceding Calculation Period (so that, for example, if the
Calculation Period specified in clause (a) corresponded to the March fiscal
month, the Calculation Period in this clause (b) would be the one corresponding
to the December fiscal month); provided that if such third preceding
Calculation Period is of a shorter duration than the Calculation Period ending
on the most recent Cut-Off Date, the amount determined pursuant to clause (b)
will be multiplied by five and divided by four; and provided further that if
such third preceding Calculation Period is of a longer duration than the
Calculation Period ending on the most recent Cut-Off Date, the amount
determined pursuant to clause (b) will be multiplied by four and divided by
five.
"Dilution Reserve Ratio" means, as calculated in each Monthly Report,
the result (expressed as a percentage) calculated in accordance with the
following formula:
{(ARF x ADR) + [(HDR-ADR) x (HDR/ADR)]} x DHV
where:
ADR = the average of the Dilution Ratios during the period
of 12 consecutive Calculation Periods ending on the
related Cut-Off Date;
ARF = the Applicable Ratings Factor;
DHV = the Dilution Horizon Variable; and
HDR = the highest average of the Dilution Ratios for any
three consecutive Calculation Periods that occurred
during the 12 consecutive Calculation Periods ending
on the related Cut-Off Date.
"Dilution Reserve Ratio (Z-value)" means, as calculated in each
Monthly Report, the result (expressed as a percentage) calculated in accordance
with the following formula:
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<PAGE> 11
[(ARF x ADR) + (Z-value x SD)] x DHV x PTM
where:
ADR = the average of the Dilution Ratios during the period
of 12 consecutive Calculation Periods ending on the
related Cut-Off Date.
ARF = the Applicable Ratings Factor.
DHV = the Dilution Horizon Variable.
SD = the sample standard deviation, during the period of
12 consecutive Calculation Periods ending on the
related Cut-Off Date, of the Dilution Ratio.
PTM = the Payment Term Multiplier.
"DRC" means Duff & Phelps Rating Co.
"Early Amortization Calculation Date" means the day before an Early
Amortization Period begins.
"Early Amortization Period" means the period beginning on the date (if
any) specified in Section 6.2 and ending on the day on which the Invested
Amount has been reduced to zero.
"Eurodollar Rate" means for any Interest Period, the rate per annum
equal to the average of the rates at which deposits in Dollars having a
maturity comparable to such Interest Period that appear on Telerate Page 3750
as of 11:00 a.m., London time, two London Business Days prior to the
Distribution Date on which that Interest Period begins. For purposes of the
foregoing, "Telerate Page 3750" means the display page so designated on the Dow
Jones Telerate Service (or such other pages as may replace that page on that
service or such other service or services as may be nominated by the British
Banker's Association for the purpose of displaying London interbank offered
rates for Dollar deposits), and "London Business Day" means a day upon which
dealings in deposits in Dollars are transacted in the London interbank market.
Notwithstanding the foregoing, in the event that no rate for Dollar deposits
appears on Telerate Page 3750 on the applicable date for determining the
Eurodollar Rate with respect to any Distribution Date, then the Eurodollar Rate
shall be determined as the arithmetic mean (rounded upwards to the nearest
one-sixteenth of 1%) of the rates at which Dollar deposits having a maturity
comparable to such Interest Period are offered to prime banks in the London
interbank market by four major banks in that market selected by the Agent as of
the determination date and time specified above. If fewer than two quotations
are provided by such banks, then the Eurodollar Rate shall be determined as the
arithmetic mean (rounded upwards as above) of the rates at which loans in
Dollars are offered to leading European banks by three major banks in New York
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<PAGE> 12
City selected by the Agent as of 11:00 a.m. New York City time on the
determination date specified above.
"Eurodollar Tranche" means, during any Interest Period, the portion of
the Invested Amount that is designated by Transferor in accordance with the
Certificate Purchase Agreement to accrue interest based on the Eurodollar Rate.
"Excess Bill and Hold Balance" means, for any Test Period, an amount
(if positive) equal to: (a) the aggregate Unpaid Balance of Eligible
Receivables arising from Bill and Hold arrangements, as shown in the Daily
Report for the related Test Date, minus (b) 20% of the Adjusted Eligible
Receivables, as shown in such Daily Report.
"Excess Concentration Balances" means, on any day and with respect to
an Obligor, the aggregate Unpaid Balances of Eligible Receivables it owes that,
expressed as a percentage of the Adjusted Eligible Receivables, exceeds the
following percentages for the following Obligors:
(a) 100% for any Tier-1 Obligor;
(b) 100% for any Tier-2 Obligor;
(c) 20% for any Tier-3 Obligor;
(d) 10% for any Tier-4 Obligor; and
(e) 5% for any Tier-5 Obligor.
For purposes of placing Obligors in each of the tiers specified above, (i) all
Obligors that are Affiliates of each other shall be treated as a single
Obligor, and (ii) if an Obligor does not have either a commercial paper rating
or a senior actual or implied debt rating from the Specified Rating Agencies,
but is the wholly-owned direct or indirect Subsidiary of a Person that has
either such rating, such Obligor shall be placed in the same tier as such
Person would be placed if it was an Obligor. Each of the percentages above is
called a "Benchmark Percentage." Transferor may from time to time, by notice in
any Monthly Report (and, in each case, after satisfying the Approval Condition)
increase or decrease any Benchmark Percentage. Any such change shall also be
given effect for purposes of the definition of "Concentration Factor" and
consequently may result in a change to the Concentration Factor.
"Expected Final Payment Date" means November 1, 2001.
"Federal Funds Rate" means (a) the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for the day (or, if the day is
not a Business Day, the immediately
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<PAGE> 13
preceding Business Day) by the Federal Reserve Bank of New York; provided that
if the rate is not so published for any Business Day, the rate for purposes of
this clause will be the average of the quotations for the day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it, plus (b) 50 basis points.
"Final Scheduled Payment Date" means May 1, 2002.
"First Issuance Date" means April 29, 1996.
"Fully Funded Date" means the first date falling in the Amortization
Period or an Early Amortization Period on which: (a) Servicer has delivered a
Daily Report to Trustee and the Agent and (b) there are funds on deposit in the
Carrying Cost Account and the Principal Funding Account that, in the aggregate,
equal or exceed the Investor Repayment Amount and any Servicing Fee payable to
anyone other than a Related Person on the first Distribution Date falling after
that date.
"Guarantor" means Avondale, in its capacity as the guarantor under the
Seller Guaranty.
"Holdback Account Termination Date" is defined in Section 4.4.
"Holder" means a Holder (as defined in the Pooling Agreement) of a
Certificate.
"Intercreditor Provisions" means: (a) the Intercreditor Agreements,
and (b) the provisions of the Avondale Credit Agreement that permit the
transactions contemplated by the Transaction Documents to be consummated
(including without limitation the definitions of Receivables, Receivables
Documents, Receivables Program Assets, Receivables Program Obligations,
Receivables Related Assets, Receivables Securitization Program and Receivables
Subsidiary), as such provisions are in effect on the date hereof.
"Interest Period" means:
(a) as to the ABR Tranche (if any) from time to time, (i) the
period from the Closing Date to the first subsequent Distribution Date
and (ii) each Distribution Period thereafter; and
(b) as to the Eurodollar Tranche (if any) from time to time,
each period from the date upon which that Eurodollar Tranche was first
designated as such pursuant to the Certificate Purchase Agreement (or
the end of the next preceding Interest Period for the Eurodollar
Tranche, if there has been one) to the date that is one month, two
months or three months, at the option of Transferor, thereafter; and
if any Interest Period for the Eurodollar Tranche would otherwise end
on a day that is not a Business Day, the Eurodollar Tranche shall
instead end on the next Business Day (or,
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<PAGE> 14
if the next Business Day falls in the next calendar month, then on the
next preceding Business Day).
"Invested Amount" means, at any time, the sum of the purchase prices
paid for Purchases made pursuant to (and as defined in) the Certificate
Purchase Agreement at or prior to that time, reduced (but not below zero) by
(a) the aggregate amount of all distributions that have been made to the
Holders of the Series 1996-1 Certificates on account of principal, and (b) the
amount of all Investor Write-Offs that have been applied to reduce the Invested
Amount (net of Investor Allocable Recoveries and Investor Allocable Dilution
Adjustments that have been applied to reinstate the Invested Amount).
"Investor Allocable Dilution" means, for any ASA Measuring Period, the
product of the aggregate amount of Dilution for that ASA Measuring Period as to
which neither the applicable Seller nor the Guarantor has made any payment
required by Sections 3.1 and 3.5 of the Purchase Agreement, multiplied by the
Series Loss Allocation Percentage as of the beginning of that ASA Measuring
Period, multiplied by the Investor Allocation Percentage as of the first
Business Day of that ASA Measuring Period.
"Investor Allocable Dilution Adjustments" is defined in Section 4.8.
"Investor Allocable Loss Amount" means, for any ASA Measuring Period,
the product of the Loss Amount for that ASA Measuring Period, multiplied by the
Series Loss Allocation Percentage as of the beginning of that ASA Measuring
Period, multiplied by the Investor Allocation Percentage as of the first
Business Day of that ASA Measuring Period.
"Investor Allocable Recoveries" means, for any ASA Measuring Period,
the product of the Net Recoveries for that ASA Measuring Period, multiplied by
the Series Loss Allocation Percentage as of the beginning of that ASA Measuring
Period, multiplied by the Investor Allocation Percentage as of the first
Business Day of that ASA Measuring Period.
"Investor Allocation Percentage" means:
(x) on any Business Day falling in the Revolving Period, a
fraction (expressed as a percentage, which in any event may not exceed
100%) (a) the numerator of which is the Net Invested Amount as of that
Business Day, and (b) the denominator of which is the Base Amount as
of that Business Day; and
(y) on any Business Day falling in the Amortization Period or
an Early Amortization Period, a fraction (expressed as a percentage,
which in any event may not exceed 100%) (a) the numerator of which is
the Net Invested Amount as of the first day of the Amortization Period
or the Early Amortization Calculation Date, as applicable, and (b) the
denominator of which is the Base Amount as of the first day of the
Amortization Period or the Early Amortization Calculation Date, as
applicable.
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"Investor Ownership Percentage" means, on any Business Day, a fraction
(expressed as a percentage, which in any event may not exceed 100%) (x) the
numerator of which is the Acquisition Amount on such day and (y) the
denominator of which is the excess of (i) the Unpaid Balance of Receivables on
such day over (ii) the Unapplied Cash on such day; provided that the Investor
Ownership Percentage shall be fixed on the last day of the Revolving Period.
"Investor Repayment Amount" means, on any Business Day falling in the
Amortization Period or an Early Amortization Period, the sum of (a) the
outstanding principal amount of the Series 1996-1 Certificates, plus (b) the
interest and any Additional Amounts known to be payable on the Series 1996-1
Certificates on the first Distribution Date falling after that date.
"Investor Write-Offs" means, as calculated in any Monthly Report
relating to a Calculation Period falling completely or partially in an Early
Amortization Period:
(a) if the Available Subordinated Amount is greater than zero
at the end of the related ASA Measuring Period, zero; and
(b) if the Available Subordinated Amount is zero at the end
of the related ASA Measuring Period (after taking into account any
reduction in the Available Subordinated Amount shown in such Monthly
Report), the excess (if any) of (x) the sum of the Investor Allocable
Loss Amount and the Investor Allocable Dilution minus the sum of
Investor Allocable Recoveries and Investor Allocable Dilution
Adjustments for the related ASA Measuring Period, over (y) the
Available Subordinated Amount as of the beginning of that ASA
Measuring Period.
"Loss Amount" means, with respect to any ASA Measuring Period, an
amount equal to the positive difference (if any) of (a) the amount of
Receivables held by the Trust that became Write-Offs during that ASA Measuring
Period, minus (b) the amount of Recoveries received during that ASA Measuring
Period.
"Loss Reserve Ratio" means, as calculated in each Monthly Report, the
result (expressed as a percentage) of (a) the Applicable Ratings Factor
multiplied by (b) the highest average of the Aged Receivables Ratio for any
three consecutive Calculation Periods that occurred during the preceding 12
consecutive Calculation Periods ending on the most recent Cut-Off Date
multiplied by (c) a fraction having (i) a numerator equal to the sum of the
aggregate amounts payable pursuant to invoices giving rise to Receivables
generated by the Sellers during the three Calculation Periods preceding or
ending on the most recent Cut-Off Date, and (ii) a denominator equal to the Net
Eligible Receivables, as of the most recent Cut-Off Date, multiplied by (d) the
Payment Term Multiplier.
"Loss Reserve Ratio (Z-value)" means, as calculated in each Monthly
Report, the result (expressed as a percentage) of (a) the Loss Reserve Ratio
plus (b) the product of the Z-
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<PAGE> 16
value multiplied by the sample standard deviation of the Aged Receivables Ratio
during the preceding 12 consecutive Calculation Periods ending on the most
recent Cut-Off Date.
"Loss to Liquidation Ratio" means, as calculated in each Monthly
Report, a fraction (a) the numerator of which is the aggregate Unpaid Balance
of Receivables (net of recoveries) that were written off as uncollectible or
(without duplication) converted into promissory notes during the three
preceding Calculation Periods in accordance with the Credit and Collection
Policy of the applicable Seller, and (b) the denominator of which is the
aggregate amount of Collections on the Receivables received during such three
Calculation Periods.
"Minimum Required Reserve Ratio" means the sum, as of any Cut-Off
Date, of (a) the Concentration Factor for the Cut-Off Date plus (b) the product
of the average of the Dilution Ratios for the period of 12 preceding
Calculation Periods ending on the Cut-Off Date, multiplied by the Dilution
Horizon Variable for the Cut-Off Date; provided that in no event shall the
Minimum Required Reserve Ratio be less than 20%.
"Net Eligible Receivables" means, at any time, (a) the Adjusted
Eligible Receivables, minus (b) the then aggregate amount of all Excess
Concentration Balances with respect to all Obligors, minus (c) the Excess Bill
and Hold Balance.
"Net Invested Amount" means, on any Business Day, the Invested Amount,
reduced by the aggregate balance on deposit in the Equalization Account and the
Principal Funding Account.
"Net Recoveries" means, with respect to any ASA Measuring Period, an
amount equal to the positive difference (if any) of (a) the amount of
Recoveries received in that ASA Measuring Period minus (b) the amount of
Receivables that became Write-Offs in that ASA Measuring Period.
"Payment Term" shall mean, with respect to any Receivable, the number
of days between its invoice date and its due date.
"Payment Term Multiplier" shall mean, with respect to a Receivable,
(a) 1.0, if the Payment Term Variable is less than 51, (b) 1.11, if the Payment
Term Variable is equal to or more than 51 but less than 61, (c) 1.22, if the
Payment Term Variable is equal to or more than 61 but less than 71, (d) 1.33,
if the Payment Term Variable is equal to or more than 71 but less than 81, and
(e) 1.44, if the Payment Term Variable is equal to or more than 81 but less
than 90; provided, however, that if the Payment Term Variable equals or exceeds
90, the Payment Term Multiplier for such Receivable shall be determined by
calculating the sum of (x) 1.44, and (y) 0.06, for each 5-day increment by
which the Payment Term Variable exceeds 90, it being understood that the same
number shall apply for all Payment Term Variables that fall within a five-day
range.
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"Payment Term Variable" shall mean, as calculated in each Monthly
Report as of the most recently ended Cut-Off Date, the quotient of:
(x) the sum of (1) the product of the Unpaid Balance of each
Receivable as of such Cut-Off Date times (2) the Payment Term with
respect to such Receivable; divided by
(y) the aggregate Unpaid Balance of all Receivables as of such
Cut-Off Date.
"Principal Payment Date" means (i) any date on which the Invested
Amount is to be reduced pursuant to Section 3.1 of the Certificate Purchase
Agreement, (ii) any date on which any prepayment is to be made pursuant to
Section 4.9, (iii) the end of each Interest Period in respect of the next
maturing Eurodollar Tranche and/or ABR Tranche, in such order as the Agent
shall select so as to minimize "breakage costs," (iv) each Distribution Date
falling in an Early Amortization Period (beginning with the Distribution Date
falling in the Calculation Period after the Calculation Period in which the
Early Amortization Period begins) and (v) any Distribution Date falling on or
after the Expected Final Payment Date.
"Refinancing Date" is defined in Section 4.9.
"Required Purchasers" is defined in Section 9.9 of the Certificate
Purchase Agreement.
"Required Receivables" means, on any Business Day:
(a) So long as an Early Amortization Period has not commenced,
the result of the following formula:
IA + CCRR R
--------- X ---
(1 - ARR) NER
where:
ARR = the Applicable Reserve Ratio in effect for that
Business Day;
CCRR = the Carrying Cost Receivables Reserve, as reported in
the Daily Report for that Business Day;
IA = the Invested Amount;
NER = the Net Eligible Receivables as reported in the Daily
Report for that Business Day; and
R = the aggregate Unpaid Balance of Receivables held by
the Trust as reported in the Daily Report for that
Business Day.
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<PAGE> 18
(b) If an Early Amortization Period has commenced, the result
of the following formula:
AIA + ASA + UCCRR
where:
AIA = the Adjusted Invested Amount, which shall be the
Invested Amount as of the end of the Revolving
Period, reduced (but not below zero) by the amount of
all Investor Write-Offs (net of Investor Allocable
Recoveries and Investor Allocable Dilution Adjustments
that have been applied to reinstate the Invested
Amount);
UCCRR = the Unfunded Carrying Cost Receivables Reserve on that
Business Day; and
ASA = the Available Subordinated Amount on that Business
Day.
"Required Reserve Ratio" means, as calculated in each Monthly Report,
the greater of (a) the Loss Reserve Ratio plus the Dilution Reserve Ratio, and
(b) the Loss Reserve Ratio (Z-value) plus the Dilution Reserve Ratio (Z-value).
"Required Series Holders" means the Required Purchasers.
"Revolving Period" means the period beginning on the Closing Date and
ending on the day before the first day of the Amortization Period or an Early
Amortization Period.
"Series Allocable Dilution Adjustments" means, for any ASA Measuring
Period, the product of the aggregate amount of payments pursuant to Sections
3.3 and 3.5 of the Purchase Agreement or pursuant to the Seller Guaranty
received during that ASA Measuring Period relating to Dilution that occurred
prior to that ASA Measuring Period, multiplied by the Series Loss Allocation
Percentage as of the beginning of that ASA Measuring Period.
"Series 1996-1" is defined in the preamble.
"Series 1996-1 Certificates" means any of the Series 1996-1
Certificates issued pursuant to this Supplement, each of which shall be
substantially in the form of Exhibit A.
"Specified Rating Agencies" means, as to any Obligor: (a) if both DCR
and S&P rate such Obligor, DCR and S&P; and (b) if S&P rates such Obligor, but
DCR does not, S&P. If DCR rates such Obligor, but S&P does not, then the
Obligor is deemed to be an unrated Obligor.
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"Stated Amount" means as to any Certificate, the initial maximum
principal amount that may be required to be funded by the Holder of such
Certificate, as such amount may be reduced pursuant to Section 2.3 of the
Certificate Purchase Agreement.
"Test Date" means each of: (a) the Closing Date, (b) the Monday of
each calendar week, (c) the Refinancing Date, (d) the first day of the Early
Amortization Period, and (e) any other Business Day on which Servicer has
delivered (or is required to deliver) a Daily Report pursuant to the second
sentence of Section 4.4(a); and provided further that if the Monday of any
calendar week is not a Business Day, then the "Test Date" for such week shall
be the next Business Day. The "related" Test Date for any Test Period shall be
the Test Date that is the first day of such Test Period.
"Test Period" means:
(a) the period from (and including) the Closing Date to (but
excluding) the first Test Date thereafter, and
(b) each subsequent period from (and including) a Test Date
to (but excluding) the next Test Date.
"Tier-1 Obligor" means any Obligor that has (a) a commercial paper
rating from the Specified Rating Agencies of at least "A-1+" (or its
equivalent) or (b) a senior actual or implied debt rating from the Specified
Rating Agencies of at least "AAA" (or its equivalent); provided that if such
Obligor has both a commercial paper rating from the Specified Rating Agencies
and a senior actual or implied debt rating from the Specified Rating Agencies,
such Obligor must have a commercial paper rating from the Specified Rating
Agencies of at least "A-1+" (or its equivalent) and a senior actual or implied
debt rating from the Specified Rating Agencies of at least "AAA" (or its
equivalent) to be a Tier-1 Obligor.
"Tier-2 Obligor" means any Obligor (other than a Tier-1 Obligor) that
has (a) a commercial paper rating from the Specified Rating Agencies of at
least "A-1" (or its equivalent) or (b) a senior actual or implied debt rating
from the Specified Rating Agencies of at least "AA-" (or its equivalent),
provided that if such Obligor has both a commercial paper rating from the
Specified Rating Agencies and a senior actual or implied debt rating from the
Specified Rating Agencies, such Obligor must have a commercial paper rating
from the Specified Rating Agencies of at least "A-1" (or its equivalent) and a
senior actual or implied debt rating from the Specified Rating Agencies of at
least "AA-" (or its equivalent) to be a Tier-2 Obligor.
"Tier-3 Obligor" means any Obligor (other than a Tier-1 Obligor or a
Tier-2 Obligor) that has (a) a commercial paper rating from the Specified
Rating Agencies of at least "A-2" (or its equivalent) or (b) a senior actual or
implied debt rating from the Specified Rating
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Agencies of at least "A-" (or its equivalent), provided that if such Obligor
has both a commercial paper rating from the Specified Rating Agencies and a
senior actual or implied debt rating from the Specified Rating Agencies, such
Obligor must have a commercial paper rating from the Specified Rating Agencies
of at least "A-2" (or its equivalent) and a senior actual or implied debt
rating from the Specified Rating Agencies of at least "A-" (or its equivalent)
to be a Tier-3 Obligor.
"Tier-4 Obligor" means any Obligor (other than a Tier-1 Obligor, a
Tier-2 Obligor or a Tier-3 Obligor) that has (a) a commercial paper rating from
the Specified Rating Agencies of at least "A-3" (or its equivalent) or (b) a
senior actual or implied debt rating from the Specified Rating Agencies of at
least "BBB-" (or its equivalent), provided that if such Obligor has both a
commercial paper rating from the Specified Rating Agencies and a senior actual
or implied debt rating from the Specified Rating Agencies, such Obligor must
have a commercial paper rating from the Specified Rating Agencies of at least
"A-3" (or its equivalent) and a senior actual or implied debt rating from the
Specified Rating Agencies of at least "BBB-" (or its equivalent) to be a Tier-4
Obligor.
"Tier-5 Obligor" means any Obligor other than a Tier-1 Obligor, a
Tier-2 Obligor, a Tier-3 Obligor or a Tier-4 Obligor.
"Tranche" means each of the ABR Tranche and the Eurodollar Tranche.
"Transferor Indemnified Losses" is defined in Section 7.2.
"Transferor Indemnified Party" is defined in Section 7.2.
"Transferor Payment Percentage" means, on any Business Day, the
difference of 100% minus the Investor Allocation Percentage on that Business
Day.
"Unapplied Cash" means, on any Business Day, available funds received
in the Master Collection Account on that day that have not been applied as
Collections on a particular Receivable.
"Unfunded Carrying Cost Receivables Reserve" means, on any Business
Day falling in an Early Amortization Period, the difference (but not less than
zero) of (a) the Carrying Cost Receivables Reserve as of the Early Amortization
Calculation Date, minus (b) the aggregate Collections deposited into the
Carrying Cost Account during the portion of the Early Amortization Period up to
and including that Business Day.
"Unmatured Early Amortization Event" means an event or condition that,
upon the giving of notice or the passage of time, would become an Early
Amortization Event.
"Z-value" means 1.96.
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SECTION 1.2 Modification Condition. For so long as the Series 1996-1
Certificates remain outstanding, for purposes of the Transaction Documents the
definition of the term "Modification Condition" shall be as follows:
"Modification Condition" means, with respect to any action, that (i)
each Rating Agency has confirmed in writing that such action will not result in
a reduction or withdrawal of the rating of any outstanding Series or Purchased
Interest that was rated by such Rating Agency, and (ii) if any Series has not
been rated, the Trustee and the Required Series Holders for that Series shall
have consented in writing to such action.
SECTION 1.3 Incorporation of Terms. The terms of the Pooling
Agreement are incorporated in this Supplement as if set forth in full herein.
As supplemented by this Supplement, the Pooling Agreement is in all respects
ratified and confirmed and both together shall be read, taken and construed as
one and the same agreement. If the terms of this Supplement and the terms of
the Pooling Agreement conflict, the terms of this Supplement shall control with
respect to the Series 1996-1 Certificates.
SECTION 1.4 Bill and Hold. A Receivable that: (x) satisfies the
requirements of the definition of "Eligible Receivable" set forth in Appendix A
to the Pooling Agreement, other than the requirement (set forth in clause (b)
of that definition) that the related goods have been shipped and (y) arises
under an arrangement that satisfies the definition of "Bill and Hold" in such
Appendix A, shall be an "Eligible Receivable" for purposes of this Supplement.
SECTION 1.5 Lockbox Arrangements. (a) Certain Obligors currently
make payments to a lockbox (the "BA Box") with Bank of America ("BofA"). The
requirements of Section 3.3 and 7.1(i) of the Pooling Agreement and Section
5.1(o) and 6.1(j) of the Purchase Agreement will be waived with respect to such
Obligors for 60 days following the Closing Date if the following conditions are
satisfied: (i) within one week of the Closing Date, the Sellers and Transferor
shall have designated an alternative lockbox with a bank that has executed and
delivered a Lockbox Agreement, (ii) Servicer shall instruct such Obligors to
make payments to such alternative lockbox, (iii) the BA Box shall be closed
following such 60 day period, and BofA shall agree to remit, by courier, all
items received by it from such Obligors to a Bank Account with a bank that has
executed an Account Agreement, and (iv) on each Business Day prior to the
closing of the BA Box, Servicer shall instruct BofA to wire transfer all
available funds in any related lockbox account to Trustee.
(b) Certain Obligors who are not Domestic Persons currently make
payment to Bank Accounts. The parties intend that Receivables owed by such
Persons shall be Excluded Receivables. The requirements of Section 3.3 and
7.1(i) of the Pooling Agreement, Section 5.1(o) and 6.1(j) of the Purchase
Agreement and the proviso to the definition of Excluded Receivable shall be
waived for a period of 60 days following the Closing Date with respect
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to such Obligors provided that, within one week of the Closing Date, Servicer
shall have instructed such Persons to make payments to an account other than a
Bank Account.
(c) Certain Obligors who owe amounts for trucking or transportation
services (excluding any such services included in an invoice for the price of
goods) currently make payments to an account at Wachovia Bank of Georgia, N.A.
into which funds other than proceeds of Receivables are deposited. The
requirements of Section 3.3 and 7.1(i) of the Pooling Agreement and Section
5.1(o) and 6.1(j) of the Purchase Agreement shall be waived for a period of 60
days following the Closing Date with respect to such Obligors provided that
Servicer, Sellers and Transferor work diligently towards establishing
alternative arrangements for the deposit of such other funds as soon as
practicable.
(d) Certain Obligors are currently making payments to a lockbox with
Chemical Bank ("Chemical"). Chemical is in the process of negotiating a
Lockbox Agreement. The requirements of Section 3.3 and 7.1(i) of the Pooling
Agreement and Section 5.1(o) and 6.1(j) of the Purchase Agreement shall be
waived for a period of one week following the Closing Date, provided that the
following conditions are satisfied: (i) Servicer, Sellers and Transferor work
diligently towards completing such negotiations, and (ii) on each Business Day
until such Lockbox Agreement shall become effective, Servicer shall instruct
Chemical to wire transfer all available funds in any related lockbox account to
Trustee.
ARTICLE II
DESIGNATION
SECTION 2.1 Designation. There is hereby created a Series to be known
as the "Series 1996-1 Certificates." Subject to the conditions set forth in
Article III, Trustee shall authenticate and deliver the Series 1996-1
Certificates, to or upon the order of Transferor in an aggregate Stated Amount
equal to $120,000,000. Notwithstanding the terms of Section 6.1 of the Pooling
Agreement, the Series 1996-1 Certificates shall be in minimum denominations of
$2,000,000 and in integral multiples of $1,000,000 in excess of that amount.
The amount payable on any day by the Holders of such Certificates for the
undivided interests evidenced by the Certificates shall equal the Acquisition
Amount.
The Series 1996-1 Certificates represent an undivided interest in the
portion of the Transferred Assets allocable to this Series, which undivided
interest (expressed as a percentage) shall equal the Investor Ownership
Percentage.
The Deferred Portion of the Acquisition Amount shall be subject to a
holdback and shall be paid to the extent (and only to the extent) Daily Series
Collections are not required to pay amounts described in clauses first through
fourth of Section 4.3 or Section 4.4 (as
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applicable), it being understood that the Holders of Series 1996-1 Certificates
shall not be liable to pay any portion of the Deferred Portion not paid out of
Daily Series Collections.
ARTICLE III
CONDITIONS TO ISSUANCE
SECTION 3.1 Conditions to Issuance. Trustee will not authenticate the
Series 1996-1 Certificates unless all conditions to the issuance of the Series
1996-1 Certificates under Section 6.10 of the Pooling Agreement shall have been
satisfied.
ARTICLE IV
PAYMENTS AND ALLOCATIONS
SECTION 4.1 Interest; Additional Amounts. (a) Subject to Section 4.1
of the Certificate Purchase Agreement, Transferor may from time to time
allocate the outstanding principal amount under the Series 1996-1 Certificates
to one ABR Tranche or one Eurodollar Tranche. Interest on each of the ABR
Tranche and the Eurodollar Tranche shall be payable on each Distribution Date,
except that interest on the amount of any principal repaid on any other date
shall be payable on the date of the repayment. If any such day is not a
Business Day, interest shall instead be due on the next Business Day (or, if
the next Business Day falls in the next calendar month, then on the next
preceding Business Day).
(b) Interest on the Eurodollar Tranche shall accrue during any
Interest Period at a rate per annum equal to the Eurodollar Rate plus the
Certificate Spread and shall be calculated on the basis of actual days over a
year of 360 days.
(c) Interest on the ABR Tranche shall accrue at the Alternate Base
Rate in effect from time to time plus the Certificate Spread and shall be
calculated on the basis of actual days over a year of 365 or 366 days, as the
case may be.
(d) Interest with respect to the Series 1996-1 Certificates due but
not paid on any Distribution Date will be due on the next Distribution Date or
last day of the next Interest Period with additional interest on the amount at
2% per annum above the Alternate Base Rate to the extent permitted by law;
provided, however, that Transferor may direct any such overdue interest to be
paid on any Business Day prior to such next Distribution Date from funds on
deposit in the Carrying Cost Account.
(e) Additional Amounts shall also be payable with respect to the
Series 1996-1 Certificates as specified in the Certificate Purchase Agreement
and to the extent (but only to
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the extent) that funds become available for such Additional Amounts in
accordance with Sections 4.2 and 4.3.
SECTION 4.2 Daily Calculations and Series Allocations. (a) On each
Test Date, the Servicer shall prepare and deliver to the Trustee and the Agent
a Daily Report substantially in the form of Exhibit B (or such other form as
may be satisfactory to the Servicer, the Trustee and the Agent). The Servicer
shall also deliver a Daily Report in such form to the Trustee and the Agent on
any other day for which the Agent has requested a Daily Report. The Agent
shall not so request a Daily Report unless an Early Amortization Event has
occurred or the Agent reasonably questions whether there has been a material
change in the Base Amount since the most recent Test Date.
(b) On each Business Day, the Servicer shall prepare and deliver to
the Trustee and the Agent a Cash Flow Report substantially in the form of
Exhibit C (or such other form as may be satisfactory to Servicer, Trustee and
the Agent).
(c) No other Series or Purchased Interest shall be issued so long as
the Series 1996-1 Certificates are outstanding. As a consequence, the Series
Collection Allocation Percentage Series 1996-1 shall be 100%, and all funds
received in the Master Collection Account shall be allocated to Series 1996-1.
All such funds received in the Master Collection Account on any Business Day,
and any funds transferred on such day to the Master Collection Account from the
Equalization Account, are herein called the "Daily Series Collections" for such
day.
(d) On each Business Day, Trustee shall allocate Daily Series
Collections pursuant to Section 4.3 or 4.4 (as applicable) on the basis of the
most recently delivered Daily Report, as supplemented by the Cash Flow Report
(if any) for such day. Without limiting the foregoing, the parties shall assume
that the Base Amount on any day shall not be less than the Base Amount shown in
the most recent Daily Report. Notwithstanding such assumption, if on any
Business Day (as a result of the delivery of a subsequent Daily Report or
otherwise) the Agent determines that the Net Invested Amount exceeded the Base
Amount on any day when the Trustee remitted funds to the Transferor, then
Transferor shall immediately pay to Trustee, for deposit to the Equalization
Account, an amount equal to such excess. Amounts not paid when due pursuant to
the foregoing sentence shall bear interest at a rate of interest equal to 2%
per annum above the Alternate Base Rate to the extent permitted by law.
(e) The requirements of Section 3.2(f)(i) and Section 3.5(c) of the
Pooling Agreement shall be waived on each date on which a Daily Report is not
required to be delivered under this Section 4.2.
(f) The requirements of Section 5.1(l)(i) of the Purchase Agreement
and Section 6.1(k) of the Purchase Agreement shall be waived while the Series
1996-1 Certificates are outstanding.
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(g) Nothing in this Section 4.2 shall modify the requirements of the
Transaction Documents regarding the preparation and delivery of Monthly Reports.
SECTION 4.3 Allocations of Daily Series Collections (Other Than in an
Early Amortization Period). On each Business Day (other than a Business Day
falling in an Early Amortization Period or after the Fully Funded Date),
Servicer shall allocate the aggregate amount of Daily Series Collections
required to fund the items described in priorities first through fourth below,
to the following purposes, in the priority indicated (and to the extent of
Daily Series Collections available):
first, to the Carrying Cost Account until the amount allocated
to the Carrying Cost Account equals the Carrying Cost Cash Required
Amount shown in the most recent Daily Report;
second, if Transferor shall have notified the Agent in
accordance with Section 3.1 of the Certificate Purchase Agreement that
it desires to reduce the Invested Amount or if the Amortization Period
has begun, to the Principal Funding Account until the funds on deposit
in that account equal the amount of such reduction or (during the
Amortization Period) the Invested Amount, provided that the amount
allocated pursuant to this priority second on any Business Day shall
not exceed the product of (x) the Investor Ownership Percentage,
multiplied by (y) the excess of the Daily Series Collections over the
amounts allocated on that Business Day pursuant to priority first;
third, if during the Revolving Period the Net Invested Amount
(as shown in the most recent Daily Report) is greater than the Base
Amount (as shown in the most recent Daily Report), to the Equalization
Account until the amount on deposit therein is sufficient to reduce
the Net Invested Amount to an amount equal to the Base Amount; and
fourth, to hold in the Master Collection Account the amount
necessary to pay on the next Distribution Date all Additional Amounts
payable to the Holders (as shown in the most recent Daily Report).
On such Business Day, Servicer shall allocate the remainder of
the Daily Series Collections to make current and/or deferred transfer
payments to Transferor in respect of the Transferor Certificate,
provided that Transferor may, from time to time, direct Servicer to
direct Trustee to hold all or part of the funds to be paid pursuant to
this sentence in the Master Collection Account to be applied as Daily
Series Collections on the following Business Day.
If, on any day, the amount of Collections that is then allocated to
the Carrying Cost Account exceeds the amount of Collections that is then
required to be allocated to the
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Carrying Cost Account, Servicer shall reallocate such Collections on such day
to one or more of the obligations described in priorities second through fourth
above, and in the last sentence of the preceding paragraph, in the order of
priority set forth therein.
In addition, if, on any day, funds on deposit in the Master Collection
Account and available for allocation under priority fourth are less than the
amount of the obligations described therein, then the available Collections
shall be allocated by Servicer to the holders of such obligations pro rata
according to the respective amounts of such obligations held by them.
On any Business Day falling after the Fully Funded Date, all Daily
Series Collections shall be paid to Transferor as current and/or deferred
transfer payments.
SECTION 4.4 Allocations of Daily Series Collections During an Early
Amortization Period. On each Business Day falling in an Early Amortization
Period and prior to or on the Fully Funded Date, Servicer shall allocate the
Daily Series Collections to the following purposes, in the priority indicated
(and to the extent of Daily Series Collections available):
first, to the Carrying Cost Account to the extent that the
balance therein is less than the amount of Current Carrying Costs (as
shown in the most recent Daily Report, but excluding any Servicing Fee
payable to any Avondale Person) payable on the Distribution Date
relating to the Calculation Period during which such Business Day
falls;
second, to the Principal Funding Account and to Transferor
(or, prior to the Holdback Account Termination Date, to the Holdback
Account) in the following amounts:
(a) the amount to be transferred to the Principal
Funding Account shall equal the product of (i) the Investor
Allocation Percentage (as shown in the most recent Daily
Report), multiplied by (ii) the excess of the Daily Series
Collections over the amount allocated on that Business Day
pursuant to priority first, provided that the aggregate amount
so deposited shall in no event exceed the lesser of (x) the
Invested Amount and (y) the Investor Ownership Percentage
times the aggregate Unpaid Balance of Receivables as of the
last day of the Revolving Period, in each case as shown in the
most recent Daily Report; and
(b) the amount to be transferred to Transferor (or,
prior to the Holdback Account Termination Date, to the
Holdback Account) shall equal the product of (i) the
Transferor Payment Percentage (as shown in the most recent
Daily Report), multiplied by (ii) the excess of the Daily
Series Collections over the amount allocated on that Business
Day pursuant to priority first;
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third, to hold in the Master Collection Account the amount
necessary (as shown in the most recent Daily Report) to pay on the
next Distribution Date all Additional Amounts payable to the Holders;
fourth, to pay any Servicing Fee payable to any Avondale
Person on the Distribution Date relating to the Calculation Period
during which such Business Day falls; and
fifth, the balance to Transferor, provided that prior to the
Holdback Account Termination Date, amounts payable to Transferor
pursuant to this priority fifth shall be deposited into the Holdback
Account and held as provided below.
The "Holdback Account Termination Date" shall be the earlier to occur
of (i) the date that falls twelve months after the beginning of the Early
Amortization Period and (ii) the Fully Funded Date. If at any time prior to the
Holdback Account Termination Date, the amount of funds on deposit in the
Holdback Account exceeds the difference of (1) the Investor Repayment Amount
minus (2) the amount of funds then held in the Carrying Cost Account and the
Principal Funding Account that are available to pay the Investor Repayment
Amount, then the amount of such excess funds shall be released from the
Holdback Account and paid to Transferor as current and/or deferred transfer
payments. On each Test Date prior to the Holdback Account Termination Date,
Servicer shall calculate the sum of: (i) the aggregate Investor Allocable
Dilution as to which no Series Allocable Dilution Adjustments have been
received and (ii) Additional Amounts due and not paid. Such sum (or, if less,
the aggregate amount of funds in the Holdback Account) shall be transferred to
the Master Collection Account and applied to the items listed in the first
paragraph of this Section as priorities first through fifth, in that order
(except that no such funds shall be allocated to Transferor or the Holdback
Account pursuant to priority second and the amount allocable to the Principal
Funding Account shall not be limited by application of the Investor Allocation
Percentage). On the Holdback Account Termination Date, all remaining funds in
the Holdback Account shall be paid to Transferor.
If, on any day, funds on deposit in the Master Collection Account and
available for allocation under priority third are less than the amount of the
obligations described therein, then the available Collections shall be
allocated by Servicer to the holders of such obligations pro rata according to
the respective amounts of such obligations held by them.
On any Business Day falling after the Fully Funded Date, all Daily
Series Collections shall be paid to Transferor in respect of the Transferor
Certificate.
SECTION 4.5 Withdrawals from the Equalization Account. On any
Business Day during the Revolving Period on which Servicer delivers a Daily
Report to the Trustee and the Agent and no Early Amortization Event or
Unmatured Early Amortization Event exists, Servicer may instruct Trustee in
writing to withdraw funds from the Equalization Account
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and apply such funds as Daily Series Collections, so long as the Net Invested
Amount would not exceed the Base Amount after giving effect to such transfer
and application. On the first day of the Amortization Period or an Early
Amortization Period, Servicer shall instruct Trustee to transfer the entire
balance in the Equalization Account to the Principal Funding Account.
SECTION 4.6 Available Subordinated Amount. 2. If an Early
Amortization Period begins, Servicer shall promptly calculate the Available
Subordinated Amount as of the Early Amortization Calculation Date and report
such amount in the Daily Report for the first day in the Early Amortization
Period. Servicer shall also calculate the Available Subordinated Amount as of
each Cut-Off Date falling in the Early Amortization Period, such calculation to
be reflected in the related Monthly Report.
(b) The Available Subordinated Amount as of the Early Amortization
Calculation Date shall equal the product of (x) the Investor Allocation
Percentage, multiplied by (y) the result of:
(i) the product of the Unpaid Balance of Receivables held by
Trustee at the opening of business on the Early Amortization
Calculation Date, multiplied by the Series Collection Allocation
Percentage on that date; minus
(ii) the sum of (i) the lesser of (A) the Base Amount and (B)
the Net Invested Amount and (ii) the Carrying Cost Receivables Reserve
at the opening of business on the Early Amortization Calculation Date.
(c) The Available Subordinated Amount, as of any Cut-Off Date in the
Early Amortization Period, shall equal the result of:
(i) the Available Subordinated Amount as of the preceding
Cut-Off Date (or as of the Early Amortization Calculation Date, in the
case of the first Cut-Off Date falling in the Early Amortization
Period); minus
(ii) the Investor Allocable Loss Amount with respect to the
ASA Measuring Period ending on that Cut-Off Date; minus
(iii) any Investor Allocable Dilution with respect to the ASA
Measuring Period ending on that Cut-Off Date; plus
(iv) subject to Sections 4.7 and 4.8, the Investor Allocable
Recoveries and Investor Allocable Dilution Adjustments with respect to
the ASA Measuring Period ending on that Cut-Off Date.
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(d) Notwithstanding the foregoing, in no event shall the Available
Subordinated Amount at any time be less than zero or greater than the initial
Available Subordinated Amount calculated pursuant to subsection (b).
SECTION 4.7 Write-Offs and Recoveries. (a) In each Monthly Report
required to be delivered during the Early Amortization Period, Servicer shall
calculate the Investor Write-Offs and the Investor Allocable Recoveries for the
most recently ended ASA Measuring Period.
(b) If the Investor Write-Offs calculated in any Monthly Report
exceed zero, the Invested Amount and the outstanding principal amount of the
Series 1996-1 Certificates shall be reduced by the amount of the Investor
Write-Offs with effect from the related Distribution Date.
(c) If the Invested Amount has been reduced on account of any
Investor Write-Offs, then any Investor Allocable Recoveries with respect to any
Calculation Period ending after the reduction takes place shall be applied to
reinstate the Invested Amount and the outstanding principal amount of the
Series 1996-1 Certificates, to the extent of such prior reductions that have
not previously been reinstated, with effect from the related Distribution Date.
If Investor Allocable Recoveries are so applied to reinstate the Invested
Amount and the outstanding principal amount of the Series 1996-1 Certificates
on any Distribution Date, then Investor Allocable Recoveries shall be applied
to increase the Available Subordinated Amount on the same Distribution Date
only to the extent of the excess, if any, of the Investor Allocable Recoveries,
minus the amount of Investor Allocable Recoveries previously so applied to
reinstate the Invested Amount.
SECTION 4.8 Certain Dilution in an Early Amortization Period. (a) In
each Monthly Report required to be delivered during the Early Amortization
Period, Servicer shall calculate the Investor Allocable Dilution and the Series
Allocable Dilution Adjustments for the most recently ended ASA Measuring
Period.
(b) If the Investor Allocable Dilution calculated in any Monthly
Report is greater than zero, and there are funds in the Holdback Account, then
those funds (up to an amount equal to the amount of the Investor Allocable
Dilution), shall be allocated (i) first, in accordance with priority first of
the first paragraph of Section 4.4, (ii) second, to the Principal Funding
Account (in accordance with priority second of the first paragraph of Section
4.4), so long as the aggregate amount on deposit therein does not exceed the
Invested Amount and (iii) third, in accordance with priorities third through
fifth of the first paragraph of Section 4.4, in that priority.
(c) If the Available Subordinated Amount or the Invested Amount has
been reduced on account of any Investor Allocable Dilution, then (i) any Series
Allocable Dilution Adjustments with respect to any Calculation Period ending
after the reduction takes place and
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(ii) any funds on deposit in the Holdback Account (the "Investor Allocable
Dilution Adjustments") shall be allocated (x) first, to reinstate the Invested
Amount and the outstanding principal amount of the Series 1996-1 Certificates,
and (y) second, to reinstate the Available Subordinated Amount, in each case to
the extent not previously reinstated. Any amount so allocated on any day shall
be allocated (i) first, in accordance with priority first of Section 4.4, (ii)
second, to the Principal Funding Account, so long as the aggregate amount on
deposit therein does not exceed the Invested Amount and (iii) third, in
accordance with priorities third through fifth of the first paragraph of
Section 4.4, in that priority.
SECTION 4.9 Defeasance. On any Business Day falling in the Revolving
Period (but with not less than three Business Days prior written notice from
Servicer to the Holders), Servicer may, upon instruction from Transferor, cause
the Series 1996-1 Certificates to be prepaid in full (but not in part) by
causing the Series Interest to be conveyed to one or more Persons (who may be
the holders of a new Series issued substantially contemporaneously with such
prepayment) for a cash purchase price in an amount equal to the sum of (a) the
Invested Amount, plus (b) to the extent not available in the Carrying Cost
Account, accrued and unpaid interest on the Series 1996-1 Certificates to the
day of such prepayment (the "Refinancing Date"), plus (c) to the extent not
available from funds set aside pursuant to priority fourth of Section 4.3, any
Additional Amounts owed with respect to the Series 1996-1 Certificates
(including any Additional Amounts arising as a result of such prepayment). No
such prepayment or conveyance shall, however, be permitted if as a result
thereof Transferor or any of its Affiliates would acquire such Series Interest
or the underlying Receivables. The purchase price shall be deposited in the
Principal Funding Account and shall be distributed to the Agent, for further
distribution to the Holders, on the Refinancing Date in accordance with the
terms of Section 5.2.
SECTION 4.10 Tax Opinion . If any Tax Opinion is required to be
delivered in connection with the Series 1996-1 Certificates, the term "Tax
Opinion" shall have the meaning specified below:
"Tax Opinion" means, with respect to any action, an Opinion of Counsel
to the effect that, for Federal income tax and state (New York, Alabama,
Georgia, and/or South Carolina, as applicable) income and franchise tax
purposes, (a) such action will not adversely affect the characterization of the
Investor Certificates of Series 1996-1 as debt or partnership interests, (b)
following such action the Trust would not be treated as an association (or
publicly traded partnership) taxable as a corporation, (c) such action would
not be treated as a taxable event to any Series 1996-1 Investor
Certificateholder or Certificate Owner.
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ARTICLE V
DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions. On each Distribution Date and (with
respect to clause (b) below) each Principal Payment Date, other than a
Distribution Date that may be a Refinancing Date, Trustee shall, in accordance
with instructions set out in the applicable Daily Report, distribute to the
Agent, for further distribution among the Holders, the following amounts:
(a) accrued and unpaid interest on the Series 1996-1
Certificates, and any additional interest payable pursuant to Section
4.1, to the extent funds are available for such payment in the
Carrying Cost Account;
(b) on each Principal Payment Date, all funds deposited in
the Principal Funding Account on or prior to the most recent Cut-Off
Date (but in no event in excess of the Invested Amount) shall be
distributed in reduction of the Invested Amount;
(c) if, on the Expected Final Payment Date or any
Distribution Date falling in an Early Amortization Period, the funds
on deposit in the Carrying Cost Account (less any Servicing Fee
payable on that day to anyone other than a Related Person) will be
equal to or greater than the Invested Amount (after giving effect to
the distribution required by subsection (b)) and any then accrued and
unpaid Additional Amounts, then an amount equal to such remaining
Invested Amount and such Additional Amounts shall be withdrawn from
the Carrying Cost Account and distributed in reduction of the Invested
Amount and such Additional Amounts; and
(d) any Additional Amounts payable with respect to Series
1996-1 Certificates to the extent that funds have been allocated for
those Additional Amounts pursuant to priority fourth of Section 4.3 or
priority third of Section 4.4.
On each Distribution Date, Trustee shall also, in accordance with
instructions set out in the applicable Daily Report, distribute the Servicing
Fee to the Servicer to the extent that funds are available for that purpose in
the Carrying Cost Account.
On any Business Day, Trustee shall, in accordance with instructions
set out in the applicable Daily Report, distribute to the Agent, for further
distribution among the Holders, overdue interest payable pursuant to Section
4.1(d) on such Business Day, to the extent funds are available for such payment
in the Carrying Cost Account.
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SECTION 5.2 Special Distributions on the Refinancing Date. On the
Refinancing Date, Trustee shall, in accordance with instructions set out in the
applicable Daily Report, distribute to the Agent, for further distribution
among the Holders, the following amounts:
(a) all interest accrued on the Series 1996-1 Certificates
through the Refinancing Date, to the extent funds are available for
such payment in the Carrying Cost Account or have been deposited in
the Principal Funding Account pursuant to Section 4.9;
(b) all funds deposited in the Principal Funding Account
pursuant to Section 4.9; and
(c) any Additional Amounts payable with respect to the Series
1996-1 Certificates to the extent that funds for those Additional
Amounts have been allocated pursuant to priority fourth of Section 4.3
or priority third of Section 4.4 or deposited in the Principal Funding
Account pursuant to Section 4.9.
Any amounts payable to the Holders of Certificates pursuant to this
Section shall be paid to the Agent, and the Agent shall distribute such amounts
to such Holders.
SECTION 5.3 Payments in Respect of Transferor Certificate. On each
day on which funds are allocated pursuant to Sections 4.3 and 4.4 (and subject
to the terms of Section 4.4 relating to the Holdback Account), Trustee shall,
in accordance with instructions set out in the applicable Daily Report or Cash
Flow Report, distribute to Transferor, in respect of the Transferor
Certificate, all funds allocated for that purpose in accordance with those
Sections. In addition, after the Invested Amount has been repaid in full and
all interest and Additional Amounts owed to the Holders have been paid, any
additional funds on deposit in the Carrying Cost Account, the Equalization
Account or the Principal Funding Account shall similarly be paid to Transferor,
in respect of the Transferor Certificate.
SECTION 5.4 Monthly Reports. Each Monthly Report shall be
substantially in the applicable form set out in Exhibit D or in such other form
as may be satisfactory to Servicer and Trustee and consistent with the terms of
this Supplement and the Pooling Agreement. Copies of each Monthly Report shall
be provided free of charge by the Servicer to the Holders of Series 1996-1
Certificates.
SECTION 5.5 Annual Tax Information. On or before February 15 of each
calendar year, beginning with calendar year 1997, Servicer, on behalf of
Trustee, shall furnish or cause to be furnished to each Person who at any time
during the preceding calendar year was a Holder the information for the
preceding calendar year, or the applicable portion thereof during which the
Person was a Holder, as is required to be provided by an issuer of indebtedness
under the Internal Revenue Code to the holders of the issuer's indebtedness and
such other customary information as is necessary to enable such Holders to
prepare their
page 28
<PAGE> 33
federal income tax returns. Servicer's obligations under the preceding sentence
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Agent to the specified Persons
pursuant to the Pooling Agreement or any requirements of the Internal Revenue
Code as from time to time in effect. Notwithstanding anything to the contrary
contained in this Agreement, Trustee shall, to the extent required by
applicable law, from time to time furnish to the appropriate Persons a Form
1099-INT within the period required by applicable law.
SECTION 5.6 Periodic Perfection Certificate. On or before March 30 of
each calendar year, beginning with calendar year 1997, Servicer, on behalf of
Trustee, shall furnish or cause to be furnished to Trustee and the Agent an
Officer's Certificate setting forth a list of all changes in (a) the name,
identity or corporate structure of Transferor or any Seller and (b) the chief
executive office of Transferor or any Seller (or in the place of business of
Transferor or any Seller that has only one place of business) that have taken
place since the date of the Officer's Certificate most recently delivered
pursuant to this Section 5.6 (or since the Closing Date, in the case of the
first such Officer's Certificate to be delivered), or indicating that no such
events have taken place, and stating in each case what filings of UCC financing
statements, or amendments thereto, relating to the Transaction Documents have
been made in connection with each such event (identifying the date and filing
index numbers for each). Any financing statement identified in such an
Officer's Certificate delivered to Trustee shall be deemed to have been
identified to Trustee in writing for purposes of subsection 11.1(c)(v) of the
Pooling Agreement. If any such new UCC financing statements are filed, Servicer
shall cause Trustee to be named as secured party (in the case of any filing
against Transferor) or assignee of the secured party (in the case of any filing
against a Seller). If any "Event of Default" under (and as defined in) the
Avondale Credit Agreement occurs, the Servicer shall deliver an Officer's
Certificate covering the matters described above to the Trustee and the Agent
not later than 10 days after the occurrence of such event, and, for so long as
any such event remains outstanding, the Servicer shall deliver such an
Officer's Certificate on the last Business Day of each of March, June,
September and December.
SECTION 5.7 Officer's Certificate. In addition to the annual
statements required to be delivered by Servicer pursuant to Section 3.2(j) of
the Pooling Agreement, Servicer will also deliver to Trustee on or before July
15, 1996, an Officer's Certificate stating, as to each signer thereof, that (i)
a review of the activities of the Servicer during the period from the Closing
Date to June 30, 1996 and of performance under the Pooling Agreement has been
made under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all its obligations
under the Pooling Agreement in all material respects throughout the period
covered by such Officer's Certificate, or, if there has been a default in the
fulfillment in any material respect of such obligations, specifying each such
default known to such officer and the nature and status thereof and remedies
therefor being pursued.
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SECTION 5.8 Servicing Report of Independent Public Accountants. (a)
In addition to the servicing reports required to be delivered pursuant to
Section 3.7(a) of the Pooling Agreement, on or before 60 days after the end of
the second fiscal quarter in 1996, Servicer shall, as an expense of Servicer
paid out of the Servicing Fee, cause Ernst & Young LLP or another firm of
independent certified public accountants that is generally recognized as being
among the "big six" (which may also render other services to Servicer, the
Sellers or Transferor) to furnish a report to Trustee, Servicer and Transferor
(which report shall be addressed to Trustee and the Purchasers and shall relate
to the period from the Closing Date to the last day of the most recently ended
fiscal quarter). The accountant's report shall set forth the results of its
performance of the procedures described in Exhibit D to the Pooling Agreement
with respect to the Monthly Reports and Daily Reports delivered to Trustee
pursuant to Section 3.5 of the Pooling Agreement during the period covered by
such accountant's report.
(b) The accountant's report described in clause (a) shall state that
the accountant has compared the amounts contained in the Monthly Reports and a
sample randomly selected from all Daily Reports delivered to Trustee during the
period covered by the report with the records (including computer records) from
which the amounts were derived and that, on the basis of such comparison, the
amounts are in agreement with the documents and records, except for such
exceptions as it believes to be immaterial and such other exceptions as shall
be set forth in the report. A copy of the report may be obtained by a Holder
by a request in writing to Trustee addressed to the Corporate Trust Center.
ARTICLE VI
EARLY AMORTIZATION EVENTS
SECTION 6.1 Early Amortization Events. Each of the following shall
constitute an "Early Amortization Event":
(a) any of the following shall occur;
(i) failure on the part of Transferor or Servicer to
make any payment of the principal amount of or any interest on
the Series 1996-1 Certificates when due, or to make any
deposit required by the terms of any Transaction Document
within one Business Day after the date the deposit is required
to be made, or to make any other payment required by the terms
of any Transaction Document on or before three Business Days
after the date such payment is required to be made; or
(ii) failure on the part of Servicer to deliver a
Daily Report within the time period required under Section
3.5(c) of the Pooling Agreement, and
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<PAGE> 35
continuance of such failure for three Business Days; provided
that if the Servicer shall have estimated the Base Amount in
the Daily Report for one or more days due to adverse
circumstances beyond its control (as described in, and subject
to the limitations in, such Section 3.5(c)), then the three
day grace period specified in this clause (ii) shall be
reduced by the number of days on which the Base Amount was
estimated (of, if such number of days exceeds three, shall be
reduced to zero); or
(iii) failure on the part of the Servicer to deliver
a Monthly Report within the time required under Section 3.5(d)
of the Pooling Agreement and the applicable Supplement or PI
Agreement, and continuance of such failure for three Business
Days; or
(iv) failure on the part of Transferor, Guarantor,
Servicer or any Seller duly to observe or perform in any
material respect Section 6.1(f), 6.1(h), 6.1(i), 6.1(j),
6.3(a), 6.3(b), 6.3(c), 6.3(e) or 6.3(f) of the Purchase
Agreement or Section 7.2(c), 7.2(d)(i), 7.2(d)(ii),
7.2(d)(iii), 7.2(e), 7.2(f), 7.2(h), 7.2(i), 7.2(j), 7.2(k) or
7.2(m) of the Pooling Agreement, which failure continues
unremedied for a period of five Business Days; or
(v) failure on the part of Transferor, Guarantor,
Servicer or any Seller duly to observe or perform any other
covenant or agreement set forth in any Transaction Document,
which failure continues unremedied for a period of 30 days
after the date on which written notice thereof, requiring the
same to be cured, shall have been given to Transferor by
Trustee or to Transferor and Trustee by the Agent; or
(vi) Guarantor gives notice of termination of the
Seller Guaranty;
(b) any representation or warranty made by a Seller in
subsection 5.1(d), 5.1(k), 5.1(n), 5.1(o) or 5.1(r) of the Purchase
Agreement or by Transferor in subsection 2.3(a)(i), 2.3(a)(iii) or
7.1(i) of the Pooling Agreement shall prove to have been incorrect in
any material respect when made, and continues to be incorrect in any
material respect for a period of five Business Days, or any other
representation or warranty made by Transferor, Servicer or any Seller
in any Transaction Document shall prove to have been incorrect in any
material respect when made, and continues to be incorrect in any
material respect for a period of 30 days after the date on which
written notice thereof, requiring the same to be cured, shall have
been given to Transferor by Trustee or to Transferor and Trustee by
the Agent; provided that a mistake in the representation of a
Receivable as an Eligible Receivable or the breach of a representation
and warranty with respect to a Receivable shall not constitute an
Early Amortization Event unless and until the applicable Seller has
failed to make the cash payments (if any) owed under Sections 3.1 and
3.5 of the Purchase Agreement
page 31
<PAGE> 36
in respect of such mistake or breach (it being understood that certain
of such mistakes or breaches may result in a non-cash adjustment under
the Purchase Agreement);
(c) a Bankruptcy Event shall occur with respect to
Transferor, Servicer, Guarantor or any Seller, or Transferor shall
become unable, for any reason, to transfer Receivables or other
Transferred Assets to the Trust in accordance with the provisions of
this Agreement and the Pooling Agreement; provided that if, at the
time any event that would, with the passage of time, become a
Bankruptcy Event occurs as a result of a bankruptcy proceeding being
filed against Transferor or any Seller, then, on and after the day on
which the bankruptcy proceeding is filed until the earlier to occur of
the dismissal of the proceeding and the Early Amortization
Commencement Date, Transferor shall not purchase Receivables and
Related Assets from the affected Seller or, if Transferor is the
subject of the proceeding, transfer Receivables and Related
Transferred Assets to the Trust;
(d) the Trust or Transferor shall be required to be
registered as an "investment company" under and within the meaning of
the Investment Company Act of 1940, as amended;
(e) the Net Invested Amount exceeds the Base Amount for a
period of three or more consecutive Business Days starting with the
delivery of the related Daily Report (or, if a Daily Report has not
been delivered when required hereunder, starting with the date on
which such delivery was required);
(f) a Servicer Default shall have occurred and shall not have
been remedied;
(g) Avondale shall cease to own, directly or indirectly, 100%
of the issued and outstanding capital stock of Transferor;
(h) the Internal Revenue Service or the PBGC files one or
more Tax or ERISA Liens against the assets of Transferor or any Seller
(including Receivables) and either (x) such Tax or ERISA Liens remain
in effect for fifteen days, or (y) the aggregate amount secured
thereby exceeds $1,000,000;
(i) the cessation of, or the failure to create, a valid
first-priority perfected ownership or security interest in favor of
Trustee in the Receivables or the rights of Transferor under the
Purchase Agreement;
(j) the Invested Amount is not paid in full on the Expected
Final Payment Date;
(k) Transferor's net worth (as calculated in accordance with
GAAP, except that all obligations owed to Transferor from an Avondale
Person shall not constitute
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<PAGE> 37
assets or equity for purposes of such calculation) shall be less than
22% of the aggregate Unpaid Balance of the Receivables at any time and
such condition continues for five or more consecutive Business Days;
(l) any foreclosure or similar proceeding in respect of any
adverse claim on any Buyer Note or the Transferor's common stock shall
have been commenced; or title to any Buyer Note or Transferor's common
stock shall pass to the holders of such adverse claim, it being
understood that the grant of a security interest in the stock of
Transferor or any Buyer Note to a creditor of a Seller that is party
to an Intercreditor Agreement shall not be an Early Amortization Event;
(m) the Intercreditor Provisions shall be amended, waived,
modified or breached without the prior written consent of the Agent;
(n) the average of the Aged Receivables Ratio for any three
consecutive Calculation Periods shall be greater than 5.5%; or
(o) the average of the Dilution Ratio for any three
consecutive Calculation Periods shall be greater than 4.25%.
SECTION 6.2 Early Amortization Period. Upon the occurrence and
continuance of any Early Amortization Event described in subsection 6.1(c), an
Early Amortization Period shall commence without any notice or other action on
the part of Trustee or the Series 1996-1 Certificateholders, immediately upon
the occurrence of such Early Amortization Event. Upon the occurrence and
continuance of any other Early Amortization Event, after the applicable grace
period, if any, set forth in such subsection, Trustee may (and, at the
direction of the Required Series Holders, shall) by notice then given in
writing to Transferor and Servicer, declare that an Early Amortization Period
has commenced as of the date of Transferor's receipt of the notice.
ARTICLE VII
OPTIONAL REDEMPTION; INDEMNITIES
SECTION 7.1 Optional Redemption of Investor Interests. On any
Distribution Date occurring during an Early Amortization Period with respect to
the Series 1996-1 Certificates on or after the date that the Invested Amount is
reduced to ten percent or less of the sum of the initial Stated Amounts for the
Certificates, Transferor shall have the option to redeem the Series 1996-1
Series Interest. The purchase price will be an amount equal to the Invested
Amount plus accrued and unpaid interest (and accrued and unpaid interest with
respect to interest that was due but not paid on any prior Distribution Date)
through the day preceding the Distribution Date at the Certificate Rate
applicable to the Series plus the aggregate
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<PAGE> 38
amount by which the Invested Amount has been reduced on account of Investor
Write-Offs and Investor Allocable Dilution (and not subsequently reinstated)
plus any Additional Amounts then due. Upon the tender of the outstanding
Certificates of the Series by the Holders, Trustee shall distribute the
amounts, together with all funds on deposit in the Principal Funding Account
that are allocable to the Series 1996-1 Certificates, to the Holders of the
Series on the next Distribution Date in repayment of the principal amount and
accrued and unpaid interest owing to the Holders. Following any redemption, the
Holders of the Series shall have no further rights with respect to the
Receivables. In the event that Transferor fails for any reason to deposit in
the Principal Funding Account the aggregate purchase price for the Series
1996-1 Certificates, payments shall continue to be made to the Holders of the
Series in accordance with the terms of the Pooling Agreement and this
Supplement.
SECTION 7.2 Indemnification by Transferor. (a) Transferor hereby
agrees to indemnify the Trust, Trustee, each Holder of a Series 1996-1
Certificate and each of the successors, permitted transferees and assigns of
any such Person and all officers, directors, shareholders, controlling Persons,
employees, affiliates and agents of any of the foregoing (each of the foregoing
Persons individually being called a "Transferor Indemnified Party"), forthwith
on demand, from and against any and all damages, losses, claims (whether on
account of settlements or otherwise, and whether or not the relevant
Indemnified Party is a party to any action or proceeding that gives rise to any
Transferor Indemnified Losses (as defined below)), judgments, liabilities and
related reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) (all of the foregoing collectively being called "Transferor
Indemnified Losses") awarded against or incurred by any of them that arise out
of or relate to this Agreement, any other Transaction Document or any of the
transactions contemplated herein or therein or the use of proceeds herefrom or
therefrom (including without limitation any Transferor Indemnified Losses (i)
relating to any Adverse Claim, without regard to whether such Adverse Claim was
a Permitted Adverse Claim, or (ii) arising from any failure to make any filing
or obtain any consent as required by the Federal Assignment of Claims Act with
respect to any Receivables).
Notwithstanding the foregoing, in no event shall any Transferor
Indemnified Party be indemnified for any Transferor Indemnified Losses (i)
resulting from gross negligence or willful misconduct on the part of such
Transferor Indemnified Party (or the gross negligence or willful misconduct on
the part of any of its officers, directors, employees, affiliates or agents),
or the breach by such Transferor Indemnified Party of its obligations under any
Transaction Document, (ii) to the extent they include Transferor Indemnified
Losses in respect of Receivables and reimbursement therefor that would
constitute credit recourse to Transferor for the amount of any Receivable or
Related Transferred Asset not paid by the related Obligor (it being understood
and agreed that the Transferor's liability for the return of funds distributed
to it on a day when the Net Invested Amount exceeded the Base Amount shall not
constitute credit recourse), (iii) to the extent they are or result from lost
profits, (iv) to the extent they are or result from taxes (including interest
and penalties thereon) asserted
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<PAGE> 39
with respect to (A) distributions on the Series 1996-1 Certificates, (B)
franchise or withholding taxes imposed on any Transferor Indemnified Party
other than the Trust or Trustee in its capacity as Trustee, or (C) federal or
other income taxes on or measured by the net income of such Transferor
Indemnified Party (other than franchise taxes imposed on the Trust) and costs
and expenses in defending against the same, or (v) to the extent they
constitute consequential, special or punitive damages.
If for any reason the indemnification provided in this section is
unavailable to a Transferor Indemnified Party or is insufficient to hold a
Transferor Indemnified Party harmless, then Transferor shall contribute to the
amount paid by such Transferor Indemnified Party as a result of any loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by such Transferor Indemnified Party on the
one hand and Transferor on the other hand, but also the relative fault (if any)
of such Transferor Indemnified Party and Transferor and any other relevant
equitable considerations.
Notwithstanding any provisions contained in any Transaction Document
to the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless funds are allocated for such payment
pursuant to Article IV of this Supplement. Any amount which Transferor does
not pay pursuant to the operation of the preceding sentence shall not
constitute a claim (as defined in Section 101 of the Bankruptcy Code) against
or corporate obligation of Transferor for any such insufficiency.
(b) If any action, suit, proceeding or investigation is commenced, as
to which a Transferor Indemnified Party proposes to demand indemnification, it
shall notify the Transferor with reasonable promptness; provided, however, that
any failure by such Transferor Indemnified Party to notify the Transferor shall
not relieve the Transferor from its obligations hereunder (except to the extent
that the Transferor is prejudiced by such failure to promptly notify). The
Transferor shall be entitled to assume the defense of any such action, suit,
proceeding or investigation, including the employment of counsel reasonably
satisfactory to the Transferor Indemnified Party. The Transferor Indemnified
Party shall have the right to counsel of its own choice to represent it, but
the fees and expenses of such counsel shall be at the expense of such
Transferor Indemnified Party unless: (a) the Transferor has failed promptly to
assume the defense and employ counsel reasonably satisfactory to the Transferor
Indemnified Party in accordance with the preceding sentence, or (b) the
Transferor Indemnified Party shall have been advised by counsel that there
exists an actual or potential conflict of interests among the Transferor and
such Transferor Indemnified Party, including situations in which one or more
legal defenses may be available to such Transferor Indemnified Party that are
inconsistent with those available to the Transferor; provided, however, that
the Transferor shall not, in connection with any one such action or proceeding
or separate but substantially similar actions or proceedings arising out of the
same general allegations, be liable for fees and expenses of more than one
separate firm of attorneys (other than local counsel) at any time for all
Transferor Indemnified Parties; and such counsel shall,
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<PAGE> 40
to the extent consistent with its professional responsibilities, cooperate with
the Transferor and any counsel designated by the Transferor.
The Transferor further agrees that it will not, without the prior
written consent of the applicable Transferor Indemnified Party, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Transferor Indemnified Party is an actual
or potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
Transferor Indemnified Party from all liability and obligations arising
therefrom.
SECTION 7.3 Indemnification by Servicer. Servicer agrees that each
Agent and each Holder of a Series 1996-1 Certificate shall be an "Indemnified
Party" for purposes of the Pooling Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
SECTION 8.2 Counterparts. This Supplement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.
SECTION 8.3 Severability of Provisions. If any one or more of the
provisions or terms of this Supplement shall for any reason whatsoever be held
invalid, then the unenforceable provision(s) or term(s) shall be deemed
severable from the remaining provisions or terms of this Supplement and shall
in no way affect the validity or enforceability of the other provisions or
terms of this Supplement.
SECTION 8.4 Amendment, Waiver, Etc. This Supplement may be amended,
modified or waived from time to time by Servicer, Transferor and Trustee with
the consent of the Required Series Holders or the Holders of Series 1996-1
Certificates (as applicable) to the extent permitted by Section 13.1 of the
Pooling Agreement and Section 10.1 of the Certificate Purchase Agreement, and
the terms of that section shall apply to any such amendment, modification or
waiver.
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SECTION 8.5 Trustee. Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplement
or for or in respect of the recitals contained herein, all of which recitals
are made solely by Transferor and Servicer.
SECTION 8.6 Instructions in Writing. All instructions given by
Servicer to Trustee pursuant to this Supplement shall be in writing, and may be
included in a Daily Report, Cash Flow Report or Monthly Report.
SECTION 8.7 Rule 144A. So long as any of the Series 1996-1
Certificates are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, Transferor shall, unless it becomes subject to and
complies with the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, or rule 12g3-2(b) thereunder,
provide to any Holder of such restricted securities, or to any prospective
purchaser of such restricted securities designated by a Holder, upon the
request of such Holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Act.
SECTION 8.8 Supplemental Ratings Requirement. So long as any of the
Series 1996-1 Certificates are outstanding, if any provision of the Purchase
Agreement, the Pooling Agreement, this Supplement or the Certificate Purchase
Agreement requires a person or investment to have a certain rating from S&P,
and such person or investment is also rated by DCR, such provision shall be
read to also require a rating from DCR that is equivalent to the required
rating from S&P.
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IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
AVONDALE RECEIVABLES COMPANY, as
Transferor
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AVONDALE MILLS, INC., as Servicer
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE> 43
EXHIBITS
EXHIBIT A Form of Series 1996-1 Certificate
EXHIBIT B Form of Daily Report
Part 1. For Use other than in Early Amortization
Period
Part 2. For Use in Early Amortization Period
EXHIBIT C Form of Cash Flow Report
EXHIBIT D Form of Monthly Report
Part 1. For Use other than in Early Amortization
Period
Part 2. For Use in Early Amortization Period
EXHIBIT E Form of Seller Guaranty
The registrants agree to furnish a copy of the Exhibits listed above
to the Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 10.4
==================================================================
CERTIFICATE PURCHASE AGREEMENT
(SERIES 1996-1)
dated as of April 29, 1996
among
AVONDALE RECEIVABLES COMPANY,
AVONDALE MILLS, INC.,
AS THE INITIAL SERVICER,
THE PURCHASERS DESCRIBED HEREIN,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
==================================================================
<PAGE> 2
TABLE OF CONTENTS
||
<TABLE>
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
PURCHASE AND SALE OF CERTIFICATES
SECTION 2.1 The Commitments . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.2 Purchase Mechanics . . . . . . . . . . . . . . . . . . . 3
SECTION 2.3 Reduction of Stated Amounts . . . . . . . . . . . . . . 4
SECTION 2.4 Certificates . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REDUCTIONS IN INVESTED AMOUNT
SECTION 3.1 Transferor's Right to Reduce Invested Amount. . . . . . 5
SECTION 3.2 Notice to Purchasers. . . . . . . . . . . . . . . . . . 5
ARTICLE IV
TRANCHES, INTEREST AND FEES
SECTION 4.1 Tranches . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4.2 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4.3 Yield Protection . . . . . . . . . . . . . . . . . . . . 7
SECTION 4.4 Illegality; Unavailability . . . . . . . . . . . . . . . 10
SECTION 4.5 Indemnity . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V
OTHER PAYMENT TERMS
SECTION 5.1 Time and Method of Payment . . . . . . . . . . . . . . . 12
SECTION 5.2 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . 13
</TABLE>
i
<PAGE> 3
<TABLE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
SECTION 6.1 Transferor . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.2 Initial Servicer and Avondale . . . . . . . . . . . . . 14
SECTION 6.3 Purchasers . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII
CONDITIONS
SECTION 7.1 Conditions to Initial Purchase . . . . . . . . . . . . . 15
SECTION 7.2 Conditions to Each Purchase . . . . . . . . . . . . . . 19
ARTICLE VIII
COVENANTS
SECTION 8.1 Affirmative Covenants . . . . . . . . . . . . . . . . . 20
SECTION 8.2 Negative Covenants . . . . . . . . . . . . . . . . . . . 21
SECTION 8.3 Transfers . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX
AGENT; REQUIRED PURCHASERS
SECTION 9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9.2 Nature of Duties . . . . . . . . . . . . . . . . . . . . 22
SECTION 9.3 Lack of Reliance on Agent and Financial Advisor . . . . 22
SECTION 9.4 Certain Rights of Agent . . . . . . . . . . . . . . . . 23
SECTION 9.5 Reliance . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.6 Indemnification . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.7 Agent in its Individual Capacity . . . . . . . . . . . . 24
SECTION 9.8 Resignation by Agent . . . . . . . . . . . . . . . . . . 24
SECTION 9.9 Required Purchasers. . . . . . . . . . . . . . . . . . 25
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Amendments . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 10.2 No Waiver; Remedies . . . . . . . . . . . . . . . . . . 26
SECTION 10.3 Successors and Assigns; Assignments . . . . . . . . . . 26
SECTION 10.4 Survival of Agreement . . . . . . . . . . . . . . . . . 31
SECTION 10.5 Expenses; Indemnification . . . . . . . . . . . . . . . 31
SECTION 10.6 Entire Agreement . . . . . . . . . . . . . . . . . . . 33
SECTION 10.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
ii
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<TABLE>
<S> <C> <C>
SECTION 10.8 No Third-Party Beneficiaries . . . . . . . . . . . . . 34
SECTION 10.9 Severability of Provisions . . . . . . . . . . . . . . 34
SECTION 10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . 34
SECTION 10.11 Governing Law . . . . . . . . . . . . . . . . . . . . . 34
SECTION 10.12 Tax Characterization . . . . . . . . . . . . . . . . . 34
SECTION 10.13 No Proceedings . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
||
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<TABLE>
SCHEDULE
<S> <C>
SCHEDULE I Amount of Each Initial Purchaser's Certificate
EXHIBITS
EXHIBIT A Form of Pooling and Servicing Agreement
EXHIBIT B Form of Receivables Purchase Agreement
EXHIBIT C Form of Series 1996-1 Supplement
EXHIBIT D Form of Assignment Agreement
APPENDIX
APPENDIX X Index of Additional Defined Terms
</TABLE>
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<PAGE> 6
This CERTIFICATE PURCHASE AGREEMENT, dated as of April 29, 1996 (this
"Agreement"), is made among AVONDALE RECEIVABLES COMPANY, a Delaware
corporation ("Transferor"), AVONDALE MILLS, INC., an Alabama corporation
("Avondale", "Servicer" or "Initial Servicer"), the purchasers named on the
signatures pages of this Agreement (together with their respective permitted
assigns, the "Purchasers"), and THE FIRST NATIONAL BANK OF CHICAGO ("FNBC"), as
agent for the Purchasers (in that capacity, together with any successors in
that capacity, "Agent").
BACKGROUND
1. Transferor (a) will enter into a Pooling and Servicing Agreement
substantially in the form of Exhibit A (the "Pooling Agreement") with Initial
Servicer, as initial Servicer, and, Manufacturer and Traders Trust Company, a
New York banking corporation, as trustee (in that capacity, together with any
successors in that capacity, the "Trustee"), (b) is party to a Receivables
Purchase Agreement substantially in the form of Exhibit B and (c) will enter
into a Series 1996-1 Supplement to the Pooling Agreement substantially in the
form of Exhibit C (the "Supplement"). Pursuant to the Pooling Agreement and
the Supplement, Transferor will obtain the Series 1996-1 Certificates (the
"Certificates"), which will represent fractional undivided beneficial interests
in the assets of the Avondale Receivables Master Trust (the "Trust"), a trust
to be organized pursuant to the Pooling Agreement.
2. Transferor wishes to obtain the commitment of each Purchaser to
purchase fractional undivided beneficial interests in the assets of the Trust
(each a "Trust Interest") that will be evidenced by its Certificate. Subject to
the terms and conditions of this Agreement, each Purchaser is willing to agree
to so make purchases of Trust Interests, up to the Stated Amount (as defined
below) set forth opposite its name in Schedule I. Initial Servicer and
Avondale have joined in this Agreement to confirm certain representations,
warranties and covenants for the benefit of the Purchasers and the Agent.
4. The Certificates and the Trust Interests represented thereby will
serve as a bridge financing until Transferor is able to effect a more widely
distributed securitization, and it is intended that they will be repaid in full
and cancelled as soon as practicable from the proceeds of such a
securitization.
<PAGE> 7
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Capitalized terms used and not otherwise
defined herein have the meanings assigned to them in the Supplement or, if not
defined in the Supplement, in Appendix A to the Pooling Agreement. An index of
terms defined directly in this Agreement is attached as Appendix X.
ARTICLE II
PURCHASE AND SALE OF CERTIFICATES
SECTION 2.1 The Commitments. (a) Subject to the terms and conditions
of this Agreement (including Section 2.1(c)), the Pooling Agreement and the
Supplement, each Purchaser agrees, severally and for itself alone, upon
Transferor's request (through Servicer), to make purchases (each a "Purchase")
of Trust Interests from time to time during the Revolving Period; provided,
that no Purchaser will be required or permitted to make a Purchase on any date
if the funded principal amount of its Certificate, after giving effect to the
Purchase, would exceed the lesser of (a) the Stated Amount of its Certificate
and (b) its Percentage (as defined below) multiplied by the Invested Amount.
In addition, no Purchaser will be required or permitted to make a Purchase if,
after giving effect thereto (and any corresponding reduction to the Invested
Amount pursuant to Section 3.1), the Net Invested Amount would exceed the Base
Amount. The Purchases by the Purchasers shall be made ratably in accordance
with their respective Percentages; provided, that the failure of any Purchaser
to make any Purchase shall not relieve any other Purchaser of its obligation to
make Purchases hereunder. No Purchaser shall, however, be responsible for the
failure of any other Purchaser to make any Purchase. Subject to the terms of
this Agreement, the aggregate principal amount of a Purchaser's investment
represented by its Certificate may be increased or decreased from time to time.
(b) For purposes of this Agreement, "Percentage" means, with respect
to each Purchaser, the percentage equivalent (carried out to twelve decimal
places) of a fraction the numerator of which is the Stated Amount of such
Purchaser's Certificate and the denominator of which is the sum of the Stated
Amounts of all of the Purchasers' Certificates. The initial Percentages of the
initial Purchasers, and the Stated Amounts of their Certificates, are set out
opposite their names in Schedule I.
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<PAGE> 8
(c) Notwithstanding anything in this Agreement or any other
Transaction Document to the contrary, no Purchaser that is a Structured Lender
shall be obligated to make any Purchase, and each Purchase by it shall be
discretionary, in its sole discretion, if: (i) one or more Support Banks for
such Structured Lender shall have agreed (which agreement may be several and
not joint) in writing to make any Purchase that such Structured Lender would
otherwise be required to make hereunder, and (ii) each such Support Bank shall
have confirmed, for the benefit of the other parties hereto and Trustee, its
obligation to make such Purchases by executing and delivering this Agreement or
an assignment agreement substantially in the form of Exhibit D. FNBC, as
Support Bank for Falcon Asset Securitization Corporation ("Falcon"), hereby
confirms, for the benefit of such parties and Trustee, its obligation to make
any Purchase that Falcon would otherwise be required to make hereunder.
SECTION 2.2 Purchase Mechanics. (a) Whenever Transferor wishes the
Purchasers to make Purchases, it shall cause Servicer to notify the Agent if
the Trust Interests to be purchased initially will form a part of (i) the ABR
Tranche, not later than noon, New York City time, one Business Day prior to the
date of the proposed Purchase and (ii) the Eurodollar Tranche, not later than
2:00 p.m., New York City time, three Business Days prior to the date of the
proposed Purchase; provided that the notice to the Agent of the initial
Purchase hereunder may be provided up to (but no later than) 10:00 a.m. on the
Closing Date and such Purchase shall form a part of the ABR Tranche. Each
notice shall be irrevocable and shall in each case refer to this Agreement and
specify (x) the aggregate purchase price for the requested Purchases (which
shall be in a minimum amount of $2,000,000 or a greater integral multiple of
$1,000,000 (or in the total unutilized amount of the various Purchasers' Stated
Amounts)), (y) whether the Trust Interests to be purchased will form a part of
the ABR Tranche or the Eurodollar Tranche and (z) the date of the Purchase
(which shall be a Business Day) and the amount thereof. If no election
required by clause (y) is made in any notice, then the Trust Interests
obtained in the Purchase shall form a part of the ABR Tranche. The Agent shall
promptly advise the Purchasers of any notice given pursuant to this section and
of the amount of each Purchaser's Purchase.
(b) After receiving notice from the Agent of any notice given pursuant
to subsection (a) and subject to the conditions in Article VII, each
Purchaser shall make a Purchase in the amount of its pro rata portion of
aggregate Purchases requested to be made, ratably according to its Percentage,
on the proposed date thereof by wire transfer in Dollars of immediately
available funds to the Agent at the office designated from time to time by the
Agent, not later than 10:00 a.m., New York City time, and the Agent shall
(unless notified in writing that any condition precedent has not been
satisfied), by
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<PAGE> 9
noon, New York City time, on the same day, make available to Transferor by wire
transfer of Dollars in immediately available funds the aggregate amount of the
funds received. Unless the Agent shall have received written notice from a
Purchaser prior to the date of any Purchase that the Purchaser will not make
available to the Agent its purchase price, the Agent may (but shall not be
required to) assume that the Purchaser has made that portion available to the
Agent on the date of the Purchase in accordance with this subsection, and the
Agent may, in reliance upon that assumption, make available to Transferor on
that date a corresponding amount.
(c) If and to the extent that any Purchaser shall not have made its
purchase price available to the Agent and the Agent has made available a
corresponding amount to Transferor, such Purchaser agrees to repay to the Agent
forthwith on demand a corresponding amount, together with interest thereon, for
each day from the date the amount is made available to Transferor until the
date the amount is repaid to the Agent (i) for the first three days following
the date the amount is made available, at a rate per annum equal to the Federal
Funds Rate and (ii) thereafter, at a rate per annum equal to the Federal Funds
Rate plus 1%. If the Purchaser shall repay to the Agent a corresponding
amount, the amount shall constitute its Purchase for purposes of this
Agreement, and if Transferor shall have already made the repayment (as provided
below), the Agent shall make a corresponding amount immediately available to
Transferor. At any time after the Agent learns that a Purchaser has failed to
make the purchase price for a Purchase available as described above, the Agent
promptly shall give notice to Transferor and Servicer of that failure, and upon
notice Transferor will be required to refund to the Agent an amount equal to
that purchase price, together with interest on the amount at the rate of
interest applicable to such Purchase (determined in accordance with Section 4.1
of the Supplement).
SECTION 2.3 Reduction of Stated Amounts. Upon at least three
Business Days' prior irrevocable notice to the Agent in writing, Transferor may
reduce the Stated Amounts of the Certificates; provided, that (a) each partial
reduction of the Stated Amounts shall be, in the aggregate for all
Certificates, in an integral multiple of $1,000,000 and in a minimum principal
amount of $2,000,000 and (b) no partial reduction shall be made that would
reduce the aggregate Stated Amounts to an amount less than the Invested Amount
at the time of the reduction. Each reduction in the Stated Amounts shall be
made ratably among the Purchasers in accordance with their respective Stated
Amounts. The Agent shall promptly advise the Purchasers of any notice given
pursuant to this section. Each reference in this Agreement to the
"Stated Amount" of a Certificate means the Stated Amount of the Certificate
after giving effect to any reductions made pursuant to this section.
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<PAGE> 10
SECTION 2.4 Certificates. The outstanding amounts of the Purchases
made by each Purchaser shall be evidenced by its Certificate, to be issued on
the Closing Date substantially in the form of Exhibit A to the Supplement.
Each Purchaser shall and is hereby authorized to record on the grid attached to
its Certificate (or at its option, in its internal books and records) the date
and amount of each Purchase made by it, the amount of each repayment of the
principal amount represented by its Certificate, the portions of its Purchases
that are from time to time allocated to the ABR Tranche and the Eurodollar
Tranche, and any reductions to the Stated Amount of its Certificate made
pursuant to Section 2.3 (which shall be conclusive absent manifest error);
provided, that failure to make any recordation on the grid or records or any
error in the grid or records shall not adversely affect the Purchaser's rights
with respect to its interest in the assets of the Trust and its right to
receive interest in respect of the outstanding principal amount of all
Purchases made by the Purchaser.
ARTICLE III
REDUCTIONS IN INVESTED AMOUNT
SECTION 3.1 Transferor's Right to Reduce Invested Amount. Transferor
may, on at least one Business Day's prior notice by Transferor or Servicer to
the Agent, reduce the Invested Amount by causing an amount of funds equal to
the desired amount of the reduction that are available for this purpose in
accordance with the terms of the Supplement to be transferred to the Agent, for
the account of the Purchasers (and application to the respective and ratable
reduction of the funded principal amount of the Certificate of each Purchaser),
provided that any reduction to the aggregate funded principal amounts
represented by the Certificates must be in a minimum amount of $1,000,000 (or
the entire funded principal amount, if less) or a greater integral multiple of
$1,000,000.
SECTION 3.2 Notice to Purchasers. The Agent shall promptly advise
the Purchasers of any notice received by the Agent pursuant to Section 3.1.
ARTICLE IV
TRANCHES, INTEREST AND FEES
SECTION 4.1 Tranches. (a) All Purchases made hereunder shall be
included in a single Eurodollar Tranche or a single ABR Tranche; it being
understood that only one Tranche shall be outstanding at any time and that all
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<PAGE> 11
new Purchases hereunder (after the initial Purchase) shall be deemed to be part
of the then outstanding Tranche.
(b) Subject to the terms and conditions set forth in this section and
Section 4.4, Transferor shall have the option: (x) on any Business Day, to
convert the ABR Tranche to the Eurodollar Tranche and (y) on the last day of
any Interest Period of the Eurodollar Tranche, to convert the Eurodollar
Tranche to the ABR Tranche and/or to continue the Eurodollar Tranche as a new
Eurodollar Tranche, the Interest Period for which shall commence on the last
day of the prior Interest Period; provided, that:
(i) subject to Section 4.4, each conversion or continuation
shall be made ratably among the Purchasers in accordance with their
respective amounts of the Purchases comprising the converted or
continued Tranche, and
(ii) no outstanding Eurodollar Tranche may be continued as
the Eurodollar Tranche, and no portion of the ABR Tranche may be
converted into the Eurodollar Tranche, at any time that an Early
Amortization Event has occurred and is continuing; and any Interest
Period for the Eurodollar Tranche that commences after the commencement
of the Amortization Period must begin on a Distribution Date and end on
the next Distribution Date.
(c) If Transferor wishes to convert and/or continue a Tranche under
this section, Transferor shall notify the Agent in writing (i) in the case of a
conversion to or continuation of the Eurodollar Tranche, not later than 2:00
p.m., New York City time, three Business Days prior to the date of the proposed
conversion or continuation date and (ii) otherwise, not later than noon, New
York City time, one Business Day prior to the date of the proposed conversion
or continuation. Each notice shall be irrevocable and shall refer to this
Agreement and specify (x) the identity and amount of the Tranche that
Transferor wishes to convert or continue, (y) whether the Tranche is to be
converted into or continued as a Eurodollar Tranche and (z) the date of the
proposed conversion or continuation (which shall be a Business Day). If
Transferor shall not have delivered a timely notice in accordance with this
section with respect to any Tranche, the Tranche shall, at the end of the
Interest Period applicable to it (unless repaid pursuant to the terms hereof),
automatically be converted into or continued as the ABR Tranche. The Agent
shall promptly advise the Purchasers of any notice given pursuant to this
section and of each Purchaser's portion of any converted or continued Tranche.
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<PAGE> 12
(d) In accordance with Section 4.1 of the Supplement, each Purchaser
and the Agent will be entitled to receive additional interest (at the rate
specified therein) on amounts that are not paid when due under this Agreement
or under its Certificate.
SECTION 4.2 Fees. (a) Each Purchaser shall be entitled to receive
from Collections a fee (a "Non-Usage Fee") (i) for the period from the Closing
Date up to (but not including) the day corresponding to the Closing Date in the
month falling six months after the month in which the Closing Date occurs (or
if there is no such corresponding day, through the last day of that sixth
month), equal to 0.25% per annum, and (ii) thereafter, until the end of the
Revolving Period, equal to 0.40% per annum, on the daily average of (i) the
Stated Amount of its Certificate minus (ii) the amount represented by the
Purchaser's Percentage of the Invested Amount. The Non-Usage Fee shall be
payable in arrears on each Distribution Date. The Non-Usage Fee for any
Distribution Date shall be calculated on the basis of the actual number of days
elapsed since the preceding Distribution Date (or, if prior to the first
subsequent Distribution Date after the Closing Date, during the period from the
Closing Date to such Distribution Date) over a year of 365 or 366 days, as
applicable.
(b) In addition, Transferor shall pay (i) to each of the initial
Purchasers, on the date of this Agreement, an up-front fee in the amount
specified in the fee letter (the "Fee Letter") dated April 3, 1996 from First
Chicago Capital Markets, Inc. to Avondale and (ii) to the Agent, for its own
account, an agency fee, payable at the times and in the amounts specified in
such fee letter.
SECTION 4.3 Yield Protection. (a) Notwithstanding any other
provision herein, if, after the date hereof, either:
(i) the adoption of any law, rule or regulation (including
any imposition or increase of reserve requirements) or any change after
the date hereof in the interpretation or administration of any law,
rule or regulation by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or
(ii) the compliance by a Purchaser with any new or revised
guideline or request from any central bank or other Governmental
Authority or quasi-governmental authority exercising control over banks
or financial institutions generally (whether or not having the force of
law),
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shall subject a Purchaser to the imposition or modification of any reserve
(including any imposed by the Federal Reserve Board), special deposit or
similar requirement (including a reserve, special deposit or similar
requirement that takes the form of a tax) against assets of, deposits with or
for the account of, or credit extended by, the Purchaser or the office from
time to time that it designates to the Agent as the office through which it
makes and maintains its Purchases comprising part of the Eurodollar Tranche (as
to each Purchaser, its "LIBOR Office") or impose any other condition on a
Purchaser affecting the Eurodollar Tranche or its obligations hereunder, and as
a result of either of the foregoing there shall be any increase in the cost to
the Purchaser of agreeing to make or making, funding or maintaining Purchases
as a Eurodollar Tranche (except to the extent already included in the
determination of the Eurodollar Rate), or there shall be a reduction in the
amount received or receivable by the Purchaser or its LIBOR Office, then, upon
written notice from the Purchaser to Transferor and Servicer (with a copy to
the Agent), signed by an officer of the Purchaser with knowledge of and
responsibility for such matters, and setting forth in reasonable detail the
calculation used to arrive at the amounts, the Purchaser shall be entitled to
receive such additional amounts sufficient to indemnify that Purchaser against
the increased cost or reduction in amounts received or receivable, solely from
amounts allocated thereto and paid pursuant to the Supplement; provided, that
any Purchaser entitled to compensation pursuant to this Section shall designate
a different LIBOR Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in such Purchaser's sole
judgment, be otherwise disadvantageous to such Purchaser.
(b) If a Purchaser shall reasonably determine that the adoption after
the date hereof of any law, rule or regulation regarding capital adequacy or
capital maintenance, or any change after the date hereof in any of the
foregoing or in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by a Purchaser, any of
its lending offices or its holding company with any new or revised request or
directive regarding capital adequacy or capital maintenance (whether or not
having the force of law) of any such Governmental Authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Purchaser's capital or the capital of its holding company as a
consequence of this Agreement, the commitment of such Purchaser to make
Purchases or the Purchases made by such Purchaser pursuant hereto to a level
below what the Purchaser or its holding company could have achieved but for the
adoption, change or compliance (taking into consideration the Purchaser's
policies, and the policies of its holding company, with respect to capital
adequacy), then, upon written notice from the Purchaser to Transferor and
Servicer (with a copy to the Agent), signed by an officer of the Purchaser with
knowledge of
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<PAGE> 14
and responsibility for such matters, and setting forth in reasonable detail the
calculation used to arrive at the amounts, the Purchaser shall be entitled to
receive such additional amounts as will compensate the Purchaser or its holding
company for the reduction, solely from amounts allocated thereto and paid
pursuant to the Supplement; provided, that any Purchaser entitled to
compensation pursuant to this Section shall designate a different lending office
if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in such Purchaser's sole judgment, be otherwise
disadvantageous to such Purchaser.
(c) A Purchaser shall promptly notify Transferor, Servicer and the
Agent in writing of any event of which it has knowledge occurring after the
date hereof that will entitle it to compensation pursuant to this section. A
certificate of the Purchaser, signed by an officer of the Purchaser with
knowledge of and responsibility for such matters, and setting forth in
reasonable detail the calculation used to arrive at the amounts necessary to
compensate the Purchaser or its holding company as specified in subsection (a)
or (b), as the case may be, shall be delivered to Transferor and Servicer and
shall be conclusive absent demonstrable error.
(d) Failure on the part of a Purchaser to demand compensation for any
amounts as specified in subsection (a) or (b) with respect to any period
shall not constitute a waiver of its right to demand compensation with respect
to that period or any other period; provided, that no such demand may be made
for any period before 180 days preceding the date of such demand. The
protection of this section shall be available to the Purchasers regardless of
any possible contention of the invalidity or inapplicability of the law, rule,
regulation, guideline or other change or condition that shall have occurred or
been imposed.
(e) Promptly after giving any notice to Transferor pursuant to this
section, a Purchaser will seek to designate one of its offices located at an
address other than that previously designated pursuant to this Agreement as the
office from which its Purchases will be made after the designation if it will
avoid the need for, or materially reduce the amount of, any payment to which
the Purchaser would otherwise be entitled pursuant to this section and will
not, in the sole and reasonable discretion of the Purchaser, be otherwise
disadvantageous to the Purchaser.
SECTION 4.4 Illegality; Unavailability. (a) In the event that on
any date any Purchaser shall have reasonably determined (which determination
shall be final and conclusive and binding upon all parties) that the making or
continuation of its Purchases as a Eurodollar Tranche has become unlawful by
compliance by the Purchaser in good faith with any law, governmental rule,
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regulation or order or has become impossible as a result of a contingency
occurring after the date hereof that materially and adversely affects its
interbank eurodollar market, then, and in any such event, that Purchaser shall
promptly give notice (by telephone confirmed in writing) to Transferor,
Servicer and the Agent (which notice the Agent shall promptly transmit to each
Purchaser) of that determination. The obligation of the affected Purchaser to
make or maintain its Purchases as the Eurodollar Tranche during any such period
shall be terminated at the earlier of the termination of the Interest Period
then in effect for the Eurodollar Tranche or when required by law, and
Transferor shall, no later than the time specified for the termination, convert
any Purchases of the affected Purchaser that constitute part of the Eurodollar
Tranche into a part of the ABR Tranche.
(b) If, prior to the beginning of any Interest Period, the Agent shall
have reasonably determined (which determination shall be final and conclusive
and binding upon all parties) that: (i) Dollar deposits in the relevant amount
and for the Interest Period are not available in the relevant interbank
eurodollar market or (ii) by reason of circumstances affecting the interbank
eurodollar market, that adequate and fair means do not exist for ascertaining
the Eurodollar Rate applicable to the Eurodollar Tranche, then the Agent shall
promptly give notice of this determination to Transferor, Servicer and to each
Purchaser. Thereafter, and continuing until the Agent shall notify Transferor,
Servicer and each Purchaser that the circumstances giving rise to this
determination no longer exist, (x) the Eurodollar Tranche will, on the last day
of the applicable Interest Period, convert into a part of the ABR Tranche, (y)
the right of Transferor to request a Eurodollar Tranche shall be suspended and
(z) any Purchases requested to be made as the Eurodollar Tranche prior to such
time but not yet made shall be made as the ABR Tranche.
SECTION 4.5 Indemnity. If a Purchaser shall incur any losses,
expenses or liabilities (including any interest paid to lenders of funds
borrowed by it to fund any Purchase of a Certificate as the Eurodollar Tranche
and any loss sustained in connection with the re-deployment of such funds) as a
result of (a) the failure of a Purchase to be made on a date specified therefor
in a notice delivered by Transferor pursuant to Section 2.2 (other than any
such failure resulting from the Purchaser's default in the performance of its
obligations hereunder) or (b) any repayment, including under Section 3.1, of
the Eurodollar Tranche on a date that is not the last day of the Interest
Period applicable to the Eurodollar Tranche or that is any date other than the
date specified in a notice of repayment given by Servicer, then, upon written
notice (which notice shall be signed by an officer of the Purchaser with
knowledge of and responsibility for such matters and shall set forth in
reasonable detail the basis for requesting the amounts) from the Purchaser to
Transferor and Servicer, additional amounts sufficient to indemnify the
Purchaser against the
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losses, expenses and liabilities, but not for any lost profits associated
therewith, shall constitute "Additional Amounts" for purposes of the Supplement,
and the Purchaser shall be entitled to receive these additional amounts, solely
from amounts allocated thereto and paid pursuant to the Supplement.
SECTION 4.6 Taxes. (a) Except as otherwise provided below, any and
all payments made to each Purchaser under its Certificate shall be made free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, duties, charges, fees, deductions or withholdings of any
nature and whatever called, by whomsoever, on whomsoever and wherever imposed,
levied, collected, withheld or assessed, excluding taxes imposed on all or part
of the net income, profits or gains of such Purchaser or its Participant,
Transferee or Affected Party (whether worldwide, or only insofar as such
income, profits or gains are considered to arise in or to relate to a
particular jurisdiction, or otherwise) by any jurisdiction under the laws of
which such Purchaser, Participant, Transferee or Affected Party is organized,
has its principal office or books its investment in its Certificate (or any tax
authority thereof) (all the nonexcluded taxes, levies, imposts, charges,
deductions, withholdings and liabilities being hereinafter referred to as
"Taxes"). If Trustee or the Agent are required by law to deduct or withhold
any Taxes from or in respect of any sum payable hereunder or under any
Certificate to a Purchaser, then the sum payable shall be increased by the
amount necessary to yield to such Purchaser (after payment of all Taxes) an
amount equal to the sum it would have received had no such deductions or
withholdings been made, and the additional amount shall constitute "Additional
Amounts" for purposes of the Supplement, and the Purchaser shall be entitled to
receive these additional amounts, solely from amounts allocated thereto and
paid pursuant to the Supplement.
(b) Whenever any Taxes are paid by Trustee pursuant to subsection
(a), as promptly as possible thereafter Servicer shall send to the relevant
Purchaser the original or a certified copy of an original official receipt
showing payment thereof (if any) or any other evidence of the payment as may
be available to Servicer through the exercise of its reasonable efforts. If
Trustee fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to the Purchaser the required receipts or other required
documentary evidence, the Purchaser shall be entitled to receive, solely from
amounts allocated with respect thereto and paid pursuant to the Supplement,
additional amounts necessary to indemnify it for any incremental taxes,
interest or penalties that may become payable by the Purchaser as a result of
any such failure, and the amounts shall constitute "Additional Amounts" for
purposes of the Supplement, and the Purchaser shall be entitled to receive
these additional
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amounts, solely from amounts allocated thereto and paid pursuant to the
Supplement.
(c) On or before the date it becomes a party to this Agreement (and,
so long as it may properly do so, periodically thereafter, as requested by
Servicer, to keep forms up to date), each Purchaser, including any Assignee,
that is not a United States person (as defined in section 7701(a)(30) of the
Internal Revenue Code), shall deliver to Trustee any certificates, documents or
other evidence that shall be required by the Internal Revenue Code or Treasury
Regulations issued pursuant thereto to establish that, assuming the
Certificates are properly characterized as indebtedness for Federal income tax
purposes, it is exempt from existing United States Federal withholding
(including backup withholding) requirements, including (i) two original copies
of Internal Revenue Service Form 4224 or successor applicable form, properly
completed and duly executed by the Purchaser or Assignee certifying that it is
entitled to receive payments under this Agreement or any Certificate without
deduction or withholding of any United States Federal income taxes, or (ii) an
original copy of Internal Revenue Service Form W-8 or applicable successor
form, properly completed and duly executed; provided, that if any Purchaser
does not comply with this subsection 4.6(c), amounts payable to such Purchaser
under this Section 4.6 shall be limited to amounts that would have been
payable under this section if such Purchaser had so complied.
(d) The Transferor shall not be required pursuant to this Section to
indemnify any Purchaser, Participant, Transferee or Affected Party that itself
is not incorporated under the laws of the United States of America or a state
thereof or that is purchasing its Certificate from or holding its Certificate
in an office not located within the United States of America or a state thereof
(a "Non-U.S. Party"), or to pay any additional amounts to any Non-U.S. Party,
in each case in respect of United States Federal withholding tax to the extent
that the obligation to withhold amounts with respect to United States Federal
withholding tax existed (i) in the case of a Purchaser, Participant or
Transferee, on the date such Non-U.S. Party became a party to this Agreement
or otherwise acquired a Certificate or any interest therein or (ii) in the case
of an Affected Party, on the date such Non-U.S. Party became a Support Bank.
ARTICLE V
OTHER PAYMENT TERMS
SECTION 5.1 Time and Method of Payment. (a) All amounts payable to
any Purchaser hereunder or with respect to its Certificate shall be made to the
Agent for the account of the Purchaser by wire transfer of immediately
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available funds in Dollars not later than 2:00 p.m., New York City time, on the
date due. Any funds received after that time will be deemed to have been
received on the next Business Day. The Agent shall distribute all payments to
the Purchasers, in accordance with their respective interests, prior to the
close of business on the Business Day on which any payment is deemed received.
(b) On any date on which a payment to one or more Purchasers hereunder
or under the Certificates is due and payable, the Agent may (but in no event
shall be required to) assume that the payment has been made available to the
Agent on the date of the payment in accordance with this section, and the Agent
may (but in no event shall be required to), in reliance upon this assumption,
make payment of a corresponding amount to the Purchasers. If and to the extent
any amounts shall not have so been made available to the Agent, each Purchaser
irrevocably and unconditionally agrees to repay to the Agent forthwith on
demand the amount of payment it received together with interest thereon, for
each day from the date payment is made by the Agent until the date the amount
is repaid to the Agent, (i) for the first three days following the date the
payment is made, at a rate per annum equal to the Federal Funds Rate and (ii)
thereafter, at a rate per annum equal to the Federal Funds Rate plus 1%.
SECTION 5.2 Pro Rata Treatment. Each repayment of the principal of
the Certificates, (except as otherwise required by Section 2.2(c)), each
payment of interest thereon, each payment of the Non-Usage Fee, each reduction
of the Stated Amounts and each conversion or continuation of any Tranche
(except as otherwise required by Section 4.4(a) with respect to conversions)
shall be allocated pro rata among the Purchasers on the date of payment or
reduction, in accordance with their respective Percentages. Each Purchaser
agrees that in computing its portion of any Purchases to be made hereunder, the
Agent may, in its discretion, round each Purchaser's pro rata share of the
Purchases to the next higher or lower whole dollar amount.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 Transferor. As of the Closing Date, Transferor represents
and warrants to the Purchasers that each of its representations and warranties
in the Pooling Agreement and Purchase Agreement is true and correct, as if made
on the Closing Date, and further represents and warrants that:
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(a) no Early Amortization Event or Unmatured Early
Amortization Event exists;
(b) assuming the accuracy of each Purchaser's representations
set out in Section 6.3 and that no Purchaser (and no Person acting on
any Purchaser's behalf) has made a general solicitation or general
advertising within the meaning of the Securities Act, the offer and
sale of the Certificates in the manner contemplated by this Agreement
is a transaction exempt from the registration requirements of the
Securities Act, and the Pooling Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended; and
(c) no information supplied by or on behalf of Transferor,
Avondale or any of its Subsidiaries to the Agent or the Purchasers in
connection with the Transaction Documents contains any untrue statement
of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading in light of
the circumstances under which they were made or the information was
furnished.
SECTION 6.2 Initial Servicer and Avondale. As of the Closing Date,
each of Initial Servicer and Avondale represents and warrants to the Purchasers
that:
(a) each of its representations and warranties in the Pooling
Agreement and the Purchase Agreement is true and correct;
(b) the Pro Forma Financial Data present fairly in all
material respects the pro forma financial position, results of
operations and cash flows of Avondale and its consolidated Subsidiaries
at the dates and for the periods to which they relate and have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis, except as otherwise stated therein
(except, in the case of quarterly financial statements, for the omission
of footnotes and ordinary year-end adjustments, none of which,
individually or in the aggregate, would be material);
(c) since August 25, 1995 through to the Closing Date (and
except as contemplated in the Pro Forma Financial Data), (i) there has
been no material adverse change in the financial condition or the
earnings, business or operations of Transferor or Avondale, whether or
not arising in the ordinary course of business, and (ii) there have
been no transactions (except the execution and delivery of Transaction
Documents, the Avondale Credit Agreement and the consummation of
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the transactions and refinancings contemplated thereby, including,
without limitation, the acquisition of the "Graniteville Assets" (as
defined in the Avondale Credit Agreement), the issuance of Subordinated
Debt evidenced by Avondales 10.25% Senior Subordinated Notes due 2006,
the repayment of certain outstanding subordinated debt evidenced by
Avondale's 5.65% Subordinated Payment-in-Kind Notes due 1998, and the
issuance by Avondale Incorporated of its capital stock (as described in
Section 13.01 of the Avondale Credit Agreement)) entered into by
Transferor, Avondale or the Sellers that are material with respect to
the financial condition or the earnings, business affairs or business
prospects of Transferor or Avondale; and
(d) no information supplied by or on behalf of Transferor,
Avondale or any of its Subsidiaries to the Agent or the Purchasers in
connection with the Transaction Documents contains any untrue statement
of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading in light of
the circumstances under which they were made or the information was
furnished.
SECTION 6.3 Purchasers. As of the Closing Date (or such later date on
which it acquires its Certificate in accordance with Section 10.3), each
Purchaser represents and warrants (and each Assignee shall be deemed to
represent and warrant as of the date that its assignment becomes effective)
that:
(a) it is a "qualified institutional buyer" as that term is
defined under Rule 144A of the Securities Act and it is not purchasing
its Certificate with a view to making a distribution thereof (within
the meaning of the Securities Act); and
(b) it is not a pension, profit sharing or other employee
benefit plan subject to the Employee Retirement Income Security Act of
1975, as amended.
ARTICLE VII
CONDITIONS
SECTION 7.1 Conditions to Initial Purchase. The obligation of each
Purchaser to Purchase its Certificate shall be subject to the satisfaction of
the conditions precedent that (x) the Agent shall have received, for the
account of
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such Purchaser, a duly executed and authenticated Certificate registered in its
name and in a Stated Amount equal to the amount set out opposite its name on the
signature pages of this Agreement, (y) the Agent and its affiliates shall have
received certain fees (as described in the Fee Letter) and reimbursement of any
expenses referred to in Section 10.5 for which invoices have been presented and
(z) the Agent shall have received, for the account of such Purchaser, an
original (except as indicated below) counterpart of the following (each of
which, if not in a form attached to this Agreement, shall be in form and
substance satisfactory to the Agent):
(a) the Supplement, the Pooling Agreement and the Purchase
Agreement, each of which shall be in full force and effect, and all
actions required to be taken under those documents in connection with
the issuance of the Certificates shall have been taken;
(b) each Account Agreement;
(c) a certificate of the Secretary, or an Assistant
Secretary, of each of Transferor, Servicer, Guarantor and each Seller
with respect to:
(i) attached copies of resolutions of its Board of
Directors then in full force and effect authorizing the
execution, delivery and performance of the Transaction
Documents,
(ii) the incumbency and signatures of those of its
officers authorized to act with respect to the Transaction
Documents,
(iii) attached copies of its certificate of
incorporation and by-laws;
(d) a certificate of an Authorized Officer of each of
Transferor, Servicer and each Seller as to the satisfaction of the
conditions precedent set forth in Section 7.2,
(e) an opinion of counsel to Trustee stating that the Pooling
Agreement has been duly authorized, executed and delivered by Trustee
and the Certificates have been duly authenticated by Trustee in
accordance with the Pooling Agreement;
(f) the Daily Report for the Closing Date;
(g) copies of any management or other agreements with regard
to the administration of Transferor's business, certified by an
Authorized Officer of Transferor;
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(h) a pro forma balance sheet of Transferor as of the date
hereof, after giving effect to the transactions contemplated by the
Supplement;
(i) confirmation satisfactory to the Agent that the following
have been placed with Lexis Document Services or another filing service
selected by the Agent for filing, the filing to occur on the Closing
Date or the first Business Day thereafter:
(i) UCC financing statements naming each Seller, as
seller/debtor, and Transferor, as secured party/purchaser, in
each office where the filing is necessary for the perfection
of the sales or contribution of Receivables and Related Assets
by each Seller to Transferor;
(ii) assignments of such existing UCC financing
statements to Trustee, as assignee of the secured party, in
each office where the filing is necessary for the perfection
of the sales of Receivables and Related Assets by each Seller
to Transferor; and
(iii) UCC financing statements naming Transferor, as
seller/debtor, and Trustee, as secured party, in each office
where the filing is necessary for the perfection of the
transfers of Receivables and other Transferred Assets by
Transferor to Trustee;
(j) results of recent searches of the UCC filing records and
tax and ERISA and judgment lien records in such jurisdictions as the
Agent shall reasonably require for filings against Avondale (including
any predecessors in interest to Avondale going back five years) and
Transferor, showing no filings of record that cover any of the
Receivables or the other Transferred Assets other than (i) the
financing statements referred to in subsection (i) (to the extent
shown in the searches) and (ii) any other filings as to which the Agent
has received signed UCC-3 termination statements or pay-off letters in
form and substance satisfactory to it;
(k) the following opinions addressed to the Agent, the
Purchasers and Trustee, and in each case as to the matters and in such
form and substance as shall be satisfactory to the Agent, the
Purchasers and Trustee:
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(i) opinions of King & Spalding as to certain
corporate and securities matters, Federal and state tax and
UCC matters, true sale and non-consolidation; and
(ii) opinions of Bradley, Arant, Rose & White as to
certain corporate, state tax and UCC matters;
(l) evidence, reasonably satisfactory to the Agent and the
Purchaser, of the payment of all taxes, fees and other governmental
charges, if any, incidental to the issuance of the Certificates and to
the consummation of the transactions contemplated hereunder and under
the Pooling Agreement;
(m) a solvency certificate of the chief financial officer of
Avondale with respect to the Sellers, which certificate shall be
addressed to the Agent and the Purchasers and shall be in form and
substance satisfactory to the Agent;
(n) a report of Commercial Lending Consultants, in form and
substance satisfactory to the Agent;
(o) evidence that the acquisition of Graniteville Company and
related merger transactions have been completed;
(p) a certificate of the Secretary of Avondale to the effect
that the conditions precedent to the effectiveness of the Avondale
Credit Agreement and any necessary amendments to other debt documents
shall have been satisfied or waived;
(q) an Intercreditor Agreement executed by Trustee and the
appropriate agent or agents under the Avondale Credit Agreement, and
evidence satisfactory to the Agent that UCC financing statements (if
any) filed under the Avondale Credit Agreement do not cover the
Transferred Assets and that any approvals required under the Avondale
Credit Agreement have been obtained;
(r) such sublicenses and assignments as the initial
Purchasers shall require with regard to all computer and data recovery
software used by Servicer or any Seller in connection with the
servicing of the Transferred Assets, which sublicenses and assignments
will permit any substitute Servicer to use such software;
(s) a copy of the Credit and Collection Policy, certified by
an appropriate officer of Avondale; and
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(t) any other information, certificates, opinions and
documents as the Agent may have reasonably requested.
If the conditions specified above have not been fulfilled on the date
hereof, any condition specified in this Agreement shall not have been fulfilled
when and as required in this Agreement or waived by the Purchasers, in each
case a Purchaser's obligations to purchase the Certificates pursuant to this
Agreement may be terminated by notice to Transferor. In addition, if, under the
circumstances, it shall not be feasible for the Purchasers to invest on the
date the funds that are held available by the Purchasers for the Purchase,
Transferor shall pay the Purchasers interest on the funds at the Alternate Base
Rate from the date of the notice until the next succeeding Business Day on
which it is feasible for the Purchasers to invest the funds. Nothing in this
paragraph shall operate to relieve Transferor from any of its obligations
hereunder or otherwise waive any of the Purchasers' rights against Transferor.
SECTION 7.2 Conditions to Each Purchase. The obligation of each
Purchaser to make any Purchase on any day (including those comprising the
initial Purchase) shall be subject to the conditions precedent that on the date
of the Purchase, before and after giving effect thereto and to the application
of any proceeds therefrom, the following statements shall be true:
(a) the representations and warranties of Transferor and
Initial Servicer set out in this Agreement (other than in Section
6.2(b) or (c)) are true and accurate in all material respects as of
that date with the same effect as though made on that date (unless
specifically stated to relate to an earlier date); and
(b) no Early Amortization Event or Unmatured Early
Amortization Event has occurred and is continuing.
The giving of any notice pursuant to Section 2.2 shall constitute a
representation and warranty by Transferor, Avondale and Initial Servicer that
the foregoing statements (limited, in the case of subsection (a) to the
representations and warranties of the Person deemed to make the representation
and warranty referred to in this sentence) are true.
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ARTICLE VIII
COVENANTS
SECTION 8.1 Affirmative Covenants. Transferor, Avondale and Initial
Servicer each severally covenant and agree that, until the Certificates have
been paid in full, it will:
(a) duly and timely perform all of its covenants and
obligations under each Transaction Document to which it is a party;
(b) with reasonable promptness deliver to each Purchaser such
information, documents, records or reports respecting the Program or
the Receivables as the Agent may from time to time reasonably request
on behalf of any Purchaser;
(c) at the same time any report (including any Daily Report,
Cash Flow Report, Monthly Report or annual auditors' report), notice or
other document is provided, or caused to be provided, by Transferor or
Servicer to Trustee under the Pooling Agreement, provide the Agent (for
the benefit of each Purchaser) with a copy of the report;
(d) if requested by the Purchasers after the 6 month
anniversary of the Closing Date, cause the Certificates to be rated by
one or more nationally recognized rating agencies, at the expense of
Servicer paid out of the Servicing Fee;
(e) during regular business hours and (so long as no Early
Amortization Event has occurred and is continuing) upon five Business
Days prior written notice, permit the Agent (or such other Person as
the Agent may designate from time to time), or their respective agents
or representatives (including certified public accountants or other
auditors), at the expense of the Servicer paid out of the Servicing
Fee, (i) to examine and make copies of and abstracts from, and to
conduct accounting reviews of, all Records in the possession or under
the control of Servicer, Transferor or any Seller, including the
related Contracts and purchase orders, invoices and other agreements
related thereto, and (ii) to visit the offices and properties of
Servicer, Transferor or any Seller for the purpose of examining such
materials described in clause (i), and to discuss matters relating to
the Receivables or the Related Transferred Assets or the performance by
Servicer, Transferor or any Seller of their respective obligations
under any Transaction Document with any officer, employee or
representative of Servicer, Transferor or any Seller. The Agent may
(but shall not be
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obligated to) conduct, or cause its agents or representatives to
conduct, reviews of the types described in this paragraph (each such
review, a "Receivables Review") whenever the Agent, in its reasonable
judgment, deems any such review appropriate; provided, that before the
occurrence and continuance of an Early Amortization Event, the Agent (or
its agent or representative) shall have the right to request a
Receivables Review not more than twice in any calendar year;
(f) maintain credit insurance policies with respect to the
Receivables in a manner reasonably consistent with Avondale's practices
prior to the Closing Date, and (at all times after May 30, 1996) cause
Trustee to be named as a loss payee under such policies; and
(g) comply with the covenants made by it in the back-up
certificates delivered to King & Spalding in support of opinions given
by that firm on the Closing Date with respect to true sale and
substance consolidation issues.
SECTION 8.2 Negative Covenants. (a) Notwithstanding Section 1.7 of
the Purchase Agreement, Transferor, Avondale and Avondale Incorporated shall
not cause or permit any Domestic Subsidiary of Avondale or Avondale
Incorporated to become a new Seller unless the Required Purchasers have
consented in writing to that addition.
(b) Transferor covenants and agrees that, until the Certificates
have been paid in full, it will not allow (i) to be outstanding over 20 Private
Holders of Subject Instruments and (ii) any Subject Instruments to be traded on
an Established Securities Market, registered under the Securities Act or
offered or sold pursuant to Regulation S (17 CFR 230.901 through 230.904 or any
successor thereto) if such offering or sale would have been required to be
registered under the Securities Act if the interests so offered or sold had
been offered and sold within the United States.
SECTION 8.3 Transfers. Each Purchaser represents that neither it nor
any Person acting on its behalf has made a general solicitation or general
advertising, within the meaning of the Securities Act and the rules and
regulations thereunder, for the offer or sale of the Certificates. Each
Purchaser further agrees that it will not make any general solicitation or
general advertising for the offer or sale of the Certificates and will not
transfer its Certificate (or any portion thereof) to any Person unless such
Person shall have provided the Trustee and Transferor with a certificate to the
effect that such Person: (a) is a "qualified institutional buyer" as that term
is defined under Rule 144A of the Securities Act and is not purchasing its
Certificate
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with a view to making a distribution thereof (within the meaning of
the Securities Act) and (b) is not a pension, profit sharing or other employee
benefit plan subject to the Employee Retirement Income Security Act of 1974, as
amended.
ARTICLE IX
AGENT; REQUIRED PURCHASERS
SECTION 9.1 Appointment. The Purchasers hereby designate FNBC as
Agent. Each Purchaser hereby irrevocably authorizes the Agent to take action on
its behalf under the provisions of the Transaction Documents and any other
instruments and agreements referred to therein and to exercise the powers and
perform the duties hereunder and thereunder that are specifically delegated to
or required of the Agent by the terms hereof and thereof, and any other powers
as are reasonably incidental thereto. The Agent may perform any of its duties
by or through its officers, directors, agents or employees.
SECTION 9.2 Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement. Neither
the Agent nor any of its officers, directors, agents or employees shall be
liable for any action taken or omitted by it or them under any Transaction
Document or in connection herewith or therewith, unless caused by their gross
negligence or willful misconduct. The duties of the Agent shall be mechanical
and administrative in nature, the Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Purchaser, and nothing in
any Transaction Document, expressed or implied, is intended to or shall be
construed as to impose upon the Agent any obligations in respect of any
Transaction Document except as expressly set forth herein.
SECTION 9.3 Lack of Reliance on Agent and Financial Advisor.
Independently and without reliance upon the Agent or the Financial Advisor,
each Purchaser, to the extent it deems appropriate, has made and shall continue
to make (a) its own independent investigation of the financial condition and
affairs of Transferor, the Sellers, Servicer, Guarantor and the Trust in
connection with the making and the continuation of each Purchase and the taking
or not taking of any action in connection herewith and (b) its own appraisal of
the creditworthiness of Transferor, the Sellers, Guarantor and Servicer and the
merits and risks of an investment in the Certificates, and, except as expressly
provided in this Agreement, the Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any
Purchaser with any credit or other information with respect thereto, whether
coming into its possession before the making of a Purchase or at any time or
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times thereafter. The Agent shall not be responsible to any Purchaser for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, priority or sufficiency of the Transaction
Documents or the financial condition of Transferor, the Sellers, Guarantor,
Servicer or the Trust or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of any
Transaction Document, or the financial condition of Transferor, the Sellers,
Guarantor, Servicer or the Trust or the existence or possible existence of any
Early Amortization Event or Unmatured Early Amortization Event.
SECTION 9.4 Certain Rights of Agent. If the Agent shall request
instructions from the Required Purchasers with respect to any act or action
(including failure to act) in connection with any Transaction Document, the
Agent shall be entitled to refrain from acting or taking the action unless and
until the Agent shall have received instructions from the Required Purchasers,
and the Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Purchaser shall have any right
of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting under any Transaction Document in accordance with the
instructions of the Required Purchasers or for refraining to act in the absence
of instruction.
SECTION 9.5 Reliance. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that the Agent believed to be the proper Person. The Agent may
consult with legal counsel (including counsel for any Related Person),
independent public accountants and other experts selected by the Agent and
shall not be liable for any action taken or omitted to be taken in accordance
with the advice of such counsel, accountants or experts.
SECTION 9.6 Indemnification. To the extent the Agent is not
reimbursed and indemnified by Transferor or Servicer, the Purchasers will
reimburse and indemnify the Agent ratably in accordance with their respective
Percentages from and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses or
disbursements of whatsoever kind or nature that may be imposed on, asserted
against or incurred or suffered by the Agent (including fees and expenses of
legal counsel, accountants and experts) in performing its duties or as a result
of any action taken or omitted to be taken by the Agent under any Transaction
Document or in any way relating to or arising out of any Transaction Document;
provided, that no Purchaser shall be liable for any portion of these
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liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable order).
SECTION 9.7 Agent in its Individual Capacity. With respect to its
obligation to purchase a Certificate under this Agreement, the Agent shall have
the rights and powers specified herein for a Purchaser and may exercise the
same rights and powers as though it were not performing the duties of the
"Agent" specified herein, and the term "Purchasers," "Required Purchasers" and
"Holders" or "payees" of any Certificates or any similar terms shall, unless
the context clearly otherwise indicates, include the Agent in its individual
capacity. The Agent and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of banking, trust or other business with
Transferor or Servicer or any Related Person as if the Agent were not
performing the duties specified herein, and may accept fees and other
consideration from Transferor or Servicer for services in connection with this
Agreement and otherwise without having to account for the same to the
Purchasers. Each of the parties hereto acknowledges that the Agent will be
acting both as agent and as lender under the Avondale Credit Agreement and as a
Purchaser and Agent under this Agreement.
SECTION 9.8 Resignation by Agent. (a) The Agent may resign at any
time by giving notice to Transferor and the Purchasers. Such resignation shall
take effect upon the appointment of a successor Agent pursuant to subsections
(b) and (c) below or as otherwise provided below.
(b) Upon any notice of resignation of the Agent, the Required
Purchasers shall appoint a successor Agent hereunder who shall be a commercial
bank or trust company reasonably acceptable to Transferor (it being understood
and agreed that any Purchaser is deemed to be acceptable to Transferor).
(c) If a successor Agent is not appointed pursuant to subsection (b)
within 30 days after the delivery of the notice referred to in subsection (a),
the resigning Agent, with the consent of Transferor, shall then appoint a
successor Agent who shall serve as Agent hereunder until the time, if any, that
the Required Purchasers appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to subsection
(b) or (c) above by the 60th day after the date notice of resignation was
given by the resigning Agent, such Agent's resignation shall become effective
and the Purchasers shall thereafter perform all the duties of the Agent under
the
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<PAGE> 30
Transaction Documents until the time, if any, that the Purchasers appoint a
successor Agent as provided above.
SECTION 9.9 Required Purchasers. "Required Purchasers" means (i) for
purposes of Sections 6.2 of the Supplement, Purchasers having Percentages that
aggregate at least 66 2/3%, and (ii) otherwise, Purchasers having Percentages
that aggregate more than 50%.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Amendments. Except as provided in Section 13.1(a) or (b)
of the Pooling Agreement, Transferor, Avondale and Initial Servicer shall not
amend, waive or otherwise modify any provision of any Transaction Document to
which it is a party, consent to any departure therefrom, or grant any waiver or
consent thereunder, unless the same shall have been consented to in writing by
the Required Purchasers prior to the effectiveness of the same; provided,
however, that no amendment shall (a) decrease in any manner the amount of, or
delay the timing of, any allocation, payment or distribution in respect of any
Certificate without the prior written consent of each Purchaser affected
thereby, (b) amend, modify or waive any provision of this Agreement that
requires the approval or consent of a specified percentage of Purchasers
without the prior written consent of that percentage of Purchasers, (c) amend,
modify or waive the provisions of this section in a manner adverse to the
rights of any Purchaser without the consent of that Purchaser, (d) waive any
Early Amortization Event arising from a Bankruptcy Event with respect to
Transferor, Avondale or any Seller without the consent of each Purchaser, (e)
amend or modify the Percentage of any Purchaser without its prior written
consent, (f) waive any of the requirements hereunder that the interests of
Trustee in the Receivables and the other Transferred Assets be perfected by
appropriate UCC filings without the prior written consent of each Purchaser or
(g) amend, modify or otherwise affect the rights or duties of the Agent
hereunder without the prior written consent of the Agent; provided further that
neither the execution and delivery of a Supplement relating to a refinancing of
the Certificates as contemplated by Section 4.9 of the Supplement relating to
the Certificates, nor any other amendment to the Transaction Documents in
connection with such a refinancing, shall require any consent from any
Purchaser, so long as the prior or contemporaneous repayment in full of the
Certificates in accordance with Section 5.2 of the Supplement relating to the
Certificates is a condition to the issuance of the refinancing certificates,
and of the effectiveness of such related amendment. Each Purchaser shall be
bound by any modification, waiver or consent authorized by this section.
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SECTION 10.2 No Waiver; Remedies. Any waiver, consent or approval
given by any party hereto shall be effective only in the specific instance and
for the specific purpose for which given, and no waiver by a party of any
breach or default under this Agreement shall be deemed a waiver of any other
breach or default. No failure on the part of any party hereto to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder, or any
abandonment or discontinuation of steps to enforce the right, power or
privilege, preclude any other or further exercise thereof or the exercise of
any other right. No notice to or demand on any party hereto in any case shall
entitle such party to any other or further notice or demand in the same,
similar or other circumstances. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 10.3 Successors and Assigns; Assignments. (a) This Agreement
shall be binding upon, and inure to the benefit of, Transferor, Servicer,
Avondale, the Agent, the Purchasers and their respective successors and
assigns; provided that none of Transferor, Servicer or Avondale may assign its
rights or obligations hereunder or in connection herewith or any interest
herein (voluntarily, by operation of law or otherwise) without the prior
written consent of all the Purchasers, except that Servicer may be terminated
in accordance with Sections 10.1 and 10.2 of the Pooling Agreement; and
provided further, that no Purchaser or Participant may transfer, pledge,
assign, sell participations in or otherwise encumber its rights or obligations
hereunder or any interest herein except as permitted under this section.
(b) No Certificate may be subdivided into an aggregate principal
amount of less than 2.1% of the aggregate principal amount of all outstanding
Subject Instruments (including the Transferor Certificate) and, if Transferor
so specifies, Enhancements (other than as a direct result of a transfer,
assignment or other conveyance by a Structured Lender to a Permitted
Transferee), and after giving effect to any subdivision (other than a transfer,
assignment or other conveyance by a Structured Lender to a Permitted
Transferee), there may not be more than 20 Private Holders of Subject
Instruments. Subject to the terms of Section 10.3(f), each Purchaser may at
any time sell to one or more banks or other entities ("Participants")
participating interests in all or any portion of its Certificate and its
obligations hereunder (its "Credit Exposure"); provided that such Participant
shall have certified to the selling Purchaser that such Participant is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act). In the event of any sale by a Purchaser of participating interests to a
Participant, the Purchaser shall notify Transferor of the identity of the
Participant upon a request by Transferor, the Purchaser's obligations under
this Agreement shall remain unchanged, the Purchaser shall remain solely
responsible for the performance thereof, and the
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<PAGE> 32
Purchaser shall remain the holder of its rights under its Certificate and this
Agreement for all purposes under this Agreement, and the other parties to the
Transaction Documents shall continue to deal solely and directly with the
Purchaser in connection with such rights and obligations under this Agreement.
If the proposed Participant is not a Permitted Transferee, prior to any rights
of such Participant being recognized hereunder or under any other Transaction
Document or Certificates the Purchaser shall provide, or shall cause such
Participant to provide, to Transferor such information as Transferor reasonably
requests to make the determination required by Section 10.3(f).
Transferor agrees that each Participant shall be entitled to the
benefits (and subject to the duties) of Sections 4.3, 4.5 and 4.6 with
respect to its participation in the Certificate. The Purchasers agree that any
agreement between them and any Participant in respect of a participating
interest shall (x) contain a covenant of the Participant not to make any general
solicitation or general advertising for the offer or sale of its interest in the
Certificates, (y) require the Participant to comply with the terms of Section
10.13 and (z) not restrict the Purchasers' right to agree to any amendment,
supplement or modification of the Transaction Documents except to (i) extend the
final maturity of any obligation, (ii) reduce the rate or extend the time of
payment of interest thereon or any fees owed to the Purchasers under the
Transaction Documents, (iii) reduce the principal amount of any obligation, (iv)
release or direct the release of all or substantially all of the Transferred
Assets or Trustee's claim to the Transferred Assets, (v) reduce substantially
the amount of any reserve included in the calculation of the Base Amount, (vi)
increase the amount of the participation from the amount thereof then in effect,
or (vii) permit assignment or transfer by Transferor or any Seller of its rights
or obligations under the Transaction Documents.
(c) Subject to the terms of Section 10.3(f), any Purchaser may at any
time assign to any Permitted Transferee or to one or more banks or other
financial institutions (each, an "Assignee") all or any part of its Credit
Exposure; provided that (i) unless assigned to an Affiliate of the Purchaser or
to a Permitted Transferee, it assigns all of its Credit Exposure or a portion
of its Credit Exposure in an amount not less than $5,000,000, (ii) such
Assignee, other than an existing Purchaser, an Affiliate of the Purchaser or a
Permitted Transferee, must be reasonably acceptable to the Agent, which
acceptance shall not be delayed or withheld unreasonably, (iii) if such
Assignee is not a United States person (as defined in section 7701(a)(30) of
the Internal Revenue Code), such Assignee shall satisfy the requirements of
Section 4.6(c), provided, that if such Assignee thereafter fails to comply
with the requirements of Section 4.6, amounts payable to it under Section 4.6
shall be limited to amounts that would be payable if such Assignee had complied
with Section 4.6(c), and (iv) such Assignee shall have certified to the
assigning Purchaser
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<PAGE> 33
that such Assignee is a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act). For purposes of this Section 10.3, a "Permitted
Transferee" means, with respect to any Structured Lender, any of its Support
Banks; provided, however, that the aggregate number of actual assignments by a
Structured Lender to Permitted Transferees at any time outstanding shall not
exceed 10.
In the event of any assignment, the Purchaser (x) shall comply with
Article VI of the Pooling Agreement; provided that no Opinion of Counsel shall
be required to be delivered pursuant to Section 6.3(e) of the Pooling Agreement
with respect to any transfer to a Permitted Transferee, and (y) shall give
notice to Transferor and the Agent and shall deliver to the Agent, for
acceptance and recording in its records, an assignment agreement substantially
in the form of Exhibit D together with a processing and recordation fee of, in
the case of assignments to a Purchaser or an Affiliate of a Purchaser, $1,500
and, in cases of any other assignment, $3,500; provided, that no processing and
recordation fee shall be payable in connection with any assignment by a
Structured Lender to a Permitted Transferee. Within five Business Days of
receipt thereof, the Agent shall, if the assignment agreement has been fully
executed by the Assignee and the assignor Purchaser, is completed and is in
substantially the form of Exhibit D, execute the assignment agreement and
record the information contained therein in its records. Upon the earlier of
the expiration of the five Business Day period or the date of the recording,
the assignment will become effective; provided, that any assignment by a
Structured Lender to a Permitted Transferee shall not require acceptance or
recording by the Agent prior to effectiveness and shall become effective
immediately upon receipt by the Agent of an assignment agreement appropriately
completed in substantially the form of Exhibit D and executed by such
Structured Lender and the applicable Permitted Transferee.
Transferor, Servicer, Avondale, the Agent and the Purchasers agree to
extend the rights and benefits under this Agreement to the Assignee to the
extent the Assignee would have had if it were a Purchaser that was an original
signatory to this Agreement; provided, that the parties hereto shall be
entitled to continue to deal solely and directly with the assignor Purchaser in
connection with the interests so assigned to the Assignee until the assignment
agreement and any required fee, as described above, shall have been delivered
to the Agent by the Purchaser and the Assignee and the assignment shall have
become effective; provided, further, that notwithstanding anything herein or in
the assignment agreement, the Transaction Documents or any Certificate to the
contrary, an assignment to an existing Purchaser or an Affiliate of the
assigning Purchaser (other than to a Permitted Transferee) shall not become
effective, an Assignee (other than a Permitted Transferee) shall not be
recognized as a Purchaser and no other rights of an Assignee hereunder or
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<PAGE> 34
under any other Transaction Document or Certificate shall be recognized unless
and until the assigning Purchaser shall have provided, or caused the Assignee to
provide, to Transferor such information as Transferor reasonably requests to
make the determinations required by Section 10.3(f). Upon the effective
assignment of its Credit Exposure, the Purchaser shall be relieved of its
obligations hereunder to the extent of the assignment.
(d) The sale or assignment of any Credit Exposure to any Assignee or
Participant (each, a "Transferee") shall not be effective until it has agreed
to be bound by the provisions of Section 10.13. Transferor and, the Sellers,
the Servicer and Avondale each authorize the Purchasers to disclose to any
Transferee and any prospective Transferee any and all information in their
possession concerning Transferor, the Sellers, the Servicer or Avondale in
connection with the Transferee's credit evaluation of the Program prior to
entering into this Agreement.
(e) Notwithstanding any other provision set forth in this Agreement,
the Purchasers may at any time create a security interest in all or any portion
of their rights under this Agreement and the Certificates in favor of any
Federal Reserve Bank in accordance with Regulation A of the Board of Governors
of the Federal Reserve System.
(f) No transfer, assignment or other conveyance of, or sale of a
participation interest in, a Certificate (other than by a Structured Lender to
a Permitted Transferee) shall be made unless (i) the aggregate outstanding
principal amount of all Certificates transferred, or in which a participation
interest is sold, pursuant to such transfer or sale is equal to a principal
amount of Certificates that would represent at least 2.1% of the aggregate
principal amounts of all Subject Instruments (including the Transferor
Certificate) and, if the Transferor so specifies, Enhancements, and (ii) after
giving effect thereto, there shall be no more than 20 Private Holders of
Subject Instruments, as reasonably determined by Transferor. No Certificate
may be subdivided into an aggregate principal amount that would represent less
than 2.1% of the aggregate principal amounts of all outstanding Subject
Instruments (including the Transferor Certificate) and, if the Transferor so
specifies, Enhancements. Any attempted transfer, assignment, conveyance,
participation or subdivision in contravention of the preceding restrictions, as
reasonably determined by the Transferor, shall be void ab initio and the
purported transferor, seller or subdivider of such Certificate shall continue
to be treated as the Certificateholder of any such Certificate for all purposes
of this Agreement.
(g) Each Affected Party with respect to each Purchaser shall be
entitled to receive additional payments pursuant to Sections 4.3, 4.5, 4.6,
and 10.5 as though it were a Purchaser and such Sections applied to its
interest in
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a Certificate or commitment to make or acquire interests in Purchases; provided
that such Affected Party shall not be entitled to additional payments pursuant
to Section 4.6 attributable to its failure to satisfy, at the time such
Affected Party becomes a Support Bank, the requirements of subsection 4.6(c) as
if it were an Assignee.
(h) Each Affected Party claiming increased amounts described in
Sections 4.3, 4.5, 4.6 or 10.5 shall furnish, through its related Purchaser,
to the Trustee, the Agent, Servicer and Transferor a certificate setting forth
in reasonable detail the basis and amount of each request by such Affected
Party for any such amounts referred to in such Section, which certificate will
be prepared in accordance with the requirements of such Section (if any).
Determinations by an Affected Party of any increased amounts referred to in
such Sections shall be conclusive, absent demonstrable error. Each Affected
Party shall promptly notify, through its related Purchaser, the Trustee, the
Agent, Servicer and Transferor of the occurrence of any event of which such
Affected Party is aware that would be likely to result in a demand for
compensation pursuant to Section 4.3, 4.5, 4.6 or 10.5.
(i) In connection with any proposal that a bank or other financial
institution become a Support Bank for a Purchaser which is a Structured Lender,
such Purchaser at its sole discretion, shall be entitled to distribute to any
proposed Support Bank on a confidential basis any information furnished to such
Purchaser by the Agent pursuant to the Transaction Documents. Each Purchaser
which is a Structured Lender shall promptly notify the Agent (who shall
promptly notify Transferor) in writing of the identity and interest of each
Support Bank for such Purchaser promptly upon the obtaining of such Support
Bank. Such Purchaser shall provide to the Agent (who shall, upon request,
provide copies of the same to Transferor, Servicer and the Trustee), with
respect to each Support Bank, such forms as would be required to be furnished
by such Support Bank pursuant to subsection 4.6(c) if such Support Bank were
an Assignee.
(j) Transferor, the Servicer and Avondale agree to assist the Agent in
any marketing of the Series 1996-1 Certificates, and Transferor, the Servicer
and Avondale agree (promptly upon request) to review any related marketing
materials and to provide all reasonably available information deemed necessary
by the Agent in such marketing. In addition, Transferor, the Servicer and
Avondale will use its best efforts to make appropriate officers and
representatives of Transferor, the Sellers and Avondale available to
participate in the information meetings for potential investors at such times
and places as the Agent may reasonably request.
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SECTION 10.4 Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the Certificates delivered
pursuant hereto shall survive the making and the repayment of the Purchases and
the execution and delivery of this Agreement and the Certificates and shall
continue in full force and effect until all obligations have been paid in full
and all commitments of the Purchasers hereunder have been terminated. In
addition, the obligations of Transferor under Sections 4.2, 4.3, 4.4, 4.6
and 10.5 and the obligations of the Purchasers under Section 9.6 shall
survive the termination of this Agreement.
SECTION 10.5 Expenses; Indemnification. (a) Transferor and Avondale
jointly and severally shall pay on demand (i) all reasonable out-of-pocket fees
and expenses (including reasonable attorneys' fees and expenses) of the Agent
incurred in connection with the preparation, execution, delivery,
administration, amendment, modification and waiver of the Transaction Documents
and the making and repayment of the Purchases, including any Servicer or
collection agent fees paid to any third party for services rendered to the
Purchasers and the Agent in collecting the Receivables and (ii) all reasonable
out-of-pocket fees and expenses of the Purchasers and the Agent
(including reasonable attorneys' fees and expenses of their counsel) incurred
in connection with the enforcement of the Transaction Documents against
Transferor, Servicer, Guarantor and the Sellers and in connection with any
workout or restructuring of the Transaction Documents. In addition, Transferor
will pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing, recording or
enforcement of this Agreement or any payment made under the Transaction
Documents (other than taxes imposed on net income that are excluded from the
definition of Taxes), and hereby indemnifies and saves the Agent and the
Purchasers harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay the taxes and fees.
Transferor and Avondale jointly and severally agree to reimburse and indemnify
the Agent and each Purchaser and their respective officers, directors,
shareholders, controlling Persons, employees and agents (collectively, the
"Indemnitees") from and against any and all actions, judgments, costs, expenses
or disbursements of whatsoever kind or nature that may be imposed on, asserted
against or incurred or suffered by the Agent or the Purchasers (including fees
and expenses of legal counsel, accountants and experts) in any way relating to
or arising out of any Transaction Document.
Notwithstanding the foregoing (and with respect to clause (x) below,
without prejudice to the rights that an Indemnitee may have pursuant to the
other provisions of the Transaction Documents), in no event shall any
Indemnitee be indemnified against any amounts (w) resulting from gross
negligence or willful misconduct by it or on the part of any of its officers,
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directors, employees or agents, or the breach by such Indemnitee of its
obligations under any Transaction Document, (x) to the extent they include
amounts in respect of Receivables and reimbursement therefor that would
constitute credit recourse to Servicer for the amount of any Receivable or
Related Transferred Asset not paid by the related Obligor, (y) to the extent
they are or result from lost profits or (z) to the extent they would constitute
consequential, special or punitive damages.
If for any reason the indemnification provided in this section is
unavailable to an Indemnitee or is insufficient to hold it harmless, then
Transferor and Avondale jointly and severally shall contribute to the amount
paid by the Indemnitee as a result of any loss, claim, damage or liability in a
proportion that is appropriate to reflect not only the relative benefits
received by the Indemnitee on the one hand and Transferor and Avondale on the
other hand, but also the relative fault of the Indemnitee (if any), Transferor
and Avondale and any other relevant equitable considerations; provided that
Transferor's obligations under this section shall be paid by Transferor only to
the extent that funds are available to make the payments pursuant to Article IV
of the Supplement, and there shall be no recourse to Transferor for all or any
part of any amounts payable pursuant to this section if the funds are at any
time insufficient to make all or part of any such payments. Any amount which
Transferor does not pay pursuant to the operation of the preceding sentence
shall not constitute a claim (as defined in Section 101 of the Bankruptcy
Code) against or corporate obligation of Transferor for any such insufficiency.
(b) If any action, suit, proceeding or investigation is commenced, as
to which an Indemnitee proposes to demand indemnification, it shall notify the
Transferor and Avondale with reasonable promptness; provided, however, that any
failure by such Indemnitee to notify the Transferor and Avondale shall not
relieve the Transferor and Avondale from their obligations hereunder (except to
the extent that the Transferor and Avondale are prejudiced by such failure to
promptly notify). The Transferor and Avondale shall be entitled to assume the
defense of any such action, suit, proceeding or investigation, including the
employment of counsel reasonably satisfactory to the Indemnitee. The Indemnitee
shall have the right to counsel of its own choice to represent it, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee unless:
(a) the Transferor and Avondale have failed promptly to assume the defense and
employ counsel reasonably satisfactory to the Indemnitee in accordance with the
preceding sentence, or (b) the Indemnitee shall have been advised by counsel
that there exists an actual or potential conflict of interests among the
Transferor and Avondale and such Indemnitee, including situations in which one
or more legal defenses may be available to such Indemnitee that are
inconsistent with those available to the Transferor and Avondale; provided,
however, that Transferor and Avondale shall not, in
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connection with any one such action or proceeding or separate but substantially
similar actions or proceedings arising out of the same general allegations, be
liable for fees and expenses of more than one separate firm of attorneys (other
than local counsel) at any time for all Indemnitees; and such counsel shall, to
the extent consistent with its professional responsibilities, cooperate with the
Transferor and Avondale and any counsel designated by the Transferor and
Avondale.
Each of the Transferor and Avondale further agrees that it will not,
without the prior written consent of the applicable Indemnitee, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnitee is an actual or potential party
to such claim, action, suit or proceeding) unless such settlement, compromise
or consent includes an unconditional release of each Indemnitee from all
liability and obligations arising therefrom.
SECTION 10.6 Entire Agreement. This Agreement, together with the
documents delivered pursuant to Section 7.1 and the other Transaction
Documents, including the exhibits and schedules thereto, contains a final and
complete integration of all prior expressions by the parties hereto with
respect to the subject matter hereof and shall constitute the entire agreement
among the parties hereto with respect to the subject matter hereof, superseding
all previous oral statements and other writings with respect thereto.
SECTION 10.7 Notices. All communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered,
sent by overnight courier or mailed by registered mail, postage prepaid and
return receipt requested, or transmitted by facsimile transmission and
confirmed by a similar mailed writing to any party at the address for that
party set forth (a) on the signature page to this Agreement or (b) to another
address as that party may designate in writing to the Agent and Transferor.
SECTION 10.8 No Third-Party Beneficiaries. Nothing expressed herein
is intended or shall be construed to give any Person (other than the parties
hereto, the Participants and Assignees described in Section 10.3 and, to the
extent provided in Section 10.3, the other Affected Parties) any legal or
equitable right, remedy or claim under or in respect of this Agreement.
SECTION 10.9 Severability of Provisions. Any covenant, provision,
agreement or term of this Agreement that is prohibited or is held to be void or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of the prohibition or unenforceability without
invalidating the remaining provisions of this Agreement.
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SECTION 10.10 Counterparts. This Agreement may be executed in any
number of counterparts (which may include facsimile) and by the different
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original, and all of which together shall constitute one and
the same instrument.
SECTION 10.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
SECTION 10.12 Tax Characterization. Each party to this Agreement (a)
acknowledges that it is the intent of the parties to this Agreement that, for
purposes of Federal, applicable state and local income and franchise and other
taxes measured by or imposed on income, the Certificates will be treated as
evidence of indebtedness secured by the Transferred Assets and the Trust will
not be characterized as an association (or publicly traded partnership) taxable
as a corporation, (b) agrees that the provisions of the Transaction Documents
be construed to further that intent, and (c) agrees to treat the Certificates,
for purposes of Federal, state and local income and franchise and other taxes
measured by or imposed on income, as indebtedness.
SECTION 10.13 No Proceedings. (a) Notwithstanding any prior
termination of this Agreement, Servicer, the Agent (solely in its capacity as
such) and each Purchaser (solely in its capacity as such) hereby agrees that it
will not institute against Transferor, or join any other Person in instituting
against Transferor, any insolvency proceeding (namely, any proceeding of the
type referred to in the definition of "Bankruptcy Event") so long as any
Certificates shall be outstanding or there shall not have elapsed one year plus
one day since the last day on which any Certificates shall have been
outstanding. The foregoing shall not limit the right of Servicer, the Agent or
any Purchaser to file any claim in or otherwise take any action with respect to
any insolvency proceeding that was instituted against Transferor by any other
Person.
(b) Notwithstanding any prior termination of this Agreement, each of
Servicer, the Agent (solely in its capacity as such), and each Purchaser
(solely in its capacity as such) hereby agrees that it will not institute
against any Structured Lender, or join any other Person in instituting against
any Structured Lender, any insolvency proceeding (namely, any proceeding of the
type referred to in the definition of "Bankruptcy Event") for one year plus one
day after the latest maturing commercial paper note, medium term note or other
debt security issued by such Structured Lender is paid. The foregoing shall
not limit the right of Servicer, the Agent or any Purchaser to file any
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claim in or otherwise take any action with respect to any insolvency proceeding
that was instituted against such Structured Lender by any other Person.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and delivered as of the day and
year first above written.
AVONDALE RECEIVABLES COMPANY
By:_______________________________________
Name:___________________________________
Title:__________________________________
Address: 506 South Broad Street
Monroe, Georgia 30655
Attention: Treasurer
Telephone: (770) 267-2226
Facsimile: (770) 267-2543
AVONDALE MILLS, INC.,
as Servicer
By:_______________________________________
Name:___________________________________
Title:__________________________________
Address: 506 South Broad Street
Monroe, Georgia 30655
Attention: Chief Financial Officer
Telephone: (707) 267-2226
Facsimile: (707) 267-2543
<PAGE> 42
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent and as Support Bank for Falcon
By:_________________________________________
Name:_____________________________________
Title: Authorized Signer
Address: One First National Plaza
Mail Suite 0079
Chicago, Illinois 60670
Attention: W. Edward Covington
Telephone: (312) 732-5768
Facsimile: (312) 732-4487
FALCON ASSET SECURITIZATION CORPORATION,
as a Purchaser
By:__________________________________________
Name:______________________________________
Title: Authorized Signer
Address: One First National Plaza
Mail Suite 0079
Chicago, Illinois 60670
Telephone: (312) 732-5768
Facsimile: (312) 732-4487
<PAGE> 43
<TABLE>
SCHEDULE
<S> <C>
SCHEDULE I Amount of Each Initial Purchaser's Certificate
EXHIBITS
EXHIBIT A Form of Pooling and Servicing Agreement
EXHIBIT B Form of Receivables Purchase Agreement
EXHIBIT C Form of Series 1996-1 Supplement
EXHIBIT D Form of Assignment Agreement
APPENDIX
APPENDIX X Index of Additional Defined Terms
</TABLE>
The registrants agree to furnish a copy of the Schedule, Exhibits and
Appendix listed above to the Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 10.5
======================================================
NOTE PURCHASE AGREEMENT
AMONG
ONEITA INDUSTRIES, INC.
AND
ROBERT M. GINTEL
AND
AVONDALE MILLS, INC.
DATED AS OF DECEMBER 28, 1995
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NOTE PURCHASE AGREEMENT ("Agreement"), dated as of December
28, 1995, among ONEITA INDUSTRIES, INC., a Delaware corporation having its
principal address at 4130 Faber Place Drive, Suite 200, Ashley Corporate
Center, Charleston, South Carolina 29405 (the "Company"), ROBERT M. GINTEL, an
individual with a principal place of business at 6 Greenwich Office Park,
Greenwich, Connecticut 06831 ("Gintel"), and AVONDALE MILLS, INC., an Alabama
corporation having its principal address at 506 South Broad Street, Monroe,
Georgia 30655 ("Avondale")(Gintel and Avondale are sometimes hereinafter
collectively referred to as the "Purchasers," and individually as a
"Purchaser").
W I T N E S S E T H
WHEREAS, each of the Purchasers desire to lend the Company
$7,500,000, or an aggregate of $15,000,000 (the "Loan") and the Company intends
to make a common stock rights offering (the "Rights Offering"), on the terms
and conditions set forth in the Standby Agreement (as defined below), to the
holders of shares of the Company's common stock, $.25 par value per share (the
"Common Stock"), to raise sufficient funds to repay $11,250,000 of the Loan;
and
WHEREAS, the Purchasers are willing to act as standby
purchasers of the Company with respect to the Rights Offering, all in
accordance with the terms set forth in a Standby Agreement among the Company
and the Purchasers, such Standby Agreement to be in the form annexed hereto as
Schedule A (the "Standby Agreement"); and
WHEREAS, to evidence the Loan, the Company desires to issue
and sell, and the Purchasers desire to purchase from the Company, Subordinated
10% Promissory Notes of the Company in the aggregate principal amount of
$15,000,000, with Gintel acquiring two notes, each in the original principal
amount of $3,750,000 (the "Initial Gintel Note" and the "Gintel Subordinated
Note"), the Initial Gintel Note to be exchangeable as herein provided; and
WHEREAS, in connection with, and as partial consideration for,
that portion of the Loan being made by Gintel, the Company, subject to its
prior receipt of all requisite consents, desires to issue and sell to Gintel
five- year warrants (the "Warrants") to purchase up to 125,000 shares of Common
Stock of the Company at $7.00 per share (the "Warrant Shares"); and
WHEREAS, should the Rights Offering fail to be consummated on
or before May 31, 1996, or upon the earlier happening of certain other events
set forth herein, the parties desire that Avondale have the right to exchange
its $7,500,000 subordinated note (the "Avondale Note") for a convertible 10%
subordinated note of the Company in like principal amount (the "Avondale
Replacement Note"), such Avondale Replacement Note to be convertible into
shares of Common Stock of the Company at the rate of $7.00 per share; and
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WHEREAS, should the Rights Offering fail to be consummated on
or before May 31, 1996, or upon the earlier happening of certain other events
set forth herein, the parties desire that Gintel have the right, subject to the
prior receipt by the Company of all requisite consents, to exchange his Initial
Gintel Note for a convertible 10% subordinated note of the Company in like
principal amount (the "Gintel Replacement Note"), such Gintel Replacement Note
to be convertible into shares of Common Stock of the Company at the rate of
$7.00 per share.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
Section 1. Purchase and Sale of Notes.
1.1 Purchase and Sale of Notes. The Company
agrees to sell to the Purchasers, and the Purchasers agree to purchase from the
Company, at a closing (the "Closing") to take place on such date as the parties
hereto shall agree, but in no event, later than February 28, 1996 (the "Closing
Date"), and subject to the conditions hereinafter set forth in Sections 1.2 and
1.3 below, $15,000,000 aggregate principal amount of Subordinated 10%
Promissory Notes of the Company due January 31, 1999 at a price equal to 100%
of the aggregate principal amount of the Notes, such Notes to be subordinated
to certain indebtedness of the Company on the terms and conditions further set
forth in the Notes. To evidence the Loan, Avondale will be issued the Avondale
Note and Gintel will be issued the Initial Gintel Note and the Gintel
Subordinated Note (the Avondale Note, the Initial Gintel Note and the Gintel
Subordinated Note are sometimes hereinafter collectively referred to as the
"Notes"). The Initial Gintel Note, the Gintel Subordinated Note and the
Avondale Note are substantially in the forms of Schedules B, C and D annexed
hereto, respectively, shall be dated as of the Closing Date, and shall be paid
for, in the amount set forth on the face of each Note, by wire transfer of
immediately available funds to such account of the Company as shall have been
designated to the Purchasers.
1.2 Conditions to the Purchasers' Obligations.
The obligations of the Purchasers to purchase the Notes as provided for herein
shall be subject to the fulfillment, or waiver by the Purchasers, on or before
the Closing Date, of each of the following conditions:
1.2.1 Representations and Warranties. The
representations and warranties of the Company contained in Section 5
hereof shall be true and correct, in all material respects, on and as
of the Closing Date and the Company shall have delivered to the
Purchasers a certificate of the President of the Company to such
effect.
1.2.2 Compliance with Agreement. The Company, in
all material respects, shall have performed and complied with all
agreements and conditions contained in this Agreement that are
required to be performed or complied with
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by it on or before the Closing Date and the Company shall have
delivered to the Purchasers a certificate of the President of the
Company to such effect.
1.2.3 Bank Financing. The Company shall have
consummated the bank financing described in Schedule 1.2.3 annexed
hereto (the "Bank Financing") on or before the Closing Date.
1.2.4 Registration Rights Agreements. The Company
shall have executed and delivered to Avondale and Gintel a
registration rights agreement, in or substantially in the form annexed
hereto as Schedule E (the "Registration Rights Agreement"), pursuant
to which, among other things, the Company, if requested by Avondale
and/or Gintel, shall register for sale, pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), any shares of Common Stock
of the Company acquired pursuant to the Standby Agreement, issuable
upon the conversion of all or any portion of the Gintel Replacement
Note and/or the Avondale Replacement Note and/or issuable upon the
exercise of all or any portion of the Warrants.
1.2.5 Opinion of Counsel. The Company shall have
delivered a favorable opinion, dated the Closing Date and addressed to
the Purchasers, from counsel for the Company, substantially in the
form of Schedule 1.2.5 annexed hereto.
1.2.6 Fairness Opinion. The Board of Directors of
the Company, acting upon the recommendation of a specially appointed
Independent Committee of the Board of Directors of the Company (the
"Independent Committee"), shall have received the opinion of Butler
Chapman & Co., Inc. ("Butler Chapman") to the effect that the
transactions contemplated by this Agreement and the Rights Offering are
fair from a financial point of view to the Company and the holders of
Common Stock of the Company and such opinion shall not have been
withdrawn as of the Closing Date.
1.2.7 Board Approval. The Board of Directors of
the Company, based upon the recommendation of the Independent
Committee and the fairness opinion described in Section 1.2.6 above,
shall have unanimously (except any director of the Company
participating in the transactions contemplated by this Agreement shall
have abstained) approved the transactions contemplated by this
Agreement, and each director of the Company who owns Common Stock
shall have agreed to vote, at any stockholders' meeting of the
Company, all shares of Common Stock beneficially owned by him in favor
of the Rights Offering, the issuance of the Warrants and any other
proposal relating to any of the transactions contemplated by this
Agreement.
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1.2.8 Approvals and Consents. There shall have
been obtained by the Company and the Purchasers all consents,
approvals, authorizations, waivers, permits and orders, necessary or
required for purposes of legally consummating the transactions
contemplated by this Agreement, including, without limitation, any
consent and/or waiver required from Prudential Insurance Company of
America ("Prudential"), and all such consents, approvals,
authorizations, permits and orders shall be reasonably acceptable to
the Purchasers.
1.2.9 Legal Actions or Proceedings. No action or
proceeding by any governmental authority or other person shall have
been instituted or threatened which could reasonably be expected to
enjoin, restrain or prohibit, or could reasonably be expected to
result in substantial damages in respect of any provision of this
Agreement or the consummation of the transactions contemplated hereby
or by the Rights Offering.
1.2.10 Certificate of Principal Financial Officer.
There shall have been delivered to the Purchasers, dated as of the
Closing Date, a certificate of the principal financial officer of the
Company to the effect that he is familiar with this Agreement, that he
has reviewed the affairs of the Company and its subsidiaries, and
that, to the best of his knowledge, there exists no condition, act or
omission to act which would constitute an event of default under the
Notes or which with notice or lapse of time, or both, would constitute
such an event of default.
1.2.11 Financial Statements. The Company shall have
delivered to the Purchasers audited financial statements of the
Company as of September 30, 1995, which financial statements contain
the unqualified opinion of Arthur Andersen LLP (the "September 30,
1995 Financial Statements").
1.2.12 Acceptable Subordination Agreements. The
Purchasers, in connection with the Bank Financing, shall have entered
into subordination agreements in form and substance acceptable to them
with the lenders in the Bank Financing.
1.2.13 Satisfactory Information. The Annual Report
of the Company on Form 10-K for the fiscal year ended September 30, 1995 and
the balance sheets of the Company delivered or to be delivered to the
Purchasers in accordance with Sections 5.7 (iii) and (iv) shall not contain
disclosure of any material adverse facts which have not been previously
disclosed to Avondale.
1.3 Conditions to the Company's Obligations. The
obligations of the Company to sell the Notes as provided for herein
shall be subject to the fulfillment, or waiver by the Company, on or
before the Closing Date, of each of the following conditions:
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1.3.1 Representations and Warranties. The
representations and warranties of each Purchaser contained in Section
7 hereof shall be true and correct, in all material respects, on and
as of the Closing Date and each Purchaser shall have delivered to the
Company an executed certificate to such effect.
1.3.2 Compliance with Agreement. Each Purchaser,
in all material respects, shall have performed and complied with all
agreements and conditions contained in this Agreement that are
required to be performed or complied with by him or it, as the case
may be, on or before the Closing Date and each Purchaser shall have
delivered to the Company a certificate to such effect.
1.3.3 Bank Financing. The Company shall have
consummated the Bank Financing on or before the Closing Date.
1.3.4 Fairness Opinion. The Board of Directors of
the Company, acting upon the recommendation of the Independent
Committee, shall have received the opinion of Butler Chapman to the
effect that the transactions contemplated by this Agreement and the
Rights Offering are fair from a financial point of view to the Company
and the holders of Common Stock of the Company and such opinion shall
not have been withdrawn as of the Closing Date.
1.3.5 Approvals and Consents. There shall have
been obtained by the Purchasers and the Company all consents,
approvals, authorizations, waivers, permits and orders necessary or
required for purposes of legally consummating the transactions
contemplated by this Agreement, including, without limitation, any
consent and/or waiver required from Prudential, and all such consents,
approvals, authorizations, permits and orders shall be reasonably
acceptable to the Company.
1.3.6 Legal Actions or Proceedings. No action or
proceeding by any governmental authority or other person shall have
been instituted or threatened which could reasonably be expected to
enjoin, restrain or prohibit, or could reasonably be expected to
result in substantial damages in respect of, any provision of this
Agreement or the consummation of the transactions contemplated hereby
or by the Rights Offering.
1.3.7 September 30, 1995 Financial Statements. The
Company shall have delivered to the Purchasers copies of the September
30, 1995 Financial Statements.
1.4 Closing. The Closing of the purchase and sale
of the Notes on the Closing Date shall take place at the offices of Reid &
Priest LLP at 11:00 a.m. on the Closing Date or
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at such other time and place as the Company and the Purchasers mutually agree
upon. At the Closing, the parties shall deliver the Notes and make the
respective payments therefor.
Section 2. Issuance and Sale of Warrants.
In connection with, and in partial consideration for, that
portion of the Loan being funded by Gintel, the Company hereby agrees, subject
to its prior receipt of all requisite approvals and consents, including,
without limitation, those of the New York Stock Exchange (the "NYSE") and/or
the Company's stockholders, to issue and sell to Gintel the Warrants. The
Warrants shall be in the form annexed hereto as Schedule F. The Company hereby
covenants to seek promptly the approvals and consents contemplated in this
Section 2.
Section 3. Transactions Upon Consummation of the Rights
Offering.
Standby Agreement. If the Rights Offering is consummated on
or before May 31, 1996, then Gintel and Avondale shall act as standby
purchasers pursuant to the Standby Agreement.
Section 4. Transactions Upon No Consummation of the
Rights Offering or Other Triggering Events.
4.1 Exchange of Avondale Note. If, (a) by May
31, 1996, the Rights Offering is not consummated, or (b) an Event of Default
occurs (as defined in the Avondale Note or the Initial Gintel Note) or, if
prior to May 31, 1996, (c) the stockholders of the Company vote to not approve
the Rights Offering and the transactions contemplated hereby and thereby, (d)
the Company publicly announces that it will not proceed with the Rights
Offering or (e) any other event takes place which effectively prohibits the
Company from lawfully consummating the Rights Offering by May 31, 1996 (the
date of occurrence of any of the events described in clauses (a) through (e)
above being referred to as the "Conversion Date"), then Avondale, at any time
within the 30-day period immediately following the Conversion Date, may
exchange the Avondale Note for the Avondale Replacement Note, such Avondale
Replacement Note to be substantially in the form annexed hereto as Schedule G
and to be convertible, at Avondale's option at any time within the 90-day
period immediately following the Conversion Date, into shares of Common Stock
of the Company at the rate of $7.00 per share, all as set forth in the Avondale
Replacement Note. The Company shall provide the Purchasers with prompt written
notice of the occurrence of any of the events described in clauses (a) through
(e) above.
4.2 Gintel Exchange of Initial Gintel Note. Gintel,
subject to the prior receipt by the Company of all requisite consents,
including, if necessary, that of the NYSE and/or the Company's stockholders,
may, within the 30-day period immediately following the Conversion Date,
exchange the Initial Gintel Note for the Gintel Replacement Note, such Gintel
Replacement Note to be substantially in the form annexed hereto as Schedule H,
and to be convertible, at Gintel's option at any time within the 90-day period
immediately following the Conversion Date,
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into shares of Common Stock of the Company at the rate of $7.00 per share, all
as set forth in the Gintel Replacement Note.
4.3 Avondale Rights. The parties hereto acknowledge that
Avondale's ability to exercise its rights under the Standby Agreement, to
exchange the Avondale Note for the Avondale Replacement Note and to convert the
Avondale Replacement Note into Common Stock of the Company does not require
NYSE and/or stockholder approval, and that Avondale and the Company will be
permitted to effect such exercise, exchange and/or conversion in accordance
with the terms of this Agreement and the agreements and promissory notes
referred to herein whether or not the necessary NYSE and/or stockholder
approvals are obtained to permit the transactions involving Gintel under this
Agreement.
Section 5. Representations and Warranties of the Company.
In order to induce the Purchasers to acquire the Notes, the
Company represents and warrants to each of the Purchasers as follows:
5.1 Organization and Standing. (a) The Company is a
corporation duly organized and validly existing, is in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified as a foreign corporation and is in
good standing in all other jurisdictions in which such qualification is
required, provided, however, that the Company need not be qualified in a
jurisdiction in which its failure to qualify would not have a material adverse
effect on its operations or financial condition.
(b) Except as set forth on Schedule 5.1 annexed hereto,
the Company owns, directly or indirectly through subsidiaries, all of the
issued and outstanding capital stock of each of the subsidiaries of the Company
set forth on Schedule 5.1 annexed hereto (collectively, the "Subsidiaries").
Each of the Subsidiaries is duly organized and validly existing, is in good
standing under the laws of the state of its incorporation, and has all
requisite power and authority to carry on its business as now conducted and as
proposed to be conducted.
(c) Each Subsidiary is duly qualified as a foreign
corporation and is in good standing in all other jurisdictions in which such
qualification is required, provided, however, that such Subsidiary need not be
qualified in a jurisdiction in which its failure to qualify would not have a
material adverse effect on its operations or financial condition.
(d) True and accurate copies of the Company's Certificate of
Incorporation and Bylaws, and the Certificate of Incorporation and Bylaws of
each Subsidiary, each as presently in effect, have been delivered to counsel
for the Purchasers.
5.2 Capitalization. (a) The authorized capital stock of
the Company consists of 15,000,000 shares of Common Stock, of which 6,878,506
shares are validly issued and outstanding, fully paid and nonassessable and
listed for trading on the NYSE, and were issued
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in compliance with all applicable federal and state securities laws, and
2,000,000 shares of preferred stock, $1.00 par value per share, of which no
shares are issued and outstanding. Except as set forth on Schedule 5.2 annexed
hereto, and as contemplated by the transactions that are the subject of this
Agreement and the Rights Offering, there are no options, warrants, conversion
privileges, preemptive rights or other rights presently outstanding to purchase
any of the authorized but unissued capital stock of the Company.
(b) The authorized capital stock of each Subsidiary is
set forth on Schedule 5.2 annexed hereto. Each outstanding share of capital
stock of each Subsidiary has been validly issued and is fully paid and
non-assessable and was issued in compliance with all applicable federal and
state securities laws. There are no options, warrants, conversion privileges,
preemptive rights or other rights presently outstanding to purchase any of the
authorized but unissued capital stock of any Subsidiary.
(c) Except as contemplated by the Registration Rights
Agreement and as set forth on Schedule 5.2 annexed hereto, there are no
registration rights with respect to the Company's securities currently
outstanding or other rights currently outstanding which could require the
Company to register for sale pursuant to the Securities Act any securities of
the Company.
5.3 Authorization. All corporate action on the part of
the Company and its Subsidiaries and their respective officers, directors and
shareholders that are necessary for the authorization, execution, delivery and
performance of all obligations of the Company under this Agreement, the
Registration Rights Agreement and the Standby Agreement, and for the
authorization, issuance and delivery of the Notes, the Avondale Replacement
Note, the Gintel Replacement Note and the Warrants have been taken. Except as
set forth on Schedule 5.3 annexed hereto, this Agreement, the Notes, the
Avondale Replacement Note, the Gintel Replacement Note, the Warrants, the
Standby Agreement and the Registration Rights Agreement, constitute and will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their respective terms, and will not violate any provision of
law, any order of any court or other agency of government, the Certificate of
Incorporation or By-Laws of the Company or any provision of any indenture,
agreement or other instrument by which the Company or any of its Subsidiaries,
or any of their respective properties or assets is bound or affected.
5.4 Validity of Common Stock. The Common Stock issuable
upon the exercise of the rights to be issued in the Rights Offering, upon any
conversion of the Gintel Replacement Note and/or the Avondale Replacement Note
or upon any exercise of the Warrants have been duly authorized and validly
reserved and, upon issuance in accordance with the terms thereof, shall be duly
and validly issued, fully paid and nonassessable and duly authorized for
listing on the NYSE, subject to official notice of issuance.
5.5 Governmental and Other Consents. Except as set forth
on Schedule 5.5 annexed hereto, all consents, approvals, orders or
authorizations of, or registrations,
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qualifications, designations, declarations or filings with, any federal or
state governmental authority or any other person on the part of the Company
which are, or will be, necessary to be obtained by the Company for the valid
execution, delivery and performance of this Agreement, the Registration Rights
Agreement and the Standby Agreement by the Company and the consummation of the
transactions contemplated hereby and thereby, or the issuance, delivery or
enforcement of the Notes, the Avondale Replacement Note, the Gintel Replacement
Note and the Warrants, have been made or obtained.
5.6 Actions Pending. Except as set forth on Schedule
5.6 annexed hereto, no claim, suit, action or legal, administrative,
arbitration or other proceeding or, to the best knowledge and belief of the
Company, investigation by any governmental agency, pertaining to the business,
products or assets of the Company or any Subsidiary, including, but not limited
to, matters involving environmental, safety or health standards, or employment
matters as currently in effect, or products liability or product safety, or any
change in the zoning or building ordinances affecting the properties or
leasehold interests of the Company and its Subsidiaries is pending or, to the
best knowledge and belief of the Company, has been threatened, nor, to the best
knowledge and belief of the Company, do any facts exist which might lead to any
such proceedings, which might materially adversely affect the business,
operations or financial condition of the Company and its Subsidiaries, taken as
a whole, or any of their respective properties or assets. The foregoing
includes, without limiting its generality, actions pending or threatened (or
any basis therefor known to the Company) involving the prior employment of any
employees or prospective employee of the Company or any Subsidiary, or the use,
in connection with the Company's business, of any information or techniques
which might be alleged to be proprietary to their former employer.
5.7 Financial Statements. The Company has furnished or
will furnish to each Purchaser (i) the audited consolidated balance sheet of
the Company as of September 30, 1994 and the related consolidated statements of
operations and cash flows of the Company for the year then ended (the "Audited
Financial Statements"), audited by Arthur Andersen LLP, the independent public
accountants retained by the Company, (ii) the unaudited consolidated balance
sheet of the Company as of July 1, 1995 and the related unaudited consolidated
statements of operations and cash flows of the Company for the nine-month
period ended July 1, 1995 (the "Unaudited Financial Statements") as contained
in the Company's Quarterly Report on Form 10-Q for the quarter ended July 1,
1995, as the same was filed with the Securities and Exchange Commission (the
"Commission"), (iii) the unaudited consolidated balance sheet of the Company as
of September 30, 1995 and the related unaudited consolidated statements of
operations and cash flows of the Company for the year then ended and (iv) the
unaudited consolidated balance sheet of the Company as of October 31, 1995 and
the related unaudited consolidated statements of operations and cash flows of
the Company for the month then ended and, if completed prior to the Closing
Date, the unaudited consolidated balance sheets of the Company as of the end of
each subsequent month and the related unaudited consolidated statements of
operations and cash flows of the Company for the months then ended. Such
financial statements are and will be complete and correct, have been and will
be prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP") and fairly present and will fairly present
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the financial position of the Company as of their respective dates and the
results of its operations for the periods then ended, provided, that unaudited
financial statements shall be subject to normal year-end adjustments and may
not contain all notes which would be required by GAAP. Except as set forth on
such balance sheets, the Company has no, and will have no, material liability
or obligation, absolute or contingent, as of the respective dates of such
balance sheets, which liability or obligation would be required to be included
thereon in accordance with GAAP. Except as set forth on Schedule 5.7 annexed
hereto, there has been no material change in the Company's business, prospects,
condition, affairs, operations, properties, or assets since September 30, 1995.
5.8 Title to Properties. Except for the liens securing
the indebtedness of the Company referenced in the notes to the September 30,
1995 financial statements of the Company, and as contemplated by the Bank
Financing the Company has good and marketable title to all of its respective
real property and owns outright all of its respective other properties and
assets, including, without limitation, those reflected on the balance sheet as
of September 30, 1995 (other than properties and assets disposed of in the
ordinary course of business since the date of such balance sheet).
5.9 Patents and Trademarks. Except as listed on Schedule
5.9 annexed hereto, the Company does not own or possess any patents,
trademarks, servicemarks, tradenames, copyrights or licenses (hereinafter
collectively referred to as the "Intangible Rights"). Except as set forth on
Schedule 5.9 annexed hereto, each of the Intangible Rights is held free from
contractual restrictions and any other restrictions except those imposed by law
or governmental regulation and those which are not material. Except as set
forth on such Schedule 5.9 annexed hereto, no material claims relating to the
Intangible Rights have been asserted with respect to which notice has been
delivered to the Company and not subsequently withdrawn. All such Intangible
Rights are valid, enforceable and in good standing and the Company is not
infringing any material Intangible Rights of any other person. Except as set
forth on Schedule 5.9 annexed hereto, the Company has the right to continue to
use its Intangible Rights without any limitation or restriction which would or
might materially adversely interfere with its business. No additional
Intangible Right is required by the Company to continue conducting its business
as presently conducted.
5.10 Tax Matters. The Company has timely filed all
federal, state, local and foreign tax returns, estimates and reports required
by any governmental authority to be filed and has paid in full (a) all taxes,
charges and assessments shown to be due by such returns, estimates or reports
or otherwise due with respect to the periods covered thereby and (b) all
deficiencies, interest and penalties imposed in connection therewith. The
Company knows of no audits, assessments, notices of deficiency, claims or
demands for taxes or proposed deficiencies against the Company for any federal,
state, local or foreign taxes.
5.11 Reports. (a) The Company has filed with the
Commission all reports and registration statements and all other filings
required to be filed with the Commission for the past three years under the
rules and regulations of the Commission, copies of which have been
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delivered to the Purchasers. At their respective times of filing, no such
report, registration statement or other filing contained any untrue statement
of a material fact or omitted to state any material fact necessary in order to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading. All such reports, registration
statements and other filings, at their respective times of filing, complied
with all applicable rules and regulations of the Commission, including, without
limitation, the Securities Act, and the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(b) The Company has provided or will provide the
Purchasers with copies of the most recent draft of the Company's proposed
Annual Report on Form 10-K for the year ended September 30, 1995. Such draft
Form 10-K does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they are being made, not
misleading.
5.12 Use of Proceeds. The Company will apply the proceeds
from the sale of the Notes, simultaneously with the Closing, to working
capital, repayment of any interim loans and general corporate needs.
5.13 ERISA. (a) With respect to each employee benefit plan
(as defined in Section 3(3) of ERISA), each oral or written incentive or
deferred compensation plan or agreement and each other employee-related plan,
program, agreement or arrangement with respect to which the Company or any
other member of the Controlled Group has or may have any liability (hereinafter
referred to as a "Benefit Plan"): (i) there has been no violation of any
applicable provision of ERISA; (ii) each Benefit Plan intended to qualify under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code") or
for any other tax-exempt or tax-favored status under the Code so qualifies;
(iii) neither the Company nor any other member of the Controlled Group is
subject to any outstanding or potential liability or obligation, direct or
indirect (other than the obligation to make contributions or pay insurance
premiums, all of such contributions or premiums having been made or paid (as
appropriate) in full on a timely basis), relating to any such Benefit Plan;
(iv) there are no actual or potential claims or actions (other than claims for
benefits in the normal course) relating to any such Benefit Plan; (v) no
Benefit Plan which is an employee pension benefit plan (within the meaning of
Section 3(2) of ERISA) has any amount of unfunded benefit liabilities (within
the meaning of Section 4001(a)(18) of ERISA), nor has a Reportable Event
(within the meaning of Section 4043(c) of ERISA) occurred with respect to any
such Benefit Plan; and (vi) no Benefit Plan is a multi-employer plan (within
the meaning of Sections 3(37) or 4001(a)(3) of ERISA).
(b) For purposes of this Section 5.13: (i) the term "ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as amended; and
(ii) the term "Controlled Group" shall mean a group composed of the Company and
each other corporation or other organization under common control with the
Company within the meaning of Section 4001(a)(14) of ERISA or Sections 414(b),
(c), (m) or (o) of the Code.
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<PAGE> 13
5.14 Environmental. Except as set forth on Schedule 5.14
annexed hereto, the Company has obtained all permits, licenses and other
authorizations which are required under all environmental laws, including laws
relating to emissions, discharges, releases or threatened releases or
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without limitation,
ambient air, surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes, except to the extent failure to obtain
any such permit, license or other authorization does not have (and is not
likely to have) a material adverse effect on the business, condition (financial
or otherwise), operation, properties, performance or prospects of the Company
and its Subsidiaries, taken as a whole. Except as set forth on Schedule 5.14
annexed hereto, the Company and each Subsidiary is in compliance with all
material terms and conditions of the required permits, licenses and
authorizations, and is also in compliance with all other material requirements,
obligations, schedules and timetables contained in those laws or contained in
any regulations, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, and no claim
or assessment with respect thereto has been made, or to the Company's
knowledge, threatened, except to the extent failure to comply or any such claim
or assessment does not have (and is not likely to have) a material adverse
effect on the business, condition (financial or otherwise), operations,
properties, performance or prospects of the Company and its Subsidiaries, taken
as a whole.
5.15 Absence of Certain Changes or Events. Except as set
forth on Schedule 5.15 annexed hereto, since September 30, 1995, there has
been:
(i) no change in the condition (financial or otherwise) of the
business and operations of the Company, which, either singly or in the
aggregate, is (or is likely to be) materially adverse to the Company;
(ii) no sales of goods or services or other transactions of
the Company other than those occurring in the ordinary and regular course of
business;
(iii) no material change in the manner of conducting the
business of the Company;
(iv) no material adverse change in the working capital
position of the Company; and
(v) no financial or other commitments or obligations incurred
by the Company except such as may be incidental to carrying on the ordinary and
regular course of business.
5.16 Material Misstatements or Omissions. No
representation or warranty by the Company to the Purchasers in this Agreement
or in any Schedule hereto, or in any of the other documents or agreements
contemplated by this Agreement, contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
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<PAGE> 14
make the statements or facts contained herein or therein not misleading. All
of the Schedules hereto applicable to the Company and its Subsidiaries will
constitute representations and warranties by the Company herein. All
representations, covenants and warranties made by or on behalf of the Company
in this Agreement will be deemed to have been relied upon by the Purchasers
(notwithstanding any investigation by the Purchasers).
5.17 Survival. All representations, warranties and
covenants made in this Agreement by the Company shall survive until three years
and one month from the Closing Date.
Section 6. Covenants of the Company.
The Company covenants and agrees that, unless the Purchasers
shall otherwise consent in writing, it will:
6.1 NYSE or Stockholder Approvals. Undertake to use its
best efforts to obtain promptly from the NYSE and/or the stockholders of the
Company approval of (i) the Gintel standby arrangement for the Rights Offering,
(ii) the ability of Gintel to exchange the Initial Gintel Note for the Gintel
Replacement Note following the Conversion Date and (iii) the issuance and sale
to Gintel of the Warrants.
6.2 Rights Offering. Undertake to attempt to consummate
a Rights Offering to the holders of its Common Stock as contemplated in the
Standby Agreement. The Company agrees to use its best efforts to prepare and
file with the Commission the appropriate registration statement covering the
Rights Offering as soon as practicable and to use its best efforts to cause
such Rights Offering registration statement to become effective under the
Securities Act as soon thereafter as possible and to solicit proxies from its
stockholders for any approvals necessary under applicable NYSE rules to
consummate or lawfully permit the Rights Offering, the Standby Agreement, the
ability of Gintel to exchange the Initial Gintel Note for the Gintel
Replacement Note following the Conversion Date and the issuance and sale of the
Warrants.
6.3 Financial Statements. As long as the Notes are
outstanding, furnish or cause to be furnished to each Purchaser the following
financial statements and information, which shall be prepared in accordance
with GAAP:
6.3.1 As soon as available, but in any event, within ninety
days after the close of each fiscal year of the Company (or such
longer period as permitted pursuant to Rule 12b-25 under the Exchange
Act ("Rule 12b-25"), provided that the Company has filed, with respect
to the report incorporating the financial statements referenced below,
the appropriate extension of time with the Commission), audited
consolidated balance sheets of the Company as of the close of such
period, and related audited consolidated statements of operations and
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<PAGE> 15
cash flows of the Company for such fiscal year, together with (a)
copies of the reports and certificates relating thereto of Arthur
Anderson LLP or other independent certified public accountants of
recognized national standing selected by the Company and (b) a
certificate of such accountants to the effect that they are familiar
with the terms and provisions of the Notes and that in making their
audit they have not discovered any condition, act or omission to act
which would constitute an event of default or which with notice or
lapse of time, or both, would constitute such an event of default,
under the Notes;
6.3.2 As soon as available, but in any event, within forty
five days after the close of each of the first three quarters of each
fiscal year of the Company (or such longer period as permitted
pursuant to Rule 12b-25 under the Exchange Act, provided that the
Company, with respect to the report incorporating the financial
statements referenced below, has filed the appropriate extension of
time with the Commission), unaudited consolidated balance sheets of
the Company as of the last day of such quarter and related unaudited
consolidated statements of operations and cash flows for such period;
6.3.3 As soon as reasonably practicable, all other reports
as the Company shall, from time to time, distribute to its
stockholders; and
6.3.4 Concurrently with its dissemination to the senior
lenders of the Company, all other reports as the Company shall, from
time to time, disseminate to its senior lenders.
6.4 Notes Tendered. Honor the rights of Avondale to
tender the Avondale Note and Gintel to tender the Initial Gintel Note to the
extent of their then outstanding principal amounts plus accrued and unpaid
interest in fulfilling his or its obligation to acquire shares of Common Stock
pursuant to the Standby Agreement.
6.5 Information Regarding the Purchasers. Provide the
Purchasers with draft copies, prior to the time of their filing with the
Commission, the NYSE and any other regulatory body, of all registration
statements, proxy statements and other documents and reports which identify and
discuss the Purchasers and the Rights Offering. The Company shall provide the
Purchasers with ample opportunity to review and comment on all such documents
and to approve statements made about them (such comments to be limited to
information relating to the Purchasers and the Rights Offering), and the
Company, prior to the time of filing, shall make such revisions to these
documents and reports as the Purchasers may request, such revisions not to be
unreasonably denied by the Company.
6.6 Other Information. As long as the Notes are
outstanding, provide each Purchaser with such information concerning the
operations of the Company as any Purchaser may from time to time reasonably
request in writing, provided that the Purchasers agree to keep such information
confidential, and at reasonable intervals permit representatives of each of the
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<PAGE> 16
Purchasers full and free access during normal business hours to the properties,
books and records of the Company, provided, however, that the Company shall not
be obligated pursuant to this Section 6.6 to provide any information which it
reasonably considers to be a trade secret or similar confidential information.
In addition, each Purchaser agrees that to the extent he or it receives from
the Company material non-public information, he or it, as the case may be, will
not effect trades in the Company's securities while in possession of such
material non-public information.
Section 7. Representations and Warranties of the
Purchasers.
Each Purchaser represents and warrants to the Company as
follows:
7.1 Organization and Authorization. Such Purchaser, if
an individual has the legal capacity to enter into this Agreement and to
undertake the transactions contemplated hereby and, if a corporation, is duly
organized and validly existing, is in good standing under the laws of the state
of its incorporation, and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted.
7.2 Valid and Binding. All corporate action on the part
of Avondale and its respective officers, directors and shareholders that are
necessary for the execution, delivery and performance of all obligations of
Avondale under this Agreement, the Standby Agreement and the Registration
Rights Agreement have been taken. Each of this Agreement, the Standby
Agreement and the Registration Rights Agreement, when and if executed and
delivered by each Purchaser in accordance with the terms contained herein and
therein, will constitute the legal, valid and binding obligation of such
Purchaser and will be enforceable against such Purchaser in accordance with its
respective terms and will not violate any provision of law, any order of any
court or other agency of government, or any provision of any indenture,
agreement or other instrument by which such Purchaser or any of his or its
respective properties or assets is bound or affected and, with respect to
Avondale, its Certificate of Incorporation or By-laws.
7.3 Investment Representations.
7.3.1 Each Purchaser has had an opportunity to ask
questions of, and to receive information from, the Company and persons acting
on the Company's behalf concerning the transactions contemplated herein and in
the Rights Offering, and to obtain any additional information necessary to
verify the accuracy of the information and data received by such Purchaser.
Such Purchaser acknowledges receipt and examination of the following
information, in addition to, and not in limitation of, any other information
obtained by such Purchaser or his or its representatives in connection with
such Purchaser's investigations and examinations of the Company:
7.3.1.1 The Annual Report of the Company on Form
10-K for the fiscal year ended September 30, 1994, as the same
was filed with the Commission;
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<PAGE> 17
7.3.1.2 The Quarterly Report of the Company on Form
10-Q for the fiscal quarter ended July 1, 1995, as the same
was filed with the Commission;
7.3.1.3 The unaudited consolidated financial
statements of the Company as of September 30, 1995; and
7.3.1.4 The unaudited consolidated balance sheets
and related statements of operations and cash flows of the
Company referenced in Section 5.7 (iv).
It is understood and agreed that the foregoing shall in no way
affect, diminish, or derogate from the representations and warranties made by
the Company hereunder.
7.3.2 Each Purchaser is an "accredited investor," as
such term is defined under Rule 501(a) promulgated by the Commission under the
Securities Act, and he or it, as the case may be, has knowledge of the business
and affairs of the Company, has sufficient knowledge and experience in business
matters to evaluate the merits and risks of an investment in the Company, has
adequate means of providing for his or its, as the case may be, current needs
and possible contingencies, has no need for liquidity of his or its, as the
case may be, investment in the Company and would be able to bear the economic
risk of a complete loss of his or its, as the case may be, proposed investment
hereunder.
7.4 Governmental and Other Consents. All consents,
approvals, orders or authorizations of, or registrations, qualifications,
designations, declarations or filings with, any federal or state governmental
authority or any other person on the part of each Purchaser which are, or will
be, necessary to be obtained by the Purchasers for the valid execution,
delivery and performance of this Agreement, the Registration Rights Agreement
and the Standby Agreement by such Purchaser and the consummation of the
transactions contemplated hereby and thereby have been made or obtained.
7.5 Material Misstatements or Omissions. No
representation or warranty by the Purchasers to the Company in this Agreement
or in any of the other documents or agreements contemplated by this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading. All representations, covenants and
warranties made by or on behalf of the Purchasers in this Agreement will be
deemed to have been relied upon by the Company (notwithstanding any
investigation by the Company).
7.6 Survival. All representations, warranties and
covenants made in this Agreement by the Purchasers shall survive until three
years and one month following the Closing Date.
Section 8. Covenants of the Purchasers.
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<PAGE> 18
8.1 Standby Agreement for Unsubscribed Shares in Rights
Offering. The Purchasers shall enter into the Standby Agreement pursuant to
which, among other things, the Purchasers shall agree to acquire all shares of
Common Stock not subscribed for by stockholders of the Company in the Rights
Offering, all in accordance with the terms and conditions set forth in the
Standby Agreement. Notwithstanding the foregoing, the parties acknowledge that
the Company will not issue more than 1,607,143 shares of Common Stock in the
Rights Offering, that Gintel's and Avondale's maximum aggregate standby
commitment will not exceed the difference obtained by subtracting from
$11,250,000, the aggregate of all subscription proceeds received by the Company
from stockholders in the Rights Offering and that Gintel's and Avondale's
individual maximum standby commitments shall not exceed $3,750,000 and
$7,500,000, respectively.
8.2 Gintel Rights. Gintel hereby covenants and agrees
that he will not subscribe for any shares of Common Stock underlying any of the
subscription rights to be issued to him, as a stockholder in the Company, in
the Rights Offering.
Section 9. Indemnification. (a) The Company will
indemnify and hold harmless each Purchaser (subject to the provisions of
Section 9(d) below) and the directors, officers, employees and agents of each
Purchaser from and against any and all losses, claims, damages and liabilities
(including any investigation, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement, of any action, suit or
proceeding or any claim asserted (collectively, the "Losses")), to which they,
or any of them, may become subject as a result of, or arising out of, any
material inaccuracy in, or any material breach of, any representation,
warranty, covenant or agreement of the Company contained in this Agreement or
in any of the other agreements or instruments contemplated by this Agreement,
including, without limitation, the Registration Rights Agreement, the Standby
Agreement, the Notes, the Warrants, the Avondale Replacement Note and the
Gintel Replacement Note. This indemnity agreement will be in addition to any
liability that the Company might otherwise have.
(b) Each Purchaser severally, but not jointly, will
indemnify and hold harmless the Company and the directors, officers, employees
and agents of the Company from and against any and all Losses to which they, or
any of them, may become subject as a result of, or arising out of, any material
inaccuracy in, or any material breach of, any representation, warranty,
covenant or agreement of such Purchaser contained in this Agreement or in any
of the other agreements contemplated by this Agreement, including, without
limitation, the Registration Rights Agreement and the Standby Agreement. This
indemnity agreement will be in addition to any liability that each Purchaser
might otherwise have.
(c) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against any indemnifying party or parties under this Section, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying
party will not relieve it from any liability that it may have to any
indemnified party otherwise than under this Section.
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<PAGE> 19
If any such action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be entitled
to participate in, and, to the extent that it elects by delivering written
notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action,
with counsel reasonably satisfactory to the indemnified party, and, after
notice from the indemnifying party to the indemnified party of its election to
assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation previously incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its counsel in any such action, but the fees and
expenses of such counsel will be at the expense of such indemnified party
unless (i) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (ii) the indemnified party has
reasonably concluded that there may be a conflict of interest between the
indemnifying party and the indemnified party in the conduct of the defense of
such action (in which case the indemnifying party will not have the right to
direct the defense of such action on behalf of the indemnified party) or (iii)
the indemnifying party has not in fact employed counsel to assume the defense
of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the fees and expenses of
counsel will be at the expense of the indemnifying party or parties. All such
fees and expenses will be reimbursed promptly as they are incurred. An
indemnifying party will not be liable for any settlement of any action or claim
effected without its or his written consent (such consent not to be
unreasonably withheld) or, in connection with any proceeding or related
proceeding in the same jurisdiction, for the fees and expenses of more than one
separate counsel for all indemnified parties.
(d) The parties hereto acknowledge and agree that the
representations and warranties made by the Company to Mr. Gintel in Section 5
hereof are being made to him without any liability therefor following the
Closing Date. Nothing in this Agreement or in any of the other documents or
instruments referred to herein shall create in Mr. Gintel, or grant Mr.
Gintel, a right, following the Closing Date, to commence a cause of action
against the Company for, or to seek indemnification for losses arising out of
or relating to, a breach by the Company of any of its representations or
warranties contained in Section 5 herein.
Section 10. Miscellaneous.
10.1 Notices. All notices, requests, demands or other
communications to or upon the respective parties hereto shall be deemed to have
been given or made, and all financial statements, information and the like
required to be delivered hereunder shall be deemed to have been delivered, when
sent by registered or certified mail or by overnight courier, postage prepaid,
addressed to the parties at their addresses set forth on the first page of this
Agreement, or to such other address as any of them shall specify in writing to
the other parties hereto, with copies
in the case of the Company, to:
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<PAGE> 20
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
Attn: Edward I. Kramer
in the case of Gintel, to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attn: Leonard Gubar
in the case of Avondale, to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attn: Michael J. Egan III
10.2 Amendment. This Agreement and the Schedules annexed
hereto may not be changed or terminated orally and may only be amended with the
written consent of the Company and the Purchasers. This Agreement shall be
binding upon the Company and the Purchasers and their successors and permitted
assigns.
10.3 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
10.4 References and Headings. All references to gender or
number in this Agreement shall be deemed interchangeable to refer to the
masculine, feminine, neuter, singular or plural, as the sense of the context
requires. The Section headings contained herein are inserted for convenience
of reference only and are not intended to define or limit the contents of any
such Section of this Agreement.
10.5 Fees and Expenses. The Company shall pay the
reasonable legal fees and disbursements of counsel to the Purchasers in
connection with the transactions contemplated hereby and in the Rights
Offering, whether or not the Closing under this Agreement or the Rights
Offering is consummated.
10.6 Governing Law. This Agreement is executed and
delivered in, and shall be construed in accordance with, and governed by, the
laws of the State of New York, without giving effect to the conflicts of law
principles thereof.
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<PAGE> 21
IN WITNESS WHEREOF, the Company and the Purchasers have
executed this Agreement as of the day and year first above written.
ONEITA INDUSTRIES, INC.
By:
---------------------------------
Name:
Title:
PURCHASERS:
--------------------------------------
Robert M. Gintel
AVONDALE MILLS, INC.
By:
--------------------------------
Name:
Title:
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<PAGE> 22
SCHEDULES
SCHEDULE A - STANDBY AGREEMENT
SCHEDULE B - INITIAL GINTEL NOTE
SCHEDULE C - GINTEL SUBORDINATED NOTE
SCHEDULE D - AVONDALE NOTE
SCHEDULE E - REGISTRATION RIGHTS AGREEMENT
SCHEDULE F - WARRANTS
SCHEDULE G - AVONDALE REPLACEMENT NOTE
SCHEDULE H - GINTEL REPLACEMENT NOTE
SCHEDULE 1.2.3 - BANK FINANCING
SCHEDULE 1.2.5 - OPINION OF COUNSEL
SCHEDULE 5.1 - SUBSIDIARIES
SCHEDULE 5.2 - CAPITAL OF SUBSIDIARIES; REGISTRATION RIGHTS
SCHEDULE 5.3 - AUTHORIZATION
SCHEDULE 5.5 - GOVERNMENTAL AND OTHER CONSENTS
SCHEDULE 5.6 - ACTIONS PENDING
SCHEDULE 5.7 - ADVERSE CHANGE
SCHEDULE 5.9 - PATENTS AND TRADEMARKS
SCHEDULE 5.14 - ENVIRONMENTAL
SCHEDULE 5.15 - CHANGE OF EVENTS
The registrants agree to furnish a copy of the Schedules listed above
to the Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of January 25, 1996, by and among ONEITA
INDUSTRIES, INC., a Delaware corporation (the "Company"), and each of the
persons listed on Schedule I annexed hereto (collectively, the "Holders" and
individually, the "Holder").
W I T N E S S E T H:
WHEREAS, pursuant to a Note Purchase Agreement dated as of
December 28, 1995 (the "Purchase Agreement"), by and among the Company and the
Holders, the Company is selling certain subordinated promissory notes of the
Company (the "Notes") in the aggregate principal amount of $15,000,000, one of
which Notes is in the principal amount of $7,500,000 and is exchangeable as
herein provided (the "Avondale Note") and another of which Notes is in the
principal amount of $3,750,000 and may be exchangeable as herein provided (the
"Initial Gintel Note");
WHEREAS, the Company intends to make a common stock rights
offering (the "Rights Offering") to the holders of shares of the Company's
common stock, $.25 par value per share (the "Common Stock"), and the Holders
are willing to act as standby purchasers with respect to the Rights Offering
pursuant to a standby agreement among the Company and the Holders (the "Standby
Agreement");
WHEREAS, as set forth in the Purchase Agreement, if, (a) by
May 31, 1996, the Rights Offering is not consummated, or (b) an "Event of
Default occurs (as defined in the Avondale Note or the Initial Gintel Note) or,
if prior to May 31, 1996, (c) the
<PAGE> 2
stockholders of the Company vote to not approve the Rights Offering and the
transactions contemplated thereby and in the Purchase Agreement, (d) the
Company publicly announces that it will not proceed with the Rights Offering or
(e) any other event takes place which effectively prohibits the Company from
lawfully consummating the Rights Offering by May 31, 1996 (the date of
occurrence of any of the events described in clauses (a) through (e) above
being referred to as the "Conversion Date"), then the Holders shall have the
right (subject, in the case of Robert Gintel, to the Company's receipt of any
requisite consents) to exchange the Avondale Note and the Initial Gintel Note
for certain convertible 10% subordinated notes of the Company in like principal
amounts (the "Replacement Notes"), such Replacement Notes to be convertible
into shares of Common Stock of the Company at the rate of $7.00 per share;
WHEREAS, in connection with the sale by the Company of the
Notes, the Company is agreeing, subject to its prior receipt of all requisite
approvals and consents, including, without limitation, those of the New York
Stock Exchange and/or the Company's stockholders, to issue and sell to one of
the Holders, five-year warrants (the "Warrants") to purchase up to 125,000
shares of the Company's Common Stock at $7.00 per share; and
WHEREAS, the Company and the Holders agree that the Holders
shall have the registration rights set forth herein with respect to any shares
of Common Stock acquired by the Holders pursuant to the Standby Agreement, upon
the conversion of the Replacement Notes and/or upon the exercise of the
Warrants or any shares issued or issuable in respect of such Common Stock upon
any stock dividend, recapitalization or similar event (collectively, the
"Registrable Shares").
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<PAGE> 3
NOW, THEREFORE, in consideration of the foregoing premises and
other good and valuable consideration, the parties hereby agree as follows:
1. Restrictive Legend. (a) (i) Each certificate
representing the Registrable Shares shall (unless otherwise permitted or unless
the securities evidenced by such certificate shall have been registered under
the Securities Act of 1933, as amended (the "Securities Act")) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY
MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
(ii) In addition, the Company may place, or instruct its
transfer agent and registrar to place, stop transfer orders against
certificates which have the aforementioned restrictive legend thereon. For
purposes of this Agreement, "Restricted Securities" shall mean securities of
the Company which are required to bear the aforementioned legend thereon.
(b) Upon request of a Holder holding Registrable Shares
which are Restricted Securities, the Company shall remove the foregoing legend
from the certificate or issue to such Holder a new certificate therefor free of
any transfer legend and without any stop transfer against such Registrable
Shares, if, with such request, the Company shall have received either an
opinion of counsel or a "no-action" letter referred to in Section 2 hereof to
the effect that any transfer by such Holder of the Registrable Shares evidenced
by such
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<PAGE> 4
certificate will not violate the Securities Act and applicable state securities
laws or the Shares have been sold pursuant to an effective registration
statement under the Securities Act. The Company shall promptly reimburse the
transferring Holder for all reasonable legal fees and expenses incurred by such
Holder in obtaining the legal opinion or "no action" letter referenced in this
Section 1(b).
2. Notice of Proposed Transfers. (a) Prior to any
proposed transfer of any Restricted Securities (other than under circumstances
described in Sections 3 and 4 hereof), the Holder thereof shall give written
notice (the "Notice") to the Company of such Holder's intention to effect such
transfer. Each Notice shall describe the manner and circumstances of the
proposed transfer in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144) by either (i) a written opinion of
legal counsel, who shall be reasonably satisfactory to the Company, addressed
to the Company and reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed transfer of the Restricted
Securities may be effected without registration under the Securities Act, or
(ii) a "no action" letter from the staff of the Securities and Exchange
Commission (the "Commission") to the effect that the distribution of such
Securities without registration will not result in a recommendation by the
staff of the Commission that action be taken with respect thereto, whereupon
the Holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the Notice. The Company
shall promptly reimburse the transferring Holder for all reasonable legal fees
and expenses incurred by such Holder in obtaining the legal opinion or "no
action" letter referenced in this Section 2(a).
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<PAGE> 5
(b) Prior to any proposed transfer requested in the
Notice and as a condition thereto, each Holder will, if requested by the
Company, and if required because any of the Restricted Securities are not to be
sold pursuant to an effective registration statement under the Securities Act
or a "no action" letter or an opinion of counsel described in the foregoing
subsection, deliver to the Company (i) an investment covenant signed by the
proposed transferee, (ii) an agreement by such transferee to the impression of
the restrictive legend set forth in Section 1(a) on the certificates
representing the Registrable Shares to be transferred to such transferee, (iii)
an agreement by such transferee that the Company may place a "stop transfer
order" with its transfer agent and registrar, if any, with respect to the
Shares proposed to be transferred, (iv) an agreement by the transferee to
assume the transferor's obligations under this Agreement, and (v) an agreement
by the transferee to indemnify the Company to the same extent as set forth in
Subsection (c) below. Any transferee complying with this Subsection (b) shall
also be deemed a "Holder" for purposes of the registration rights under
Sections 3 and 4 herein.
(c) Each Holder agrees to indemnify the Company against
any and all losses, claims, damages, expenses or liabilities to which the
Company may become subject under any federal or state securities law, at common
law, or otherwise, insofar as such losses, claims, damages, expenses or
liabilities arise out of or are based upon (i) any transfer by such Holder of
such Registrable Shares in violation of the Securities Act, or the rules and
regulations promulgated thereunder, (ii) any transfer by such Holder of Shares
in violation of the provisions of this Section 2 or (iii) any untrue statement
or omission to state any material fact in connection with such Holder's
investment representations or with respect to the facts
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<PAGE> 6
and representations supplied to counsel to the Company upon which its opinion
as to a proposed transfer by such Holder was given.
3. Demand Registration. (a) At any time after receipt by
any Holder of Registrable Shares that the Company receives a written request
executed by one or more of the Holders (the "Initiating Holder") requesting
registration of a number of shares of Common Stock at least equal to (i) thirty
percent (30%) or more of the Registrable Shares then held by the Holders or
(ii) the entire remaining number of Registrable Shares owned by the Initiating
Holder, the Company will give notice of such request to each other Holder (the
"Other Holders") and give them the right to participate therein in accordance
with this Section 3.
(b) As soon as practicable after receipt of the request
given pursuant to Subsection (a) above, the Company shall prepare and file a
registration statement (the "Registration Statement") under the Securities Act
covering the Registrable Shares requested to be sold under a Registration
Statement (the "Registered Shares") and shall otherwise comply with its
obligations under Section 5.
(c) The Company's obligations under this Section 3 shall
be limited to six (6) effective Registration Statements under the Securities
Act, three of which may be initiated by each of Robert M. Gintel and Avondale
Mills, Inc. or their respective transferees in accordance with Section 8(b)
hereof.
(d) If a registration pursuant to this Section 3 is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders. In such event, the right of any Holder to registration
shall be conditioned upon such Holder's participation
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<PAGE> 7
in the underwriting arrangements required by this Section 3(d), and the
inclusion of such Holder's Registrable Shares in the underwriting to the extent
requested shall be limited to the extent provided herein.
The Company shall (together with the Initiating Holder and
Other Holders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company, but subject
to the reasonable approval of the Initiating Holder. Notwithstanding any other
provision of this Section 3, if the managing underwriter advises the Company in
writing that market factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise the Initiating Holder and the
Other Holders, and the number of shares that may be included in the
registration and underwriting shall be allocated, first, to the Initiating
Holder, and second, among the Other Holders in proportion to the number of
shares proposed to be included in such registration by such Other Holders. No
Registrable Shares excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. To
facilitate the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares allocated to any
holder to the nearest one hundred (100) shares. If any such limitation results
in the Initiating Holder being able to sell less than 75% of the Registrable
Shares requested to be included by the Initiating Holder in such offering, the
offering shall not be counted as a demand registration by the Initiating Holder
for the purposes of Section 3(c).
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<PAGE> 8
If any Holder disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company,
the managing underwriter and the Initiating Holder. The Registrable Securities
and/or other securities withdrawn from such underwriting shall also be
withdrawn from such registration.
4. Piggy Back Registration Rights. (a) At any time
after the receipt by the Holders of any Registrable Shares, the Company will
send written notice to the Holders then owning Restricted Securities as defined
in Section 1(a)(ii), at least twenty (20) days prior to the filing of each and
every Registration Statement filed by the Company, whether or not pursuant to
this Agreement (other than a Registration Statement covering exclusively
securities under an employee option or stock purchase plan, a merger,
acquisition or similar transaction) and give to such Holders the right to have
included therein any Registrable Shares then held by the Holders. Such notice
must specify the proposed offering price and the plan of distribution. The
Company must receive written notice from such Holders within fifteen days after
the date of the Company's written notice, indicating the full name and address
of each Holder desiring to have Registrable Shares included for sale in such
Registration Statement and the number of Registrable Shares requested to be
covered.
(b) If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company
shall so advise the Holders as a part of the written notice given pursuant to
Section 4(a). In such event the right of any Holder to registration pursuant
to Section 4 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities in the underwriting to
the extent provided in this Section 4(b).
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<PAGE> 9
All Holders proposing to distribute their securities through
such underwriting shall, together with the Company, enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by the Company. The Company shall use its reasonable best efforts
to cause the managing underwriter of such proposed underwritten offering to
permit the Registrable Shares proposed to be included in such registration to
be included in the registration statement for such offering on the same terms
and conditions as any similar securities of the Company included therein.
Notwithstanding any other provision of this Section 4, the Company shall be
entitled to include in the registration all of the shares which the Company
desires to sell for its own account, and if the managing underwriter determines
that marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Shares to be
included in such registration. The Company shall so advise all Holders
requesting to participate in such registration, and the number of shares that
may be included in the registration and underwriting by all Holders shall be
allocated among them, as nearly as practicable, first, to Avondale Mills, Inc.
and, second, to Robert M. Gintel, or his or its respective transferees. To
facilitate the allocation of shares in accordance with the above provisions,
the Company may round the number of shares allocated to any Holder to the
nearest one hundred (100) shares.
If any Holder disapproves of the terms of any such
underwriting, such person may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting also shall be withdrawn from such registration, and
shall not be transferred prior to one hundred eighty
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<PAGE> 10
(180) days after the effective date of the registration statement relating
thereto, or such other shorter period of time as the underwriters may require.
5. Miscellaneous Registration Provisions.
(a) In connection with any Registration Statement filed
pursuant to Sections 3 or 4 hereof:
(i) The Company's obligation under this Agreement to
include Registrable Shares in a Registration Statement shall mean shares of
Common Stock or any security received by a Holder in exchange or upon
reclassification of the present Common Stock;
(ii) the Holders of Registered Shares (herein
"Registering Holders") shall furnish to the Company in writing such appropriate
information (relating to the intention of such Holders as to proposed methods of
sale or other disposition of the Registered Shares) and the identity of and
compensation to be paid to any proposed underwriters to be employed in
connection therewith as the Company, any underwriter, or the Commission or any
other regulatory authority may request;
(iii) the Registering Holders and the Company shall
enter into the usual and customary form of underwriting agreement agreed to by
the Company and any underwriter with respect to any such offering, if required,
and such underwriting agreement shall contain the customary reciprocal rights of
indemnity and contribution between the Company, the underwriters, and the
selling shareholder, including the Registering Holders, to the extent set forth
in Subsections (g) and (h) herein;
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<PAGE> 11
(iv) the Registering Holders shall agree that they
shall execute, deliver and/or file with or supply to the Company, any
underwriters, the Commission and/or any state or other regulatory authority
such information, documents, representations, undertakings and/or agreements
necessary to carry out the provisions of the registration covenants contained
in this Agreement and/or to effect the registration or qualification of their
Registrable Shares under the Securities Act and/or any of the laws and
regulations of any state or governmental instrumentality;
(v) the Registering Holders shall furnish the
Company with such questionnaires and other documents regarding their identity
and background as the Company may reasonably request; and
(vi) the Company's obligation to include the
Registering Holders' Registrable Shares in a Registration Statement shall be
subject to the written agreement of the Holders to offer the Registrable Shares
in the same manner and on the same terms and conditions as the other securities
of the same class are being offered pursuant to the Registration Statement, if
such shares are being underwritten.
(b) if and whenever the Company is required to effect the
registration of any Registrable Shares pursuant to Section 3 or 4, the Company
will use its best efforts to effect such registration to permit the sale of
such Registrable Shares in accordance with the intended method or methods of
disposition thereof, and pursuant thereto it will, as promptly as is
practicable:
(i) before filing a Registration Statement or
prospectus or any amendments or supplements thereto, furnish to the counsel of
the Holders of the Registrable
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<PAGE> 12
Shares covered by such Registration Statement copies of all documents proposed
to be filed, which documents will be made available on a timely basis, for
review by such counsel to the Holders;
(ii) prepare and file with the Commission, as soon
as practicable, and use its best efforts to cause to become effective, a
Registration Statement to be offered on such form under the Securities Act as
the Initiating Holder and the Company or, if not filed pursuant to Section 3
hereof, the Company, determines and for which the Company then qualifies;
(iii) prepare and file with the Commission such
amendments (including post-effective amendments) and supplements to such
Registration Statement and the prospectus used in connection therewith as may
be necessary to keep such Registration Statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Shares covered by such Registration Statement until the earlier of
such time as all of such Registrable Shares have been disposed of in accordance
with the intended methods of disposition set forth in such Registration
Statement or the expiration of one hundred eighty (180) days after such
Registration Statement becomes effective; provided that such one hundred eighty
(180) day period shall be extended in the case of a registration pursuant to
Section 3 hereof for such number of days that equals the number of days
elapsing from (A) the date the written notice contemplated by Section 5(b)(vii)
hereof is given by the Company to (B) the date on which the Company delivers to
the Selling Holders the supplement or amendment contemplated by Section 5(b)
(vii) hereof;
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<PAGE> 13
(iv) furnish to the Holders and to any underwriter
of Registrable Shares such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included in
such Registration Statement (including each preliminary prospectus and any
summary prospectus) and any amendment or supplement thereto, in conformity with
the requirements of the Securities Act, such documents incorporated by
reference in such Registration Statement or prospectus, and such other
documents, as the Holders or such underwriter may reasonably request, and, if
requested, a copy of any and all transmittal letters or other correspondence
to, or received from, the Commission or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any domestic
or foreign securities exchange) relating to such offering;
(v) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of such Registration
Statement at the earliest possible moment;
(vi) if required by a Holder, (A) furnish to each
Holder and to any underwriter an opinion of counsel for the Company addressed
to each Holder and underwriter and dated the date of the closing under the
underwriting agreement (if any) (or if such offering is not underwritten, dated
the effective date of the Registration Statement), (B) use its best efforts to
furnish to each Holder a "cold comfort" or "special procedures" letter
addressed to each Holder and signed by the independent public accountants who
have audited the Company's financial statements included in such Registration
Statement and (C) make such representations and warranties to the Holders and,
in connection with any underwritten
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<PAGE> 14
offering, to the underwriters, in each such case covering substantially the
same matters with respect to such Registration Statement (and the prospectus
included therein) as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters and in underwriting
agreements in underwritten public offerings of securities and such other
matters as the Holders may reasonably request, and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, provided, however, that the Company shall not be
obligated to cause the legal counsel and accountants' letters contemplated by
this Subsection (b)(vi) to be delivered to the Holders if the Company would be
required to incur unreasonable expenses to cause such letters to be delivered;
(vii) immediately notify the Holders in writing (A)
at anytime when a prospectus relating to a registration hereunder is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (B) of any request by the Commission or any other
regulatory body or other body having jurisdiction for any amendment of or
supplement to any Registration Statement or other document relating to such
offering, and in either such case, at the request of a Holder, prepare and
furnish to such Holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Shares, such prospectus shall
not include an untrue
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<PAGE> 15
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading;
(viii) use its best efforts to list all such
Registrable Shares covered by such Registration Statement on the principal
securities exchange and inter-dealer quotation system on which a class of
common equity securities of the Company is then listed, and to pay all fees and
expenses in connection therewith;
(ix) upon the transfer of shares by a Holder in
connection with a registration hereunder (other than to an "affiliate" of the
Company as such term is defined in Rule 144(a)), furnish unlegended
certificates representing ownership of the Registrable Shares in such
denominations as shall be requested by the Holders or the underwriters;
(x) promptly notify the Holders and the managing
underwriter, if any, and if requested by any such Person, confirm such advice
in writing,
(A) of the issuance by the Commission of
any stop order suspending the effectiveness of such Registration Statement or
the initiation of any proceedings for that purpose,
(B) of the Company's becoming aware at
any time that the representations and warranties of the Company contemplated by
Section 5(b)(vii)(C) above have ceased to be true and correct, and
(C) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Shares for sale in any jurisdiction or the initiation or threat of
any proceeding for such purpose;
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<PAGE> 16
(xi) if reasonably requested by the managing
underwriter, if any, or a majority in interest of the Registrable Shares being
sold in connection with an underwritten offering, immediately include in a
prospectus supplement or post-effective amendment to such Registration
Statement such information as the managing underwriter or such majority in
interest of the Registrable Shares being sold reasonably request to have
included therein relating to the plan of distribution with respect to such
Registrable Shares, including, without limitation, information with respect to
the amount of Registrable Shares being sold to such underwriters and any other
terms of the underwritten (or best-efforts underwritten) offering of the
Registrable Shares to be sold in such of offering; and make all required
filings of such prospectus supplement or post-effective amendment to such
Registration Statement as soon as notified of the matters to be incorporated in
such prospectus supplement or post-effective amendment to such Registration
Statement;
(xii) prior to any public offering of Registrable
Shares, register or qualify or reasonably cooperate with the Holders, the
managing underwriter, if any, and their respective counsel in connection with
the registration or qualification of such Registrable Securities for offer and
sale under the securities or blue sky laws of such jurisdictions as any Holder
or managing underwriter reasonably requests and do any and all other facts or
things necessary to enable the disposition in such jurisdictions of the
Registrable Shares covered by such Registration Statement;
(xiii) cooperate and assist in any filings required
to be made with the NASD and any performance of any due diligence investigation
by any underwriter (including
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<PAGE> 17
any "qualified independent underwriter" as required to be retained in
accordance with the rules and regulations of the NASD); and
(xiv) otherwise use its best efforts to comply with
the Securities Act, the Exchange Act, all applicable rules and regulations of
the Commission and all applicable state blue sky and other securities laws,
rules and regulations.
(c) The Company shall pay all out-of-pocket expenses and
disbursements incurred by the Company and the Holders in connection with the
Registration Statements filed by it pursuant to Sections 3 or 4, including,
without limitation, all legal and accounting fees, Commission filing fees,
National Association of Securities Dealers ("NASD") filing fees, printing
costs, registration or qualification fees and expenses to comply with Blue Sky
or other state securities laws, the fees of other experts, and any expenses or
other compensation paid to the underwriters; provided, however, that such
registration expenses shall not include underwriting commissions and discounts
and transfer taxes, if any.
(d) The Company shall be obligated to keep any
Registration Statement filed by it under Sections 3 and 4 effective under the
Securities Act for a period of 180 days after the actual effective date of such
Registration Statement and to prepare and file such supplements and amendments
necessary to maintain an effective Registration Statement for such period. As
a condition to the Company's obligation under this Subsection (d), the
Registering Holders will execute and deliver to the Company such written
undertakings as the Company and its counsel may reasonably require in order to
assure full compliance with relevant provisions of the Securities Act.
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<PAGE> 18
(e) The Company shall use its best efforts to register or
qualify the Registered Shares under such securities or blue sky laws in such
jurisdictions within the United States as the Registering Holders may
reasonably request; provided, however, that the Company reserves the right, in
its sole discretion, not to register or qualify such Registered Shares in any
jurisdiction where such Registered Shares do not meet with the requirements of
such jurisdiction after having taken reasonable steps to meet such requirements
or where the Company is required to qualify as a foreign corporation to do
business in such jurisdiction and is not so qualified therein or is required to
file any general consent to service of process.
(f) In the event all the Registered Shares have not been
sold on or prior to the expiration of the period specified in Subsection (d)
above, the Registering Holders hereby agree that the Company may deregister by
post- effective amendment any shares covered by the Registration Statement, but
not sold on or prior to such date. The Company agrees that it will notify the
Registering Holders of the filing and effective date of such post-effective
amendment.
(g) The Registering Holders agree that upon notification
by the Company that the prospectus in respect to any public offering covered by
the provisions hereof is in need of revision, they shall immediately upon
receipt of such notification (i) cease to offer or sell any securities of the
Company which must be accompanied by such prospectus; (ii) return all such
prospectuses in their hands to the Company; and (iii) shall not offer or sell
any securities of the Company until they have been provided with a current
prospectus and the Company has given them notification permitting them to
resume offers and sales.
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<PAGE> 19
(h) As a condition to the filing of a Registration
Statement pursuant to this Agreement, the Company shall indemnify and hold
harmless the Registering Holders and the underwriter(s) and controlling
person(s) of such underwriter(s) who may purchase from or sell for the
Registered Holders, any Registrable Shares, from and against any and all
losses, claims, damages, expenses or liabilities caused by any failure of the
Company to comply with the Securities Act or any rule or regulation promulgated
thereunder in connection with the registration of the Registrable Securities or
any untrue statement of a material fact contained in the Registration
Statement, any post-effective amendment to such registration statements, or any
prospectus included therein required to be filed or furnished by reason of this
Agreement or caused by 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 or
liabilities are caused by any such untrue statements or alleged untrue
statements or omissions based upon information furnished or required to be
furnished in writing to the Company by the party seeking indemnification
expressly for use therein; which indemnification shall include each person, if
any, who controls any such underwriter within the meaning of the Securities Act
and each officer, director, employee and agent of such underwriter; provided,
however, that the Company shall not be obligated to so indemnify the
Registering Holders or any such underwriter or other person referred to above
unless the Registering Holders or underwriter or other person, as the case may
be, shall at the same time indemnify the Company, its directors, each officer
signing the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any and all
losses, claims, damages and
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<PAGE> 20
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any registration
statement or any prospectus required to be filed or furnished by reason of this
Agreement or caused by any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, insofar as such losses, claims, damages or liabilities are caused
by any untrue statement or alleged untrue statement or omission based upon
information furnished in writing to the Company by the Holder or underwriter
expressly for use therein.
(i) Each party entitled to indemnification under
paragraph (h) above (the "Indemnified Party") shall, promptly after receipt of
notice of any claim or the commencement of any action against such Indemnified
Party in respect of which indemnity may be sought, notify the party required to
provide indemnification (the "Indemnifying Party") in writing of the claim or
the commencement thereof; provided that the failure of the Indemnified Party to
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability which it may have to an Indemnified Party pursuant to the provisions
of paragraph (h), unless the Indemnifying Party was materially prejudiced by
such failure, and in no event shall such failure relieve the Indemnifying Party
from any other liability which it may have to such Indemnified Party. If any
such claim or action shall be brought against an Indemnified Party, it shall
notify the Indemnifying Party thereof and the Indemnifying Party shall be
entitled to participate therein, and, to the extent that it wishes, jointly
with any other similarly notified Indemnifying Party, to assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party. After
notice from the Indemnifying Party to the Indemnified Party of its election to
assume the defense of such claim or action, the
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<PAGE> 21
Indemnifying Party shall not be liable (except to the extent the proviso to
this sentence is applicable, in which event it will be so liable) to the
Indemnified Party under paragraph (h) for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation: provided that each
Indemnified Party shall have the right to employ separate counsel to represent
it and assume its defense (in which case, counsel to the Indemnifying Party
shall not represent it) if (i) upon the advice of counsel, the representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party will not have the right to assume the defense of such claim or action on
behalf of such Indemnified Party), or (ii) in the event the Indemnifying Party
has not assumed the defense thereof within ten (10) days of receipt of notice
of such claim or commencement of action, in which case the fees and expenses of
one such separate counsel shall be paid by the Indemnifying Party. If any
Indemnified Party employs such separate counsel it will not enter into any
settlement agreement which is not approved by the Indemnifying Party, such
approval not to be unreasonably withheld. If the Indemnifying Party so assumes
the defense thereof (and by so assuming shall be solely responsible for
liabilities relating to such claim or action, and shall release the Indemnified
Party from such liabilities to the extent permitted by law, except to the
extent the Indemnified Party is not entitled to be indemnified pursuant to
paragraph (h)), it may not agree to any settlement of any such claim or action
as the result of which any remedy or relief, other than monetary damages for
which the Indemnifying Party shall be
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<PAGE> 22
responsible hereunder, shall be applied to or against the Indemnified Party,
without the prior written consent of the Indemnified Party. No Indemnified
Party will consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or action. In any action hereunder as to which the Indemnifying
Party has assumed the defense thereof with counsel satisfactory to the
Indemnified Party, the Indemnified Party shall continue to be entitled to
participate in the defense thereof, with counsel of its own choice, but, except
as set forth above, the Indemnifying Party shall not be obligated hereunder to
reimburse the Indemnified Party for the costs thereof.
(j) If for any reason the indemnification provided
for above is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage, liability or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying party, but also the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations.
6. Rule 144 Reporting. With a view to making available
the benefits of certain rules and regulations of the Commission which may
permit the sale of the Restricted Securities to the public without
registration, the Company agrees to:
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<PAGE> 23
(a) Make and keep public information available at all
times, as those terms are understood and defined in Rule 144 under the
Securities Act (as such Rule may be amended from time to time) or any similar
rule hereinafter adopted by the Commission;
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
(c) Take such further action as any Holder may reasonably
request, all to the extent required from time to time, to enable such Holder to
sell Registrable Shares without registration under the Securities Act,
including, without limitation, issuing appropriate instructions to the
Company's transfer agent and registrar and exchanging legended certificates for
certificates without legend and processing in requisite time frames counsel
opinions, if any.
7. No Other Registration Rights. The Company represents
and warrants to the Holders that except as set forth in this Agreement and the
Purchase Agreement, there are no other registration rights with respect to the
Company's securities currently outstanding or other rights currently
outstanding which could require the Company to register for sale pursuant to
the Securities Act any securities of the Company (collectively, "Registration
Rights"). In addition, the Company covenants and warrants to the Holders that
at all times while the Holders have the right to request the registration of
Registrable Shares hereunder, the Company will not, without the prior written
consent of the Holders, grant to any person Registration Rights, the effect of
which could (a) limit, in any registration statement subsequently filed by the
Company, the number of Registrable Shares that the Purchasers
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<PAGE> 24
may include in such registration statement or (b) otherwise adversely affect
the priority of the Registration Rights being granted to the Holders hereunder.
8. Miscellaneous. (a) This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and the successors
and assigns of the Company and the permitted transferees of the Holders.
(b) Upon acquisition of any Registrable Shares, the Holders
agree that the Registrable Shares shall not be transferable except upon the
conditions set forth in this Agreement, which conditions are intended to insure
compliance with the provisions of the Securities Act. Each Holder in any
transfer subject to Section 2 herein shall cause any proposed transferee of
Registrable Shares held by that Holder to agree to take and hold those
securities subject to the rights and obligations and upon the conditions
specified in this Agreement.
(c) This Agreement contains the entire agreement among
the parties hereto with respect to the subject matter herein, and cannot be
modified, changed, discharged or terminated except by an instrument in writing
signed by the party against whom the enforcement of any modification, change,
discharge or termination is sought.
(d) References to the Holders or some of them by use of
masculine pronoun is for convenience only and shall, where appropriate, be
deemed to be reference by feminine or neuter pronouns.
(e) Any notice, request, instruction or other document to
be given hereunder shall be in writing and shall be delivered personally or
sent by registered or certified mail as follows:
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<PAGE> 25
(i) If to the Company:
4130 Faber Place
Suite 200, Ashley Corporate Center
Charleston, South Carolina 29405
Attn: President
With a copy to:
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
Attn: Edward I. Kramer
(ii) If to the Holders, at the address specified
next to their respective names on Schedule I hereto or to such other address
as any party hereto hereinafter designates in writing to any other party
hereto, and
in the case of Robert M. Gintel, to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attn: Leonard Gubar
and, in the case of Avondale Mills, Inc., to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attn: Michael J. Egan, III
Upon receiving notice from a Holder (or any permitted
transferee of an Holder) that Registrable Shares have been transferred and if
the transferee is entitled to any rights under this Agreement, the Company
shall give notices to such transferee as contemplated by this Agreement.
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<PAGE> 26
(f) The captions herein are inserted for convenience
only and shall not affect the construction of this Agreement.
(g) This Agreement is executed and delivered in, and
shall be construed in accordance with, and governed by, the laws of the State
of New York, without giving effect to the conflicts of law principles thereof.
(h) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed as of the
date and year first above written.
ONEITA INDUSTRIES, INC.
By:
------------------------------
Name:
Title:
HOLDERS:
-----------------------------------
Robert M. Gintel
AVONDALE MILLS, INC.
By:
------------------------------
Name:
Title:
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<PAGE> 27
SCHEDULE I
Holders
Robert M. Gintel
Address: 6 Greenwich Office Park
Greenwich, Connecticut 06831
Avondale Mills, Inc.
Address: 506 South Broad Street
Monroe, Georgia 30655
<PAGE> 1
EXHIBIT 10.7
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THAT CERTAIN
SUBORDINATION AGREEMENT DATED AS OF THE DATE HEREOF AMONG SUNTRUST BANK,
ATLANTA, FIRST UNION NATIONAL BANK OF SOUTH CAROLINA, NATWEST BANK N.A., THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, ROBERT M. GINTEL AND AVONDALE MILLS,
INC., AS THE SAME MAY BE AMENDED FROM TIME TO TIME.
ONEITA INDUSTRIES, INC.
10% SUBORDINATED PROMISSORY NOTE
$7,500,000.00 Charleston, South Carolina
January 26, 1996
ONEITA INDUSTRIES, INC., a Delaware corporation (the
"Company"), the principal office of which is located at 4130 Faber Place, Suite
200, Ashley Corporate Center, Charleston, South Carolina 29405, for value
received hereby promises to pay to AVONDALE MILLS, INC., or its registered
assigns (the "Holder"), the sum of SEVEN MILLION FIVE HUNDRED THOUSAND AND
00/100 ($7,500,000.00), or such lesser amount as shall then equal the
outstanding principal amount hereof on the terms and conditions set forth
hereinafter. Interest on the unpaid principal amount hereof shall be payable as
herein set forth. The entire principal amount hereof and any unpaid accrued
interest hereon, as set forth below, shall be due and payable on the earlier to
occur of (i) February 26, 1999, or (ii) when declared due and payable by the
Holder upon the occurrence of an Event of Default (as defined below). Payment
for all amounts due hereunder shall be made by wire transfer of immediately
available funds to such account of the Holder as shall have been designated to
the Company. This Note is issued in connection with the transactions described
in Section 1.1 of that certain Note Purchase Agreement between the Company and
the Holders described therein, dated as of December 28, 1995 (the "Purchase
Agreement"). Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Purchase Agreement. This Note is the
Avondale Note referred to in the Purchase Agreement. As set forth in the
Purchase Agreement, the Company anticipates effecting a Rights Offering to,
among other things, raise the funds necessary to repay this Note. Moreover,
the holder of this Note has agreed, subject to the prior receipt by the Company
of all requisite consents, including, if necessary, that of the New York Stock
Exchange (the "NYSE") and/or the Company's stockholders, to serve as a standby
purchaser of the Company in the Rights Offering. Notwithstanding anything to
the contrary set forth herein, the Holder of this Note may apply the then
outstanding amount of all principal and accrued and unpaid interest under this
Note to satisfy its obligations as a standby purchaser in the Rights Offering.
In the event that the Rights Offering is not consummated prior to May 31, 1996,
or upon the occurrence of any of the other events referred to in Section 4.1 of
the Purchase Agreement, then the Holder may, commencing at the Conversion Date
(as such term is defined in the Purchase Agreement), exchange this Note for the
Avondale Replacement Note (as such term is defined in the Purchase Agreement)
on the terms set forth in the Purchase Agreement (a "Note Exchange").
The following is a statement of the rights of the Holder of
this Note and the conditions to which this Note is subject, and to which the
Holder hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms,
unless the context otherwise requires, have the following meanings:
<PAGE> 2
(i) "Company" includes any corporation which shall succeed
to or assume the obligations of the Company under this Note.
(ii) "Holder," when the context refers to a holder of this
Note, shall mean any person who shall at the time be the registered holder of
this Note.
2. Interest. The unpaid principal balance of the Note shall bear
interest compounded annually, from the date hereof until paid in like money, at
a rate (based on a 360-day year) equal to ten percent (10%) per annum, such
interest to be payable on June 30 and December 31 in each year. Any accrued
but unpaid interest shall be payable in full upon maturity or prior prepayment
of this Note. In the event that the principal amount of this Note is not paid
in full upon maturity, interest shall continue to accrue at the rate provided
in the previous sentence plus five percent (5%) on the balance of any unpaid
principal and unpaid interest until such balance is paid.
3. Events of Default. If any of the events specified in this
Section 3 shall occur (herein individually referred to as an "Event of
Default"), the Holder of this Note may, in the sole discretion of the Holder,
so long as such condition exists, (a) declare the entire principal and unpaid
accrued interest hereon immediately due and payable, and (b) effect a Note
Exchange, by notice in writing to the Company:
(i) (a) Default in the payment of the principal when
due under this Note, the Initial Gintel Note or the Gintel Subordinated Note,
and (b) default in the payment of the unpaid accrued interest under this Note,
the Initial Gintel Note or the Gintel Subordinated Note, when due and payable
if such default in the payment of accrued interest is not cured by the Company
within ten (10) days after the Holder or Robert Gintel, as the case may be, has
given the Company written notice of such default; or
(ii) The institution by the Company or any material
Subsidiary of proceedings to be adjudicated as bankrupt or insolvent, or the
consent by it to institution of bankruptcy or insolvency proceedings against it
or the filing by it of a petition or answer or consent seeking reorganization
or release under the federal Bankruptcy Act, or any other applicable federal or
state law, or the consent by it to the filing of any such petition or the
appointment of a receiver, liquidator, assignee, trustee or other similar
official of the Company or any material Subsidiary, or of any substantial part
of its property, or the making by it of an assignment for the benefit of
creditors, or the taking of corporate action by the Company or any material
Subsidiary in furtherance of any such action; or
(iii) If, within sixty (60) days after the commencement
of an action against the Company or any material Subsidiary (and service of
process in connection therewith on the Company or any material Subsidiary)
seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or
similar relief under any present or future statute, law or regulation, such
action shall not have been resolved in favor of the Company or any material
Subsidiary or all orders or proceedings thereunder affecting the operations or
the business of the Company or any material Subsidiary stayed, or if the stay
of any such order or proceeding shall thereafter be set aside, or if, within
sixty (60) days after the appointment without the consent or acquiescence of
the Company or any material Subsidiary of any trustee, receiver or liquidator
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<PAGE> 3
of the Company or any material Subsidiary or of all or any substantial part of
the properties of the Company or any material Subsidiary, such appointment
shall not have been vacated; or
(iv) Any event of default or default of the Company
under any Senior Indebtedness (as defined below) that gives the holder thereof
the right to accelerate such Senior Indebtedness, even if such Senior
Indebtedness is not, in fact, accelerated by the holder; or
(v) Any failure by the Company to comply with, perform
or observe any term, covenant or agreement contained in the Purchase Agreement,
this Note, the Initial Gintel Note, the Gintel Subordinated Note, the
Registration Rights Agreement, the Standby Agreement or any other agreement,
instrument or documents entered into in connection therewith, which failure
continues for a period of 30 days after written notice thereof by the Holder to
the Company; or
(vi) Any change of control of the Company which, for
purposes of this Section 3(vi), shall be deemed to have occurred if (i) any
person, other than any person who, as of the date of the Purchase Agreement,
beneficially owns 5% or more of the outstanding capital stock of the Company,
whether alone or as part of a group (including any individual, firm,
partnership or other entity), together with all Affiliates and Associates (as
defined under Rule 12b-2 of the General Rules and Regulations promulgated under
the Securities Exchange Act of 1934, as amended) of such person, but excluding
(A) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any subsidiary of the Company, (B) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of the Company or (C) the Company or any
subsidiary of the Company is or becomes the Beneficial Owner (as defined in
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities, (ii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 80% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (iii) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets; or
(vii) the Company or any material Subsidiary shall be
subject to a final judgment by a court of competent jurisdiction (which is no
longer being appealed) in an amount in excess of $1,000,000.
4. Subordination. The indebtedness evidenced by this Note is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all the Company's
Senior Indebtedness, as hereinafter defined.
4.1 Senior Indebtedness. As used in this Note, the
term "Senior Indebtedness" shall mean the principal of and unpaid accrued
interest on: (i) all indebtedness of
-3-
<PAGE> 4
the Company concurrently being incurred by the Company with SunTrust Bank,
Atlanta, First Union Bank of South Carolina and Natwest Bank, N.A., (ii) all
indebtedness of the Company to banks, insurance companies or other financial
institutions regularly engaged in the business of lending money (collectively,
"Bank Debt"), which is outstanding on the date hereof and which is for money
borrowed by the Company (whether or not secured), (iii) up to $6 million of
additional Bank Debt provided that such additional Bank Debt is advanced to the
Company prior to such time as the conversion privileges set forth in the
Avondale Replacement Note and the Gintel Replacement Note have either been
exercised in their entirety, canceled or terminated and (iv) any refinancings
of the indebtedness described in clauses (i) through (iii) above.
4.2 Default on Senior Indebtedness. If there should
occur any receivership, insolvency, assignment for the benefit of creditors,
bankruptcy, reorganization or arrangements with creditors (whether or not
pursuant to bankruptcy or other insolvency laws), sale of all or substantially
all of the assets, dissolution, liquidation or any other marshalling of the
assets and liabilities of the Company, then (i) no amount shall be paid by the
Company in respect of the principal of or interest on this Note at the time
outstanding, unless and until the principal of and interest on the Senior
Indebtedness then outstanding shall be paid in full, and (ii) no claim or proof
of claim shall be filed with the Company by or on behalf of the Holder of this
Note that shall assert any right to receive any payments in respect of the
principal of and interest on this Note, except subject to the payment in full
of the principal of and interest on all of the Senior Indebtedness then
outstanding. If there occurs an Event of Default that has been declared in
writing with respect to a payment obligation under any Senior Indebtedness, or
in the instrument under which any Senior Indebtedness is outstanding,
permitting the holder of such Senior Indebtedness to accelerate the maturity
thereof, then, unless and until such Event of Default shall have been cured or
waived or shall have ceased to exist, or all Senior Indebtedness shall have
been paid in full, no payment shall be made in respect of the principal of or
interest on this Note, unless within three (3) months after the happening of
such Event of Default, the maturity of such Senior Indebtedness shall not have
been accelerated.
4.3 Effect of Subordination. Subject to the rights,
if any, of the holders of Senior Indebtedness under this Section 4 to receive
cash, securities or other properties otherwise payable or deliverable to the
Holder of this Note, nothing contained in this Section 4 shall impair, as
between the Company and the Holder, the obligation of the Company, subject to
the terms and conditions hereof, to pay to the Holder the principal hereof and
interest hereon as and when the same become due and payable, or shall prevent
the Holder of this Note, upon default hereunder, from exercising all rights,
powers and remedies otherwise provided herein or by applicable law.
4.4 Subrogation. Subject to the payment in full of
all Senior Indebtedness and until this Note shall be paid in full, the Holder
shall be subrogated to the rights of the holders of Senior Indebtedness (to the
extent of payments or distributions previously made to such holders of Senior
Indebtedness pursuant to the provisions of Section 4.2 above) to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness. No such payments or distributions applicable to the Senior
Indebtedness shall, as between the Company and its creditors, other than the
holders of Senior Indebtedness and the Holder, be deemed to be a payment by the
Company to or on account of this Note; and for the purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
to which
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<PAGE> 5
the Holder would be entitled except for the provisions of this Section 4 shall,
as between the Company and its creditors, other than the holders of Senior
Indebtedness and the Holder, be deemed to be a payment by the Company to or on
account of the Senior Indebtedness.
4.5 Undertaking. By its acceptance of this Note, the
Holder agrees to execute and deliver such documents as may be reasonably
requested from time to time by the Company or the lender of any Senior
Indebtedness in order to implement the foregoing provisions of this Section 4.
5. Prepayment.
5.1 Optional Prepayment. The Company may not prepay
this Note, in whole or in part, without the prior consent of the Holder hereof
and the holders of the Initial Gintel Note and the Gintel Subordinated Note.
If the Company shall prepay this Note pursuant to this Section 5, it shall
cause notice thereof, specifying the date and amount of prepayment, to be given
by registered or certified mail to the holders of the Initial Gintel Note and
the Gintel Subordinated Note at their last-known post office addresses of which
the Company shall have received written notice, at least 10 days prior to the
date fixed for such prepayment. Notice of prepayment having been given as
aforesaid, this Note, the Initial Gintel Note and the Gintel Subordinated Note,
or the portions thereof so to be prepaid shall, on the date designated in such
notice, become due and payable in the principal amounts thereof to be prepaid.
In the event that this Note, the Initial Gintel Note and/or the Gintel
Subordinated Note are outstanding and a partial prepayment is made, each of
this Note, the Initial Gintel Note and the Gintel Subordinated Note shall be
prepaid pro rata to the then outstanding principal amounts thereof.
5.2 Mandatory Prepayment. The Company shall
immediately use any proceeds received by it from any stockholder of the Company
upon the exercise by such stockholder of rights issued in the Rights Offering,
to repay, pro rata with the Initial Gintel Note, based upon the then
outstanding principal amount in relation to the then outstanding principal
amount of the Initial Gintel Note, the outstanding principal amount and any
unpaid and accrued interest hereunder.
6. Notifications by the Company. In case at any time:
(1) there shall be any capital reorganization,
reclassification of the capital stock of the Company,
consolidation or merger of the Company with, or sale of all or
substantially all of the assets of the Company to, another
corporation; or
(2) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give written notice
to the registered Holder of this Note of the date on which such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up shall take place, as the case may be. Such written notice shall be
given not less than 30 days and not more than 60 days prior to the action in
question and not less than 30 days and not more than 80 days prior to the
record date or the
-5-
<PAGE> 6
date on which the Company's transfer books are closed in respect thereto and
such notice may state that the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933, as amended, or to a
favorable vote of stockholders, if either is required.
7. Assignment. The rights and obligations of the Company and the
Holder of this Note shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
8. Notices. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or mailed by registered or certified mail or
overnight courier, postage prepaid, at the respective addresses of the parties
as set forth herein. Any party hereto may by notice so given change its address
for future notice hereunder. Notice shall conclusively be deemed to have been
given when delivered in the manner set forth above and shall be deemed to have
been received when delivered. Copies of all notices to the Company shall be
given to:
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
Attention: Edward I. Kramer
9. No Stockholder Rights. Nothing contained in this Note shall
be construed as conferring upon the Holder or any other person the right to
vote or to consent or to receive notice as a stockholder in respect of meetings
of stockholders for the election of directors of the Company or any other
matters or any rights whatsoever as a stockholder of the Company.
10. Collection. If the Holder shall institute any action to
enforce collection of this Note, there shall become due and payable from the
Company, in addition to the unpaid principal amount and interest under this
Note, all costs and expenses of that action (including, but not limited to,
reasonable attorneys' fees) and the Holder shall be entitled to judgment for
all such additional amounts.
11. Governing Law. This Note is executed and delivered in, and
shall be construed in accordance with, and governed by, the laws of the State
of New York, without giving effect to the conflicts of law principles thereof.
12. Headings; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
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<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this Note to be issued this
26th day of January, 1996.
ONEITA INDUSTRIES, INC.
By
-----------------------------------
-----------------------------------
-7-
<PAGE> 1
EXHIBIT 10.8
AVONDALE INCORPORATED
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of April 29, 1996, between Avondale
Incorporated, a Georgia corporation (the "Company"), and the Persons listed on
Exhibit A hereto (the "Investors").
The parties to this Agreement are parties to a Stock Purchase
Agreement dated as of March 31, 1996 (the "Purchase Agreement"). In order to
induce the Investors to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the Closing under
the Purchase Agreement. Unless otherwise provided in this Agreement,
capitalized terms used herein shall have the meanings set forth in paragraph 8
hereof.
The parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time from and after
the earlier of (i) the IPO Date and (ii) the expiration of the three (3) year
period commencing on the date hereof, the holders of a majority of the
Registrable Securities may request registration under the Securities Act of all
or any portion of their Registrable Securities on Form S-1 or any similar
long-form registration ("Long-Form Registrations"), and the holders of a
majority of the Registrable Securities may request registration under the
Securities Act of all or any portion of their Registrable Securities on Form
S-2 or S-3 or any similar short-form registration ("Short-Form Registrations"),
if available. All registrations requested pursuant to this paragraph 1(a) are
referred to herein as "Demand Registrations". The Company shall only be
obligated to effect a Demand Registration if the aggregate number of
Registrable Securities requested to be registered is 100,000 or more. Each
request for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the intended method or
methods of distribution thereof. Within ten days after receipt of any such
request, the Company shall give written notice of such requested registration
to all other holders of Registrable
<PAGE> 2
Securities and shall include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.
(b) Long-Form Registrations. Except as provided in
paragraph 1(c) below, the holders of Registrable Securities shall be entitled
to request one Long-Form Registration. The Company shall pay all of the
Registration Expenses for such Long-Form Registration; provided, however, that
if such Long-Form Registration is not declared effective by the Commission
pursuant to the Securities Act, or is declared effective but is subsequently
withdrawn by the Company (prior to the end of the Distribution Period), then
such Demand Registration shall not be counted as a Long-Form Registration for
such purposes.
(c) Short-Form Registrations. In addition to the
Long-Form Registration provided pursuant to paragraph 1(b), the holders of
Registrable Securities shall be entitled to request an unlimited number of
Short-Form Registrations. The Company shall pay all Registration Expenses for
one Short-Form Registration. Demand Registrations shall be Short-Form
Registrations whenever the Company is permitted to use any applicable short
form. After the Company has become subject to the reporting requirements of the
Exchange Act, the Company shall use its reasonable best efforts to make
Short-Form Registrations on Form S-3 available for the sale of Registrable
Securities. If at any time following the first anniversary of the IPO Date the
Company shall not be permitted for any reason to make a Short-Form Registration
on Form S-3 at the time the holders of Registrable Securities request their
first Short-Form Registration, then in such event, the holders of Registrable
Securities shall be entitled to request a Long-Form Registration (regardless of
whether the Company has previously consummated a Long-Form Registration in
accordance with paragraph 1(b) above). The Company shall pay all of the
Registration Expenses for such Long-Form Registration. The parties hereto agree
that notwithstanding whether any Demand Registration is a Long-Form
Registration or Short-Form Registration, the Company shall be obligated to pay
all Registration Expenses for only two Demand Registrations.
2
<PAGE> 3
(d) Priority on Demand Registrations. The Company shall
be entitled to include in any Demand Registration for sale, in accordance with
the method of disposition specified by the holders requesting a Demand
Registration, shares of Class A Common to be sold by the Company for its own
account or by other shareholders of the Company for their account, except that
if a Demand Registration is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the offering,
then the Company will include in such registration (i) first, the Registrable
Securities requested to be registered hereunder, (ii) second, securities the
Company proposes to sell and (iii) third, other securities requested be
included in such registration.
(e) Selection of Underwriters. If the method of
disposition specified by the holders initiating the Demand Registration shall
be an underwritten public offering, the Company may designate the managing
underwriter of such offering, subject to the approval of the holders of a
majority of the Registrable Securities initially requesting such Demand
Registration, which approval shall not be unreasonably withheld. If in
connection with any underwritten public offering requested by the holders of
Registrable Securities pursuant to paragraph 1(b) above, the securities of the
Company included in such offering consist exclusively of Registrable
Securities, then the Company shall designate the managing underwriter of such
offering, subject to the approval of the holders of a majority of the
Registrable Securities initially requesting such Demand Registration and at
least one such managing underwriter shall be either CS First Boston Corporation
or Goldman, Sachs & Co.
(f) Other Registration Rights. From and after the date
hereof, the Company shall not, without the prior written consent of the holders
of a majority of the Registrable Securities, enter into any agreement with any
holder or prospective holder of any securities of the Company that would allow
such holder or prospective holder to require the Company to include shares or
securities in any Demand Registration unless under the terms of such agreement
such holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of such securities will not
reduce the amount
3
<PAGE> 4
of Registrable Securities registered in connection with such Demand
Registration.
(g) Exceptions to Demand Registrations. Notwithstanding
anything in this Section 1 to the contrary, the Company shall not be required
to file a registration statement in connection with a Demand Registration (i)
within six months after the effective date of a registration statement filed in
connection with an underwritten initial public offering and 90 days after the
effective date of a registration statement filed in connection with any other
Demand Registration or a Piggyback Registration, provided that (A) the holders
of Registrable Securities shall have been afforded the opportunity to sell
Registrable Securities pursuant to such registration statement, (B) all
Registrable Securities requested to be registered shall have been so registered
and, (C) if such registration statement shall relate to an underwritten public
offering, all Registrable Securities requested to be registered shall have been
included therein to the extent so requested and shall have been sold, (ii) if
counsel for the Company shall deliver an opinion reasonably acceptable to the
holders of Registrable Securities that, pursuant to Rule 144 under the
Securities Act or otherwise, the holders of Registrable Securities can publicly
sell the Registrable Securities as to which registration has been requested
without registration under the Securities Act (without regard to volume
limitations), (iii) the Company elects within 15 days after receiving a request
for a Demand Registration to purchase all but not less than all of the
Registrable Securities as to which registration has been requested, if the
Class A Common is not publicly traded, at a price per share equal to the
Current Market Price, or, if the Class A Common is not publicly traded, at a
price per share mutually agreed upon by the holders of such Registrable
Securities and the Company (provided that if such parties cannot mutually agree
upon such purchase price after negotiating in good faith for 20 days, the
Company shall effect such Demand Registration) and the Company closes such
purchase within 30 days after delivery of written notice to the Shareholder
that the Company has elected to purchase such Registrable Securities or (iv)
the Board of Directors of the Company makes a good faith determination that
filing a registration statement, or continuing to permit offers and sales
pursuant to an effective registration statement filed pursuant to Section 2
hereof (where the method of distribution is not a firm commitment underwritten
offering), is not in the best interests of the Company or its shareholders and
delivers written notice to such effect to the holders whose shares
4
<PAGE> 5
are registered pursuant to such effective registration statement; provided,
however, that (A) any such deferral of the filing of the registration statement
shall not exceed a period equal to 60 days after the date of the Demand
Registration Request or (B)(1) any such suspension of offers and sales under an
effective registration statement shall not exceed a period equal to 60 days
after the date on which the Company gives notice of such suspension to the
holders and (2) the Company shall not be permitted to suspend such offers and
sales for more than 60 days during any six-month period.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to
register on its behalf and/or on behalf of any of its security holders any of
its securities under the Securities Act (other than pursuant to a Demand
Registration or registrations on Form S-4 or Form S-8, or any successor forms)
and the registration form to be used may be used for the registration of
Registrable Securities (a "Piggyback Registration"), the Company shall give at
least 25 days prior written notice to all holders of Registrable Securities of
its intention to effect such a registration (which notice shall set forth the
intended method of disposition of the securities proposed to be registered by
the Company) and, except as provided in Section 2(c), shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after the
receipt of the Company's notice.
(b) Piggyback Registration Expenses. The Registration
Expenses of the holders of Registrable Securities shall be paid by the Company
in all Piggyback Registrations.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering without materially and
adversely affecting the offering, the Company shall include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares requested to
5
<PAGE> 6
be registered by each such holder or such other proportions as such holders may
determine, and (iii) third, other securities requested to be included in such
registration.
(d) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering
without materially and adversely affecting the marketability of the offering,
the Company shall include in such registration (i) first, the securities
requested to be included therein by the holders requesting such registration,
(ii) second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares requested to be registered by each such holder or
such other proportions as such holders may determine, and (iii) third, other
securities requested to be included in such registration.
3. Holdback Agreements.
(a) Each holder of Registrable Securities shall not
effect any public sale or distribution (including sales pursuant to Rule 144)
of equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 90-day period beginning on the effective date of any underwritten
Demand Registration (except as part of such underwritten registration), unless
the underwriters managing the registered public offering otherwise agree in
writing.
(b) The Company (i) shall not effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-4 or Form S-8 or any successor form), unless the underwriters
managing the registered public offering otherwise agree in writing, and (ii)
(A) except to the extent such holder has previously so agreed, shall use its
reasonable best efforts to cause each holder at such time of at least five
percent (5%) of its Common Stock, or any securities convertible into or
exchangeable or exercisable for Common Stock to agree and
6
<PAGE> 7
(B) shall cause each holder of at least five percent (5%) of its Common Stock,
or any securities convertible into or exchangeable or exercisable for at least
five percent (5%) of its Common Stock, purchased from the Company at any time
after the date of this Agreement (other than (i) in a registered public
offering or (ii) pursuant to any employee benefit plan of the Company) to
agree,not to effect any public sale or distribution (including sales pursuant
to Rule 144) of any such securities during such period (except as part of such
underwritten registration, if otherwise permitted), unless the underwriters
managing the registered public offering otherwise agree in writing.
4. Registration Procedures. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall use its reasonable
best efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company shall as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its reasonable
best efforts to cause such registration statement to become effective for the
Distribution Period, but no longer (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall furnish to the counsel selected by the holders of a majority of the
Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed, which documents shall be subject to the
review and reasonable comment of such counsel provided such Counsel shall
conduct such review and provide any such comment promptly after receipt of such
documents);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective for the Distribution Period and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
7
<PAGE> 8
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its reasonable best efforts to register or
qualify such Registrable Securities under such other securities or blue sky
laws of such jurisdictions as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided that the Company shall
not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this subparagraph,
(ii) subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, but during the
Distribution Period only, the Company shall prepare a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement
of a material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its
reasonable best efforts to secure designation of all such Registrable
Securities covered by such registration statement as a NASDAQ "national market
system security" within the meaning of Rule 11Aa2-1 of the Commission or,
failing that, to secure NASDAQ authorization for such Registrable Securities
and, without limiting the generality of the foregoing, to arrange for at least
two market makers
8
<PAGE> 9
to register as such with respect to such Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including effecting a stock split
or a combination of shares);
(i) during regular business hours and upon reasonable
notice, make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(j) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning with the
first day of the Company's first full month after the effective date of the
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which
holder, in its sole and exclusive judgment, might be deemed to be an
underwriter or a controlling person of the Company, to participate in the
preparation of such registration statement and to require the insertion therein
of material concerning such holder, furnished to the Company in writing, which
in the reasonable judgment of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order
suspending the effectiveness of a registration state-
9
<PAGE> 10
ment, or of any order suspending or preventing the use of any related
prospectus or suspending the qualification of any common stock included in such
registration statement for sale in any jurisdiction, the Company shall use its
best efforts promptly to obtain the withdrawal of such order;
(m) use its reasonable best efforts to cause such
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the sellers thereof to consummate the disposition of such
Registrable Securities; and
(n) furnish, at the request of any holder requesting
registration of Registrable Securities pursuant to Section 1 or 2, on the date
that such shares of Registrable Securities are delivered to the underwriters
for sale pursuant to such registration or, if such Registrable Securities are
not being sold through underwriters, on the date that the registration
statement with respect to such shares of Registrable Securities becomes
effective, (1) an opinion, dated such date, of the independent counsel
representing Company for the purposes of such registration, addressed to the
underwriters, if any, and if such Registrable Securities are not being sold
through underwriters, then to the holders making such request, in customary
form and covering matters of the type customarily covered in such legal
opinions; and (2) a comfort letter dated such date, from the independent
certified public accountants of Company, addressed to the underwriters, if any,
and if such Registrable Securities are not being sold through underwriters,
then to the holder making such request and, if such accountants refuse to
deliver such letter to such holder, then to Company in a customary form and
covering matters of the type customarily covered by such comfort letters and as
the underwriters or such holder shall reasonably request. Such opinion of
counsel shall additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as such holders of
Registrable Securities may reasonably request. Such letter from the independent
certified public accountants shall additionally cover such other financial
matters (including information as to the period ending not more than 5 business
days prior to the date of such letter) with respect to the registration in
respect of which such letter is being given as the holders holding a majority
of the Registrable Securities being so registered may reasonably request.
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<PAGE> 11
5. Registration Expenses.
(a) All expenses incident to the Company's performance of
or compliance with this Agreement, including without limitation all
registration and filing fees, fees and expenses of compliance with securities
or blue sky laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians incurred in connection with Piggyback Registration
and two Demand Registrations, fees and disbursements of counsel for the
Company, and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
as provided in this Agreement, including the Company paying its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance
and the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of Registrable
Securities included in such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities included in such registration and for the reasonable
fees and disbursements of each additional counsel retained by any holder of
Registrable Securities for the purpose of rendering a legal opinion on behalf
of such holder in connection with any underwritten Demand Registration or
Piggyback Registration; provided, however, that in no event shall the Company's
reimbursement obligation exceed $25,000 in connection with a Demand
Registration or Piggyback Registration. In no event shall the Company be
responsible for the fees and expenses of accountants for holders of Registrable
Securities).
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<PAGE> 12
6. Indemnification and Contribution.
(a) In the event of any registration of any Registrable
Securities under the Securities Act pursuant to this Agreement, the Company
shall indemnify and hold harmless the holder of such Registrable Securities,
such holder's directors, officers and partners (and the directors and officers
of such partners), and each underwriter and broker- dealer (if required by any
broker-dealer as a condition to its participation in such offering of
Registrable Securities) who participated in the offering of such Registrable
Securities and each other Person, if any, who controls such holder or such
participating underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such holder
or any such director, officer and partners (and the directors and officers of
such partners) or participating Person or controlling Person may become subject
under the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or (ii) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse such holder or such director, officer,
partner or participating Person or controlling Person for any legal or any
other expenses reasonably incurred by such holder or such director, officer,
partner or participating Person or controlling Person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any alleged untrue statement or alleged omission made in such registration
statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to Company
by such holder or underwriter specifically for use therein or (in the case of
any registration pursuant to Section 1 or 2) so furnished for such purposes by
any underwriter. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder or such
director, officer or participating Person or
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<PAGE> 13
controlling Person, and shall survive the transfer of such securities by such
holder.
(b) Each holder of any Registrable Securities, by acceptance
thereof, agrees to indemnify and hold harmless the Company, its directors and
officers and each other Person, if any, who controls Company within the meaning
of the Securities Act against any losses, claims, damages or liabilities, joint
or several, to which the Company or any such director or officer or any such
Person may become subject under the Securities Act or any other statute or at
common law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon information in writing
provided to the Company by such holder of such Registrable Securities
specifically for use in the following documents and contained, on the effective
date thereof, in any registration statement under which securities were
registered under the Securities Act at the request of such holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto; provided that the obligation to indemnify shall be
individual, not joint and several, for each holder and shall be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof. The failure
to give notice as required by this Section 6(c) in a timely fashion shall not
result in a waiver of any right to indemnification hereunder, except to the
extent such failure results in the loss or forfeiture by the indemnifying party
of any rights or defenses that would otherwise have been available to the
indemnifying party. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in and, to the extent it shall wish, to assume and undertake the defense
thereof with counsel reasonably satisfactory to such indemnified party, and,
after notice from the indemnifying party to such indemnified party of its
election so to assume and undertake the defense thereof, the indemnifying party
shall not be liable to such indemnified party under this Section 6 for any
legal expenses subsequently incurred by such indemnified party in
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<PAGE> 14
connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected; provided, however, that,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
based on advice of counsel that there may be reasonable defenses available to
it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select separate counsel (consisting
of one law firm) and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by
the indemnifying party as incurred. Further, in any such action, any
indemnified party shall have the right to retain its own counsel, but the fees
and disbursements of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party shall have failed to retain counsel for
the indemnified party as aforesaid; or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld but if settled with
such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 6 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the 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 fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
rele-
14
<PAGE> 15
vant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. 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 any legal or other fees or expenses reasonably incurred by such party
in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
7. Participation in Underwritten Registrations. No
Person may participate in any registration hereunder which is underwritten
unless such Person (i) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting arrangements;
provided that no holder of Registrable Securities included in any underwritten
registration shall be required to make any representations or warranties to the
Company or the underwriters (other than representations and warranties
regarding such holder and such holder's intended method of distribution) or to
undertake any indemnification obligations to the Company or the underwriters
with respect thereto, except as otherwise provided in paragraph 6 hereof.
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<PAGE> 16
8. Definitions.
"Class A Common" means the Company's Class A Common Stock, par
value $.01 per share.
"Commission" means the Securities and Exchange Commission or
any agency succeeding to the functions thereof.
"Current Market Price" shall mean, on the date of any
determination thereof, the average of the last sale prices per share of the
Class A Common reported on the Nasdaq Stock Market's National Market (or the
principal trading market or stock exchange for the Class A Common if other than
the Nasdaq Stock Market's National Market) for the 15 trading days preceding
the date of such determination.
"Distribution Period" shall mean, with respect to a
distribution of Registrable Securities in a firm commitment underwritten public
offering, the period extending until, but not beyond, such time as each
underwriter has completed the distribution of all securities purchased by it,
and with respect to any other distribution of Registrable Securities in any
other registration, the period extending until, but not beyond, the earlier of
the sale of all Registrable Securities covered thereby or 90 days following the
effective date of the registration statement utilized in connection with such
registration under the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"IPO Date" means the first date on which any class of common
stock of the Company shall have been registered and sold pursuant to an
effective registration statement under the Securities Act.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Registrable Securities" means any Class A Common issued to
the Investors pursuant to the Purchase Agreement or purchased by the Investors
pursuant to paragraph 3 of the Shareholders' Agreement. As to any particular
Registrable
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<PAGE> 17
Securities, such securities shall cease to be Registrable Securities when they
have been distributed to the public pursuant to a offering registered under the
Securities Act or sold to the public through a broker, dealer or market maker
in compliance with Rule 144 under the Securities Act (or any similar rule then
in force) or repurchased by the Company or any Subsidiary. For purposes of this
Agreement, a Person shall be deemed to be a holder of Registrable Securities,
and the Registrable Securities shall be deemed to be in existence, whenever
such Person has the right to acquire directly or indirectly such Registrable
Securities (upon conversion or exercise in connection with a transfer of
securities or otherwise, but disregarding any restrictions or limitations upon
the exercise of such right), whether or not such acquisition has actually been
effected, and such Person shall be entitled to exercise the rights of a holder
of Registrable Securities hereunder.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Shareholders' Agreement" means the Shareholders' Agreement
dated as of April ___, 1996.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) Adjustments Affecting Registrable Securities. The
Company shall not take any action, or permit any change to occur, with respect
to its securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. Any Person having rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically to recover damages caused by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law. The parties
hereto agree and acknowledge that money damages may not be
17
<PAGE> 18
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other security) for
specific performance and for other injunctive relief in order to enforce or
prevent violation of the provisions of this Agreement.
(d) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of the Company and holders of at least 51% of the
Registrable Securities.
(e) Successors and Assigns. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of Registrable
Securities.
(f) Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(g) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
(i) Governing Law; Consent to Jurisdiction. (a) This
Agreement shall be deemed to be a contract made under the laws of the State of
New York, and for all purposes shall be construed in accordance with the laws
of the State of New York, without regard to principles of conflict of laws.
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<PAGE> 19
(b) Each party hereto agrees that all judicial proceedings
arising out of or relating to this Agreement or the breach hereof may be
brought in any state or federal court of competent jurisdiction in the State of
New York.
(j) Notices. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications shall be sent to each Investor at the address
indicated on the Schedule of Investors and to the Company at the address
indicated below:
Avondale Incorporated
506 South Broad Street
Monroe, Georgia 30655
Attention: G. Stephen Felker
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Telephone: (404) 572-1763
Attention: Michael J. Egan III, Esq.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(k) Entire Agreement. Except as otherwise expressly set
forth herein, this Agreement embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
* * * *
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
AVONDALE INCORPORATED
By:
Its:
----------------------------------
INVESTORS
Clipper Capital Associates, L.P. Clipper Equity Partners I, L.P.
By: Clipper Capital Associates, Inc. By: Clipper Capital Associates, L.P.
its general partner its general partner
--------------------------------- -----------------------------------
By: Clipper Capital Associates, Inc.
its general partner
---------------------------------
By: By:
--------------------------------- -----------------------------------
Name: Name:
----------------------------- -------------------------------
Title: Title:
---------------------------- ------------------------------
Clipper/Merchant Partners, L.P. Clipper/European Re, L.P.
By: Clipper Capital Associates, L.P. By: Clipper Capital Associates, L.P.
its general partner its general partner
--------------------------------- -----------------------------------
By: Clipper Capital Associates, Inc. By: Clipper Capital Associates, Inc.
its general partner its general partner
----------------------------- -------------------------------
By: By:
---------------------------------- -------------------------------------
Name: Name:
---------------------------- ------------------------------
Title: Title:
--------------------------- -----------------------------
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<PAGE> 21
Clipper/Merban, L.P. CS First Boston Merchant Investments
By: Clipper Capital Associates, L.P. 1995/96, L.P.
its general partner By: Merchant Capital, Inc.
By: Clipper Capital Associates, Inc. its general partner
its general partner
By: By:
-------------------------------- --------------------------------
Name: Name:
--------------------------- ---------------------------
Title: Title:
-------------------------- --------------------------
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<PAGE> 22
EXHIBIT A
LIST OF INVESTORS
Clipper Capital Associates, L.P.
12 East 49th Street
New York, NY 10017
Clipper/Merchant Partners, L.P.
12 East 49th Street
New York, NY 10017
Clipper/Merban, L.P.
c/o CITCO
De Ruterkade 62
P.O. Box 812
Curacao, Netherlands Antilles
Clipper Equity Partners I, L.P.
12 East 49th Street
New York, NY 10017
Clipper/European Re, L.P.
c/o CITCO
De Ruterkade 62
P.O. Box 812
Curacao, Netherlands Antilles
CS First Boston Merchant
Investments 1995/96, L.P.
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
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<PAGE> 1
EXHIBIT 10.9
EXECUTION COPY
AVONDALE INCORPORATED
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT dated as of April 29, 1996 by
and among Avondale Incorporated, a Georgia corporation (the "Company"), each of
the investors listed on the Schedule of Investors attached hereto (the
"Investors"), each of the shareholders listed on the Schedule of Existing
Shareholders attached hereto (the "Existing Shareholders") and Clipper Capital
Partners, L.P., in its capacity as Purchaser Representative under this
Agreement (in such capacity, the "Purchaser Representative"). The Investors and
the Existing Shareholders are collectively referred to as the "Shareholders"
and individually as a "Shareholder." Except as otherwise set forth herein,
capitalized terms used herein are defined in paragraph 8 hereof.
W I T N E S S E T H:
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Investors are purchasing shares (the "Purchased Shares") of
the Company's Class A Common Stock, par value $.01 per share, pursuant to a
Stock Purchase Agreement, dated as of March 31, 1996, among the Investors and
the Company (the "Purchase Agreement"); and
WHEREAS, the Company and the Shareholders desire to enter
into this Agreement for the purposes, among others, of (i) establishing the
composition of the Company's Board of Directors (the "Board") and committees
thereof and (ii) and agreeing upon certain matters with respect to the
Purchased Shares. The execution and delivery of this Agreement by the Company
and the Existing Shareholders is a condition to the Investors' purchase of the
Purchased Shares pursuant to the Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Board of Directors.
(a) From and after the Closing (as defined in the
Purchase Agreement) and as long as the Investors shall
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beneficially own at least 1,000,000 Shares, each Shareholder shall vote all of
his, her or its Shares which are voting shares and any other voting securities
of the Company over which such Shareholder has voting control and shall take
all other necessary or desirable actions within his, her or its control
(whether in his, her or its capacity as a shareholder, director, member of a
board committee or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary or desirable actions within its control
(including, without limitation, calling special board and stockholder
meetings), so that:
(i) one representative (the "Investor Director")
designated by Clipper Equity Partners I, L.P. (the "Fund"), or by the
Purchaser Representative if the Fund shall cease to own Shares, shall
be elected to the Board;
(i) the Board shall maintain at all times an audit committee
and a compensation committee, and the Investor Director shall serve on
each such committee;
(iii) the removal from the Board (with or without cause) of
any representative designated hereunder by the Fund or the Purchaser
Representative, whichever is then entitled to designate the Investor
Director under clause (i) above, shall be at the written request of the
Fund or the Purchaser Representative, as applicable, but only upon such
written request and under no other circumstances; and
(iv) in the event that any representative designated hereunder
by the Fund or the Purchaser Representative, whichever is then entitled
to designate the Investor Director under clause (i) above, ceases to
serve as a member of the Board during his term of office, the resulting
vacancy on the Board shall be filled by a representative designated by
the Fund or the Purchaser Representative, as applicable, as provided
hereunder.
(b) The Company shall pay the reasonable out-of-pocket
expenses incurred by the Investor Director in connection with attending the
meetings of the Board and any committee thereof.
(c) If the Fund or Purchaser Representative, whichever
is then entitled to designate the Investor Director under clause (i) above,
fails to designate a representative to fill a directorship pursuant to the
terms of this paragraph 1, the election of an individual to such directorship
shall be accomplished in accordance with the Company's bylaws and applicable
law.
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election of an individual to such directorship shall be accomplished in
accordance with the Company's bylaws and applicable law.
(d) In the event Clipper Equity Partners I, L.P. owns
Shares but neither the Fund nor the Purchaser Representative is entitled to
appoint the Investor Director pursuant to clause (i) above, Clipper Equity
Partners I, L.P. shall have the right to routinely consult with management of
the Company at reasonable times and upon reasonable notice.
(e) For the purposes of this Agreement, references herein
to specified numbers of Shares shall be appropriately adjusted to reflect any
stock splits, reverse stock splits, stock dividends, recapitalizations, merger
or consolidations occurring after the date hereof.
2. Representations and Warranties.
(a) Representations and Warranties of Shareholders.
Each Shareholder represents and warrants that (i) such Shareholder is the
record owner of the number of Shares set forth opposite its name on the
Schedule of Investors or Schedule of Existing Shareholders attached hereto,
(ii) this Agreement has been duly authorized, executed and delivered by such
Shareholder and constitutes the valid and binding obligation of such
Shareholder, enforceable in accordance with its terms, and (iii) such
Shareholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement, or which is violated by this Agreement. No holder
of Shares shall grant any proxy or become party to any voting trust or other
agreement which is inconsistent with, conflicts with or violates any provision
of this Agreement.
(b) Representations and Warranties of the Company.
The Company represents and warrants to each Shareholder that (i) it is a
corporation duly organized, validly existing and in good standing under the
laws of Georgia and is qualified to do business in every jurisdiction in which
its ownership of property or conduct of business requires it to qualify, except
where the failure to be so qualified would not have a material adverse effect
upon the Company or its business, (ii) it possesses all requisite corporate
power and authority and all material licenses, permits and authorizations
necessary to own and operate its properties, to carry on its businesses as now
conducted and to carry out the transactions contemplated by this Agreement,
(iii) this Agreement has been duly authorized, executed and
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delivered by it and constitutes the valid and binding obligation of it
enforceable in accordance with its terms, (iv) it is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its or any of its Subsidiaries' capital stock or any
warrants, options or other rights to acquire its capital stock, except pursuant
to the Felker Agreement and certain agreements to repurchase shares of its
Class A Common Stock from certain of its management employees, (v) to the best
of the Company's knowledge, there are no agreements which will survive the
Closing (as defined in the Purchase Agreement) among the Company's shareholders
with respect to the voting or transfer of the Company's capital stock or with
respect to any other aspect of the Company's affairs, except for this Agreement
and the Felker Agreement and (vi) the copies of the Company's Articles of
Incorporation and Bylaws which have been furnished to the Purchaser
Representative reflect all amendments made thereto at any time prior to the
date of this Agreement and are correct and complete.
3. Preemptive Rights.
(a) Except for issuances of Common Stock (i) to the
employees of the Company or its Subsidiaries pursuant to a stock option plan
approved by the compensation committee of the Board, (ii) as consideration in
connection with the acquisition of another company or business, to the seller
thereof or (iii) pursuant to a public offering registered under the Securities
Act, if the Company authorizes the issuance or sale of any shares of Common
Stock or any securities containing options or rights to acquire any shares of
Common Stock (other than as a dividend on the outstanding Common Stock), the
Company shall first offer to sell to the Investors a portion of such stock or
securities equal to the quotient determined by dividing (1) the number of
Shares held by the Investors by (2) the total number of shares of Outstanding
Common Stock (the "Additional Shares"). The Investors shall be entitled to
purchase such stock or securities at the most favorable price and on the most
favorable terms as such stock or securities are to be offered to any other
Persons. The purchase price for all stock and securities offered to the
Investors shall be payable by wire transfer of immediately available federal
funds.
(b) In order for the Investors to exercise their purchase
rights hereunder, the Purchaser Representative must, within 15 days after
receipt of written notice from the Company describing in reasonable detail the
stock or securities being offered, the purchase price thereof, the payment
terms and such holder's percentage allotment, deliver a written notice to the
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<PAGE> 5
Company describing its election hereunder. The Purchaser Representative's
notice shall set forth the number or amount of securities to be purchased by
each Investor (which may be allocated among the Investors as they shall
determine).
(c) Upon the expiration of the offering period described
above, the Company shall be entitled to sell such stock or securities which the
Investors have not elected to purchase during the 135 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to the Investors. The closing of the sale of the Additional
Shares to the Investors shall occur on the date of consummation of the sale of
such stock or securities to the purchasers thereof. Any stock or securities
offered or sold by the Company after such 135-day period must be reoffered to
the Investors pursuant to the terms of this paragraph 3.
(d) Any Additional Shares acquired by the Investors
pursuant to this paragraph 3 shall be subject to the provisions of this
Agreement and the Registration Rights Agreement.
4. Tag Along/Drag Along Provisions.
(a) Tag Along. At least 10 days prior to any Transfer of
Shares (other than pursuant to a Public Sale) by any of the Existing
Shareholders, the Existing Shareholder or Shareholders making such Transfer
(each, a "Transferor") shall deliver a written notice (the "Sale Notice") to
the Company and the Purchaser Representative specifying in reasonable detail
the identity of the prospective transferee(s), the number of Shares to be
transferred and the terms and conditions of the Transfer. The Investors may
elect, in such proportions as they shall determine, to participate in the
contemplated Transfer at the same price per Share and on the same terms by
delivering written notice to the Transferor within 10 days after delivery of
the Sale Notice. If the Investors have elected to participate in such Transfer,
the Transferor and the Investors (as a group) shall be entitled to sell in the
contemplated Transfer, at the same price and on the same terms, a number of
Shares equal to the product of (i) the quotient determined by dividing the
percentage of Shares owned by such Person(s) by the aggregate percentage of
Shares owned by the Transferor and the Investors (as a group) and (ii) the
number of Shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplates a sale of 90 Shares by the
Transferor, and if the Transferor at such time owns 20% of all Shares,
one or more Investors
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<PAGE> 6
elects to participate and the Investors as a group own 10% of all
Shares, the Transferor would be entitled to sell 60 shares (20% / 30% x
90 shares) and the Investors would be entitled to sell 30 shares (10% /
30% x 90 shares).
The Transferor shall use its commercially reasonable efforts (which
shall not require the payment of money) to obtain the agreement of the
prospective transferee(s) to the participation of the Investors in any
contemplated Transfer, and the Transferor shall not transfer any of its Shares
to any prospective transferee if such prospective transferee(s) declines to
allow the participation of the Investors. Each Investor transferring Shares
pursuant to this paragraph 4(a) shall be obligated to join on a pro rata basis
(based on the number of Shares to be sold to the transferee(s)) in any
indemnification or other obligations that the Transferor reasonably agrees to
provide in connection with such Transfer (other than any such obligations that
relate specifically to a particular Shareholder, such as indemnification with
respect to representations and warranties given by a Shareholder regarding such
Shareholder's title to and ownership of Shares; provided that no Investor shall
be obligated in connection with such Transfer to agree to indemnify or hold
harmless the transferees with respect to an amount in excess of the net cash
proceeds paid to such Investor in connection with such Transfer).
(b) Rights to Compel Sale.
(i) If the Existing Shareholders propose to sell all or any
portion of their Shares in any arm's length transaction or any series of
related arm's length transactions in which Shares in an amount greater than 50%
of the Outstanding Common Stock held by Persons other than the Investors will
be sold to a third party, the Existing Shareholders may require the Investors
to sell the Pro Rata Share of the aggregate number of Shares owned by Investors
(the "Investor Shares") to such third party for the same per Share
consideration and otherwise on the terms and conditions provided in this
paragraph 4(b).
(ii) The Existing Shareholders shall send written notice of the
exercise of their rights pursuant to this paragraph 4(b) to each of the
remaining Shareholders (the "Drag Along Notice"), setting forth the percentage
of the Outstanding Common Stock held by Persons other than the Investors to be
transferred (the "Pro Rata Share"), the consideration per Share to be paid by a
third party
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purchaser and the other terms and conditions of the transaction. Within
10 days following the date of the Drag Along Notice, the Purchaser
Representative shall deliver certificates representing the Investor
Shares, duly endorsed, together with all other documents required to be
executed in connection with such transactions. If the Purchaser
Representative should fail to deliver such certificates, the Company
shall cause the books and records of the Company to show that such Shares
are bound by the provisions of this paragraph 4(b) and that such Shares
shall be transferred only to the third party purchaser upon surrender for
transfer by the holder thereof.
(iii) Simultaneously with the consummation of the sale of the
Shares pursuant to this paragraph 4(b), the Existing Shareholders shall
promptly, but in any event not later than three business days thereafter,
remit to the Purchaser Representative the total sales price of the
Investor Shares sold pursuant thereto (which may be net of any expenses,
escrow amounts or other charges that are borne on a pro rata basis by all
of the selling Shareholders); and shall furnish such other evidence of
the completion and time of completion of such sale or other disposition
and the terms thereof as may be reasonably requested by the Purchaser
Representative.
(iv) The purchase from the Investors pursuant to this
paragraph 4(b) shall be the same date of transfer and on the same terms
and conditions as are to be received by the Existing Shareholders, which
date, terms and conditions shall be stated in the Drag Along Notice
(provided, however, that if any securities are to be received by the
Shareholders in connection with such sale, each Shareholder will have the
right to receive non-voting securities).
(c) Termination of Restrictions. The restrictions set
forth in this paragraph 4 shall continue with respect to each Share held by the
Shareholders until the earlier of (i) the date on which such Share has been
transferred in a Public Sale or a Sale of the Company, (ii) the date on which
such Share has been transferred pursuant to this paragraph 4 or (iii) the
consummation of a Qualified Public Offering.
5. Holdback Agreement. Each Existing Shareholder agrees that
it shall not effect any public sale or distribution of equity securities of the
Company (including sales pursuant to Rule 144 promulgated by the Securities and
Exchange Commission under the Securities Act), or any securities convertible
into or exchangeable or exercisable for such securities, during the seven
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days prior to and the 90-day period beginning on the effective date of any
underwritten Demand Registration (as defined in the Registration Rights
Agreement), except as part of such underwritten Demand Registration, unless the
underwriters managing such Demand Registration otherwise agree in writing.
6. Legends. (a) Except as provided in paragraph (b)
below, each certificate evidencing Shares and each certificate issued in
exchange for or upon the transfer of any Shares (if such shares remain Shares
after such transfer) shall bear the following legends:
"THE SHARES OF STOCK REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAW. NEITHER THESE SHARES, NOR ANY
PORTION THEREOF OR INTEREST THEREIN, MAY BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS THE SAME ARE REGISTERED AND
QUALIFIED IN ACCORDANCE WITH SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW, OR IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A SHAREHOLDERS' AGREEMENT DATED AS OF APRIL 29, 1996
AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN
OF THE COMPANY'S SHAREHOLDERS, AS AMENDED AND MODIFIED FROM
TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
COMPANY AND WILL BE FURNISHED TO ANY PROSPECTIVE PURCHASERS ON
REQUEST. BY ACCEPTANCE OF THIS CERTIFICATE, EACH HOLDER HEREOF
AGREES TO BE BOUND BY THE PROVISIONS OF THE SHAREHOLDERS'
AGREEMENT."
The legends set forth above shall be removed from the certificates evidencing
any shares which cease to be Shares.
(b) Nothwithstanding the provisions of paragraph (a) above,
the Company shall imprint the legends on certificates evidencing Shares held by
the Existing Shareholders outstanding as of the date hereof only at such time
as such Shares are surrendered to the Company for exchange or upon the transfer
of any such Shares (if such shares remain Shares after such transfer).
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(c) The Company agrees that it shall make an entry in its
stock record books to the effect that the outstanding Shares held by the
Existing Shareholders as of the date hereof are subject to the terms of this
Agreement. Further, the Company agrees that it shall not issue any shares
either in exchange for or upon the transfer of any Shares unless the
certificates evidencing such shares (to the extent such shares remain Shares
after such transfer) are imprinted with the legends set forth in paragraph (a)
above.
7. Transfer. Prior to transferring any Shares (other than
pursuant to a Public Sale or a Sale of the Company) to any Person, the
transferring Shareholder shall cause the prospective transferee to be bound by
this Agreement and to execute and deliver to the Company and the other
Shareholders a counterpart of this Agreement.
8. Definitions.
"Affiliate" has the meaning ascribed to it in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended from time to
time.
"Board" has the meaning set forth in the recitals.
"Class A Common" means the Company's Class A Common
Stock, par value $.01 per share.
"Class B Common" means the Company's Class B Common
Stock, par value $.01 per share.
"Common Stock" means the Company's Class A Common,
and the Company's Class B Common Stock.
"Company" has the meaning set forth in the preamble.
"Drag Along Notice" has the meaning set forth in
paragraph 4(b)(ii).
"Existing Shareholders" has the meaning set forth
in the preamble.
"Felker" means G. Stephen Felker.
"Felker Agreement" means the Felker Shareholder
Agreement, dated as of July 11, 1986, as amended on or prior to the date
hereof, between the Company and Felker.
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"Independent Third Party" means any Person who,
immediately prior to the contemplated transaction, does not own 5% or more of
any class of the Company's Common Stock on a fully-diluted basis (a "5%
Owner"), who is not controlling, controlled by or under common control with any
such 5% Owner and who is not among any such 5% Owner's Family Group.
"Investors" has the meaning set forth in the preamble.
"Investor Director" has the meaning set forth in
paragraph 1(a)(i).
"Outstanding Common Stock" means, as of any date of
determination, the aggregate number of shares of Common Stock then outstanding
on a fully-diluted basis taking into account any and all options, warrants or
other rights requiring the Company to issue any shares of Common Stock, and any
other securities of the Company then outstanding and exercisable or
exchangeable for, or convertible into, any shares of Common Stock.
"Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.
"Pro Rata Share" has the meaning set forth in
paragraph 4(b)(ii).
"Public Sale" means any sale of Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"Purchase Agreement" has the meaning set forth in the
recitals.
"Purchased Shares" has the meaning set forth in the
recitals.
"Purchaser Representative" means Clipper Capital
Partners, L.P. or a Person designated by the holders of a majority of the Shares
owned by the Investors.
"Qualified Public Offering" means the sale of the
Company's Common Stock in an underwritten initial public offering registered
under the Securities Act that results in (i) net proceeds to the Company and
the selling shareholders of at least
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$30 million or (ii) the sale of more than 50% of the total number of shares of
Class A Common Stock then owned by the Purchasers.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated as of the date hereof, between the Company and the
Investors, as such agreement may from time to time be amended, modified or
otherwise supplemented pursuant to the terms thereof.
"Sale Notice" has the meaning set forth in paragraph 4(a).
"Sale of the Company" means a transaction involving an
Independent Third Party or group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of the Company possessing the
voting power under normal circumstances to elect a majority of the Board
(whether by merger, consolidation or sale or transfer of the Company's capital
stock) or (ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"Securities Act" means the Securities Act of 1933, as
amended from time to time.
"Shares" means (i) any Common Stock purchased or
otherwise acquired by any Shareholder and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Shares, such shares shall cease to be Shares when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force).
"Shareholders" has the meaning set forth in the preamble.
"Subsidiaries" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of 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 that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a
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combination thereof. For purposes hereof, a Person or Persons shall be deemed
to have a majority ownership interest in a limited liability company,
partnership, association or other business entity if such Person or Persons
shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control any
managing member or general partner of such limited liability company,
partnership, association or other business entity.
"Transfer" means any sale, transfer, assignment or
other disposition (whether with or without consideration and whether voluntary,
involuntary or by operation of law) of Shares by a Shareholder, except pursuant
to a Public Sale or a Sale of the Company.
"Transferor" has the meaning set forth in paragraph 4(a).
9. Transfers in Violation of Agreement. Any
Transfer or attempted Transfer of any Shares in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer on
its books or treat any purported transferee of such Shares as the owner of such
Shares for any purpose.
10. Termination of Agreement. The parties
hereto agree that this Agreement shall terminate upon the earlier of (i) twenty
years from the date hereof or (ii) the consummation of a Qualified Public
Offering; provided, however, that the voting agreement provisions contained in
paragraph 1(a) shall terminate ten years from the date hereof, if this
Agreement has not otherwise terminated; provided further, however, that at any
time within two years prior to the termination of the voting agreement
contained in paragraph 1, the parties hereto may extend its duration for an
additional period not to exceed ten years, by a written instrument executed by
such parties.
11. After-Acquired Shares. All of the
provisions of this Agreement shall apply to all of the shares of Common Stock
now owned by or which may be issued or transferred hereafter to any of the
parties hereto or any Persons who are required hereby to become parties hereto
in consequence of any additional issuance, purchase, exchange, conversion or
reclassification of shares of Common Stock, corporate reorganization, or any
form of
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recapitalization, consolidation, merger, share split, share dividend or
distribution, or Transfer or which are acquired by such Person in any manner
whatsoever.
12. Amendment and Waiver. Except as otherwise
provided herein, no modification, amendment or waiver of any provision of this
Agreement shall be effective against the Company, the Existing Shareholders or
the Investors unless such modification, amendment or waiver is approved in
writing by each of the Company, the holders of at least two-thirds of the
Shares held by all Existing Shareholders, and the Purchaser Representative on
behalf of the Investors. The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms. The
parties hereto agree that the addition of new parties to this Agreement
(including pursuant to paragraph 7) shall not constitute a modification,
amendment or waiver of this Agreement.
13. Severability. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
any other provision of this Agreement in such jurisdiction or affect the
validity, legality or enforceability of any provision in any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
14. Entire Agreement. Except as otherwise
expressly set forth herein, this Agreement embodies the complete agreement and
understanding among the parties hereto with respect to the subject matter
hereof and supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
15. Successors and Assigns. Except as otherwise
provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Company and its successors and assigns and the Shareholders
and their successors and assigns.
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16. Counterparts. This Agreement may be executed
in multiple counterparts, each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
17. Remedies. The Company, the Investors and
the Existing Shareholders shall be entitled to enforce their rights under this
Agreement specifically, to recover damages and costs by reason of any breach of
any provision of this Agreement and to exercise all other rights existing in
their favor. The parties hereto agree and acknowledge that money damages would
not be an adequate remedy for any breach of the provisions of this Agreement
and that the Company, the Purchaser Representative, any Investor and any
Existing Shareholder may in their sole discretion apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive
relief (without posting a bond or other security) in order to enforce or
prevent any violation of the provisions of this Agreement.
18. Notices. Any notice provided for in this
Agreement shall be in writing and shall be either personally delivered, or
mailed by certified mail (postage prepaid and return receipt requested) or sent
by reputable overnight courier service (charges prepaid) to the Company at the
address set forth below and to any other recipient at the address indicated on
the schedules attached hereto and to any subsequent holder of Shares subject to
this Agreement at such address as indicated by the Company's records, or at
such address or to the attention of such other Person as the recipient party
has specified by prior written notice to the sending party. Notices shall be
deemed to have been given hereunder when delivered personally, three days after
deposit in the U.S. mail and one day after deposit with a reputable overnight
courier service. The Company's address is:
Avondale Incorporated
506 South Broad Street
Monroe, Georgia 30655
Telephone: (404) 267-2226
Attention: G. Stephen Felker
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Telephone: (404) 572-4600
Attention: Michael J. Egan III, Esq.
14
<PAGE> 15
19. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Georgia.
20. Business Days. If any time period for
giving notice or taking action hereunder expires on a day which is a Saturday,
Sunday or legal holiday in the state in which the Company's chief-executive
office is located, the time period shall automatically be extended to the
business day immediately following such Saturday, Sunday or legal holiday.
21. Descriptive Headings. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
* * * *
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the day and year first above written.
AVONDALE INCORPORATED
By:
----------------------------
Its:
---------------------------
INVESTORS
<TABLE>
<S> <C>
Clipper Capital Associates, L.P. Clipper Equity Partners I, L.P.
By: Clipper Capital Associates, Inc. By: Clipper Capital Associates, L.P.
its general partner its general partner
By: Clipper Capital Associates, Inc.
its general partner
By: By:
--------------------------------------- --------------------------------------
Name: Eugene P. Lynch Name: Eugene P. Lynch
Title: Attorney-in-Fact Title: Attorney-in-Fact
Clipper/Merchant Partners, L.P. Clipper/European Re, L.P.
By: Clipper Capital Associates, L.P. By: Clipper Capital Associates, L.P.
its general partner its general partner
By: Clipper Capital Associates, Inc. By: Clipper Capital Associates, Inc.
its general partner its general partner
By: By:
----------------------------------- ---------------------------------
Name: Eugene P. Lynch Name: Eugene P. Lynch
Title: Attorney-in-Fact Title:Attorney-in-Fact
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
Clipper/Merban, L.P. CS First Boston Merchant Investments
By: Clipper Capital Associates, L.P. 1995/96, L.P.
its general partner By: Merchant Capital, Inc.
By: Clipper Capital Associates, Inc. its general partner
its general partner
By: By:
------------------------------------- -------------------------------
Name: Eugene P. Lynch Name: Eugene P. Lynch
Title: Attorney-In-Fact Title: Attorney-in-Fact
</TABLE>
EXISTING SHAREHOLDERS
------------------------
G. STEPHEN FELKER
FELKER INVESTMENTS, LTD.
by:
--------------------
G. Stephen Felker
General Partner
17
<PAGE> 18
LIST OF INVESTORS
<TABLE>
<CAPTION>
Number
Name and Address of Shares
of Purchaser Initially Held
---------------- --------------
<S> <C>
Clipper Capital Associates, L.P.
12 East 49th Street
New York, NY 10017
Clipper/Merchant Partners, L.P.
12 East 49th Street
New York, NY 10017
Clipper/Merban, L.P.
c/o CITCO
De Ruterkade 62
P.O. Box 812
Curacao, Netherlands Antilles
Clipper Equity Partners I, L.P.
12 East 49th Street
New York, NY 10017
Clipper/European Re, L.P.
c/o CITCO
De Ruterkade 62
P.O. Box 812
Curacao, Netherlands Antilles
CS First Boston Merchant
Investments 1995/96, L.P.
Park Avenue Plaza
55 East 52nd Street ---------
New York, NY 10055 Total 2,222,223
</TABLE>
18
<PAGE> 19
LIST OF EXISTING SHAREHOLDERS
<TABLE>
<CAPTION>
Name and Address of
Existing Shareholder Number of Shares Class of Shares
-------------------- ---------------- ---------------
<S> <C> <C>
G. Stephen Felker 1,000,000 Class A Common Stock
c/o Avondale Incorporated 978,939 Class B Common Stock
506 South Broad Street
Monroe, Georgia 30655
Felker Investments Ltd. 2,093,750 Class A Common Stock
c/o Avondale Incorporated
506 South Broad Street
Monroe, Georgia 30655
</TABLE>
19
<PAGE> 1
EXHIBIT 10.10
POST-MERGER
STOCK TRANSFER AND REPURCHASE AGREEMENT
THIS POST-MERGER STOCK TRANSFER AND REPURCHASE AGREEMENT (the
"Agreement"), is made and entered into as of August 27, 1993, by and among
WALTON MONROE MILLS, INC., a Georgia corporation (the "Company"), METROPOLITAN
LIFE INSURANCE COMPANY (a successor-in-interest to First Boston Mezzanine
Investment Partnership-2), a New York corporation ("Met"), 1985 MERCHANT
INVESTMENT PARTNERSHIP (formerly known as First Boston Investment Limited
Partnership No. 4), a New York limited partnership ("1985 MIP"), MERCHANT LBO,
INC., a New York corporation ("Merchant LBO"), G. STEPHEN FELKER, an individual
resident of the State of Georgia ("Felker"), JOHN F. MAYPOLE, an individual
resident of the State of New Jersey ("Maypole") (Met, 1985 MIP, Merchant LBO,
Felker and Maypole being hereinafter collectively referred to as the "Other
Shareholders"), and JACK R. ALTHERR, JR., an individual resident of the State
of Georgia (the "Shareholder");
W I T N E S S E T H:
WHEREAS, Avondale Mills, Inc., an Alabama corporation ("Avondale"), will
become, as a result of the Merger (as hereinafter defined), a wholly owned
subsidiary of the Company; and
WHEREAS, the Shareholder is serving as an employee and officer of
Avondale; and
WHEREAS, pursuant to Stock Purchase and Transfer Agreements, dated
December 22, 1986 and August 28, 1987, respectively (the "Initial Agreements"),
the Shareholder purchased 5.9811 shares of Class B Common Stock, par value
$1.00 per share, of AM Acquisition, Inc. ("Acquisition"), from Acquisition; and
WHEREAS, the Initial Agreements were amended and restated by an Amended
and Restated Stock Purchase and Transfer Agreement dated June 23, 1988 (the
"Current Agreement"); and
WHEREAS, the Company, Acquisition, the Other Shareholders (or, in the case
of Met, its predecessor-in-interest) have entered into that certain
Shareholders/Registration Rights Agreement, dated as of August 9, 1993 (the
"Shareholders Agreement"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Acquisition will be merged with and into the Company (the "Merger"),
and the Company will be the surviving corporation in the Merger; and
WHEREAS, in connection with the Merger, the Shareholder's 5.9811 shares of
Class B Common Stock of Acquisition (the "Acquisition Shares") will be
converted into 403.802821258 shares
<PAGE> 2
of Class A Common Stock, par value $.01 per share, of the Company (the "Class A
Common Stock"); and
WHEREAS, the Shareholder, the Other Shareholders and the Company believe
it to be advisable and in the best interests of the parties hereto to enter
into this Agreement, which amends and restates in its entirety the Current
Agreement; in order to create and impose certain rights and restrictions with
respect to the sale and transfer of shares of Class A Common Stock received by
the Shareholder in connection with the Merger; and
WHEREAS, the execution and delivery of this Agreement is a condition to
the obligations of the Company and Acquisition to consummate the Merger;
NOW THEREFORE, in consideration of the mutual agreements and covenants
contained herein, the parties hereto hereby agree as follows:
Section 1. Effective Time
This Agreement will become effective when the Merger becomes effective
under Georgia law.
Section 2. General Restriction on Transfer of Shares
2.1. This Agreement shall apply to the 403.802821258 shares of Class A
Common Stock issued to the Shareholder in connection with the Merger and any
shares of capital stock issued to the Shareholder as a result of any share
dividends, stock splits, recapitalizations or similar transactions which are
attributable to such 403.802821258 shares of Class A Common Stock (the
"Shares").
2.2. None of the Shares shall be directly or indirectly sold,
transferred, hypothecated, pledged, assigned, alienated or otherwise disposed
of (collectively "transferred"), voluntarily or involuntarily, including by
operation of law, except in accordance with the terms and provisions of this
Agreement. Any transfer of any Shares by any person contrary to the terms of
this Agreement shall be null and void.
Section 3. Repurchase of Shares
3.1. The provisions of Sections 3.2, 3.3 and 3.4 hereof shall terminate
on the date on which the Company (or any shareholder or shareholders thereof)
completes an initial public offering of the Class A Common Stock.
3.2. In the event of the death of the Shareholder during the term of
this Agreement, the legal successor of the Shareholder shall be obligated to
sell the Shares owned by such legal successor and said Shares shall be
repurchased pursuant to the provisions of Section 3.3 hereunder. The legal
successor of the
-2-
<PAGE> 3
Shareholder shall immediately notify the Company in writing of the death of the
Shareholder, but in the event that the Company receives no such notification,
the Required Election Period (as defined in Section 3.3) shall commence on the
date on which the Chief Executive Officer of the Company acquires actual
knowledge of the death of the Shareholder. The purchase price of the Shares
shall be determined pursuant to the terms set forth in Section 4 hereof, and
the terms of payment and closing of any such repurchase shall take place
pursuant to the terms of Sections 4.3 and 6 hereof.
3.3. The repurchase of Shares following the death of the Shareholder
shall be an obligation of the Company, provided, however, that if such
repurchase (i) would be in violation of applicable law or (ii) would cause the
Company to be in default under any loan agreement or other debt instrument to
which it is a party ("Events of Deferral"), then the Company shall, upon
written notice given to the legal successor of the Shareholder within 60 days
after the Company receives notice of the death of the Shareholder (the
"Required Election Period"), have the right to defer the repurchase of the
Shares until no Event of Deferral exists; provided further that if by reason of
such deferral all of the Shares have not been repurchased by the Company within
six months after the expiration of the Required Election Period, then the Other
Shareholders shall be obligated to purchase such remaining Shares on a pro rata
basis (in which each Other Shareholder shall purchase a number of the remaining
Shares equal to the result obtained by multiplying the number of remaining
Shares by a fraction, the numerator of which is the number of shares of Class A
Common Stock (or in the case of Felker, the number of shares of Class B Common
Stock, par value $.01 per share, of the Company (the "Class B Common Stock"))
owned by such Other Shareholder and the denominator of which is the aggregate
number of shares of Class A Common Stock and Class B Common Stock owned by all
of the Other Shareholders) as of the expiration of such six-month period. The
Other Shareholders shall fulfill their obligation to purchase such remaining
Shares within 60 days following expiration of said six-month period, pursuant
to the terms of Section 6 hereof.
3.4. After December 22, 1992 (the "First Put Date"), provided that no
Event of Deferral exists and that the Shareholder has ceased to be employed by
the Company or any of its subsidiaries, the Shareholder shall have the right to
sell to the Company, and the Company shall be obligated to purchase, 50% of the
Shares held by the Shareholder as of the First Put Date. After December 22,
1996 (the "Second Put Date"), provided that no Event of Deferral exists and
that the Shareholder has ceased to be employed by the Company or any of its
subsidiaries, the Shareholder shall have the right to sell to the Company, and
the Company shall be obligated to purchase, the Shares held at such time by the
Shareholder. The purchase price of Shares purchased by the Company pursuant to
this Section 3.4 shall be determined pursuant to the terms set forth in Section
4 hereof, with the
-3-
<PAGE> 4
First or Second Put Date (whichever is applicable) being substituted for the
date of the Shareholder's death, and the terms of payment and closing of such
purchase shall be governed by the terms of Sections 4.3 and 6 hereof.
Notwithstanding any of the above, if (i) any Put Holder (as defined in the
Shareholders Agreement) shall have exercised a Put (as defined in the
Shareholders Agreement) prior to the First or Second Put Date (whichever is
applicable) and (ii) the Put Closing (as defined in the Shareholders Agreement)
in respect of such Put shall not have occurred, then any such sale pursuant to
such Put shall have priority over, and the Put Closing thereof shall occur
prior to, any sale of Shares pursuant to this Section 3.4. If an Event of
Deferral exists, then the Company, upon written notice to the Shareholder
within 60 days after the Shareholder exercises his right to sell Shares
hereunder, shall have the right to defer the repurchase of any Shares pursuant
to this Section 3.4 until no Event of Deferral exists. The date of
determination of the repurchase price for such Shares shall be established
pursuant to Section 4.4 hereof.
3.5. In the event that during the term of this Agreement the
Shareholder (i) ceases to be employed by the Company or any of its subsidiaries
for any reason other than his death, including disability, (ii) makes an
assignment for the benefit of creditors, (iii) fails to pay his debts generally
as they fall due, or (iv) commences or has commenced against him any proceeding
relating to bankruptcy or insolvency (in any case referred to in clauses (i),
(ii), (iii) or (iv) a "Terminating Event"), then the Company may at its option
repurchase the Shares pursuant to this Section 3.5. The Company may exercise
such option by giving written notice to the Shareholder at any time within 60
days after the Terminating Event (the "Exercise Period"). The purchase price
of the Shares shall be determined pursuant to the terms set forth in Section 4
hereof, with the date of the Terminating Event being substituted for the date
of the death of the Shareholder. The terms of payment and closing of any such
purchase shall be governed by the terms of Sections 4.3 and 6 hereof. If an
Event of Deferral exists, then the Company may elect upon written notice given
to the Shareholder within 60 days after the Terminating Event (the "Optional
Election Period") to defer the repurchase of the Shares until no Event of
Deferral exists; provided that if any such deferred repurchase shall not be
closed within one year after the expiration of the Optional Election Period,
then the option of the Company to repurchase the Shares pursuant to this
Section 3.5 shall expire. The Shareholder shall immediately notify the Company
in writing of any Terminating Event, but in the event that the Company receives
no such notification of any Terminating Event, the Exercise Period and the
Optional Election Period shall commence on the date on which the Chief
Executive Officer of the Company acquires actual knowledge of such Terminating
Event.
-4-
<PAGE> 5
Section 4. Determination of Purchase Price
4.1. The price to be paid upon any purchase of Shares under Section 3
shall be one of the following:
(a) The "Put Price" as defined and determined pursuant to
the terms of the Shareholders Agreement at any time within six months
prior to the date of the Shareholder's death (and, if more than one such
valuation has been made within the said six-month period, the most recent
valuation shall control).
(b) In the event that no determination of the "Put Price"
has been made pursuant to the terms of the Shareholders Agreement at any
time within six months prior to the date of the Shareholder's death, the
purchase price shall be the product of (i) the "EBITD Value" plus the
"Balance Sheet Items Adjustment," multiplied by (ii) the number of Shares
to be purchased, divided by (iii) the number of shares of Class A Common
Stock outstanding on the date of the Shareholder's death (treating for
purposes of such computation outstanding shares of Class B Common Stock as
outstanding shares of Class A Common Stock). The "EBITD Value" will be
the product of 5.0, multiplied by an amount equal to (a) the Company's
aggregate consolidated operating earnings before interest, income Taxes
and depreciation ("EBITD") (excluding from such earnings the one time
charge recorded to recognize immediately the accumulated post-retirement
benefit obligation in accordance with Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits
other than Pensions" ("SFAS 106")) for the 10 fiscal quarters immediately
preceding the death of the Shareholder divided by (b) 2.5. The "Balance
Sheet Items Adjustment" will be the amount (which may be a positive or
negative number) equal to (x) the Company's consolidated cash and
short-term investments and equivalents thereof (excluding items that are
seasonal in nature) minus (y) the accrued postretirement benefit
obligations recorded in accordance with SFAS 106 (net of related deferred
tax benefits), minus (z) the Company's total consolidated indebtedness
(excluding indebtedness that is seasonal in nature), in each case as of
the last day of the last full fiscal quarter preceding the date of the
Shareholder's death. Notwithstanding the foregoing, for purposes of
calculating the "EBITD Value," EBITD for any fiscal quarter ending on or
before August 27, 1993 shall be assumed to be an amount equal to
Acquisition's actual historical EBITD for any such quarter plus $1.7
million.
4.2. The price to be paid upon any purchase of Shares under Section 5.3
shall the lesser of the following:
(a) The book value per Share, as determined as of the end of
the last full fiscal quarter of the Company prior to the last day of the
Election Period (as defined in Section
-5-
<PAGE> 6
5.3) in accordance with generally accepted accounting principles,
without audit, by a firm of independent certified public accountants
selected by the Company.
(b) The purchase price paid by the Shareholder for the
Acquisition Shares, plus an amount equal to the average interest earned on
90-day U.S. Treasury Bills in the principal amount of such purchase price
during the period since the date of the Initial Agreement.
4.3. Payment by the Company of the purchase price as determined
pursuant to Section 4.1 or 4.2 hereof shall be made, at the Company's option,
either in cash or by the issuance of a senior subordinated note in a principal
amount equal to the price to be paid for such Shares. Such senior subordinated
note will be (i) senior to all subordinated indebtedness of the Company and
subordinate to any loans outstanding under the Permanent Loan Agreements (as
defined in the Shareholders Agreement), (ii) will be due and payable in full in
three equal annual installments commencing one year from its date of issue, and
(iii) will bear interest at a rate equal to 300 basis points over the yield
prevailing on the date of its issue for 18-month U.S. Treasury Notes. Any
payment for Shares purchased by the Other Shareholders pursuant to the terms of
Section 3 or 5 hereof shall be made in cash.
4.4. In the event the Company defers any purchase pursuant to Section 3
hereof, the purchase price of the Shares shall be determined as of the last day
of the first fiscal quarter of the Company after which no Event of Deferral
exists.
Section 5. Rights of First Refusal
5.1. The Shareholder may not transfer any or all of the Shares, other
than pursuant to Section 3 or 7 hereof, unless he has first complied with the
provisions of this Section 5.
5.2 If the Shareholder desires to sell any or all of the Shares, he
shall give written notice to the Company (the "Notice of Transfer") of any bona
fide offer to purchase all or part of the Shares. An offer to purchase, in
order to be bona fide, must be in writing, must be made by an individual or
entity who or which is financially able to consummate the purchase, and must be
solely for cash consideration. A copy of such offer to purchase shall be
included with the Notice of Transfer, and the Notice of Transfer shall state
the name of the proposed transferee, the number of Shares proposed to be
transferred (the "Offered Shares"), the price per Offered Share proposed to be
paid, and the terms of payment.
5.3. Upon receipt of a Notice of Transfer, the Company shall have the
right to purchase all or part of the Offered Shares from the Shareholder. If
the Company receives such Notice of Transfer prior to the termination of
Shareholder's employment with the
-6-
<PAGE> 7
Company and any of its subsidiaries, (i) the purchase price of the Offered
Shares shall be as determined under Section 4.2 hereof, and (ii) the terms of
payment of any such purchase shall be governed by the terms of Section 4.3
hereof. If the Company receives such Notice of Transfer subsequent to the
termination of Shareholder's employment with the Company and any of its
subsidiaries, such purchase shall be at the price and upon the terms set forth
in the Notice of Transfer; provided that the receipt of the Notice of Transfer
shall not prejudice the Company's ability to exercise its rights under Section
3.5, notwithstanding that the purchase price for the Shares pursuant to Section
3.5 may be lower than the purchase price set forth in the Notice of Transfer.
The Company may exercise its right to purchase by giving written notice to the
Shareholder within 30 days following receipt of the Notice of Transfer (the
"Election Period"). The closing of any purchase of the Offered Shares pursuant
to this Section 5.3 shall take place in accordance with the terms of Section 6
hereof.
5.4. In the event that the Company elects not to purchase all of the
Offered Shares, the Company shall give written notice within the Election
Period to both the Shareholder and the Other Shareholders specifying the number
of Shares which the Company elects not to purchase. The other Shareholders
shall then have the right, within 30 days following receipt of such written
notice (the "Other Shareholders Election Period"), to elect to purchase, at the
price and upon the terms available to the Company pursuant to Section 5.3, all
or part of the Offered Shares not purchased by the Company on a pro rata basis
(in which each Other Shareholder shall purchase a number of the remaining
Offered Shares equal to the result obtained by multiplying the number of
remaining Offered Shares by a fraction, the numerator of which is the number of
shares of Class A Common Stock (or in the case of Felker, the number of shares
of Class B Common Stock) owned by such Other Shareholder and the denominator of
which is the aggregate number of shares of Class A Common Stock and Class B
Common Stock owned by all of the Other Shareholders). The Other Shareholders
shall exercise such right of purchase by giving written notice to the
Shareholder within the Other Shareholders Election Period. In the event that
any Other Shareholder elects not to purchase its full pro rata portion of the
Offered Shares, the remaining Other Shareholders shall have the right to
purchase such Offered Shares, based upon their mutual agreement. The closing
of any purchase of the Offered Shares pursuant to this Section 5.4 shall take
place in accordance with the terms of Section 6 hereof.
5.5. In the event the Company and the Other Shareholders elect not to
purchase all of the Offered Shares, then the Shareholder may sell the remaining
Offered Shares not so purchased to the proposed transferee named in the Notice
of Transfer at a price equal to or greater than that specified in the Notice of
Transfer, and on such other terms and subject to such other conditions no less
favorable to the Shareholder than those specified in the Notice of Transfer;
provided, however, that such
-7-
<PAGE> 8
sale is consummated within 60 days following termination of the Other
Shareholders Election Period; and provided further that such proposed
transferee, prior to the transfer of any of the Offered Shares, shall agree in
writing (the "Transferee's Agreement") to hold such Offered Shares subject to
all the provisions of this Agreement in the same manner as if such Offered
Shares continued to be owned by the Shareholder, except that:
(i) the rights of the Shareholder under Section 3.4 shall
not be exercisable by such transferee; and
(ii) no subsequent transfer of any of such Offered Shares
shall be made or permitted under the provisions of Section 7.1 hereof.
Such Transferee's Agreement shall provide that following the transfer of the
Offered Shares (x) the transferee shall have the rights and obligations of the
Shareholder, and shall be subject to the limitations and restrictions imposed
on the Shareholder, as set forth in Sections 2, 5 and 7.2, (y) the transferee
(in place of the Shareholder and the legal representative of the Shareholder),
the Company and the Other Shareholders shall have their respective rights and
obligations under Sections 3.2 and 3.3 upon the death of the Shareholder, and
(z) the Company shall have the rights set forth in Section 3.5 with respect to
the Shares owned by the transferee, in the event of a Terminating Event with
respect to the Shareholder.
Section 6. Delivery of and Payment for Shares
6.1. If, pursuant to Section 3.3 or 3.4, the Company or the Other
Shareholders (the "Purchaser") become obligated to purchase all or part of the
Shares, or if, pursuant to Section 3.5 or 5, the Purchaser elects to purchase
all or part of the Shares, the Shareholder or his legal representative shall
deliver to the principal office of the Purchaser, or to such other location as
shall be agreed upon by the Shareholder and the Purchaser, the certificate or
certificates representing the Shares to be sold, duly endorsed in blank for
transfer or accompanied by an appropriate stock power, together with all other
documents necessary or appropriate for an effective transfer, free and clear of
any claims, liens or encumbrances, at a date, designated by the Purchaser,
within 60 days after either (i) an obligation to purchase such Shares has
become fixed, or (ii) the Purchaser has given written notice to the Shareholder
of its or his intention to purchase such Shares.
6.2. The Purchaser shall, simultaneously with the delivery of such
Shares as hereinabove provided, pay to the Shareholder or his legal
representative the purchase price as determined pursuant to Section 4 or 5
hereof.
-8-
<PAGE> 9
Section 7. Permissible Transfers
7.1. Notwithstanding anything contained herein to the contrary, the
Shareholder may transfer any or all of the Shares to his spouse, child or
grandchild, or to any trust for the benefit of the Shareholder or his spouse,
child or grandchild; provided that any such transferee shall remain bound by
all the terms and provisions of this Agreement as if the transferred Shares
were still owned by the Shareholder, and no such transfer shall be effected or
be valid unless and until such transferee (including a trustee under a trust)
consents in writing to be bound by the terms hereof.
7.2. Notwithstanding anything contained herein to the contrary, the
Shareholder may transfer the Shares pursuant to any merger, reorganization,
sale of assets or similar transaction Involving the Company that has been
approved or consented to by the holders of the Class A Common Stock and Class B
Common Stock, voting either together or separately as a class (in accordance
with applicable law and the Company's Restated and Amended Articles of
Incorporation and Bylaws), or pursuant to any offer to purchase the Shares for
the same price and on the same terms as the holders of a majority of the shares
of Class A Common Stock have sold, or agreed to sell, such shares.
Section 8. Legend on Stock Certificates
8.1. Each certificate representing any Shares now or hereafter held by
the Shareholder shall contain legends in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED (THE
"GEORGIA ACT"), IN RELIANCE UPON THE EXEMPTION CONTAINED IN SECTION
10-5-9(13) OF THE GEORGIA ACT, AND HAVE NOT BEEN REGISTERED UNDER ANY
OTHER STATE SECURITIES LAWS OR THE SECURITIES ACT OF 1933, AS AMENDED (THE
"FEDERAL ACT"). THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF, NOR WILL ANY ASSIGNEE OR TRANSFEREE THEREOF BE RECOGNIZED BY
THE CORPORATION AS HAVING ANY INTEREST IN SUCH SHARES, UNLESS SUCH SHARES
ARE THE SUBJECT OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
GEORGIA ACT, THE FEDERAL ACT AND ANY OTHER APPLICABLE STATE SECURITIES
LAWS OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL MAY BE THE CORPORATION'S
COUNSEL), WHICH OPINION AND COUNSEL SHALL BE SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT THE TRANSACTION BY WHICH SUCH SHARES WILL
BE OFFERED FOR SALE, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACTS OR LAWS OR IS
OTHERWISE IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACTS OR
LAWS.
-9-
<PAGE> 10
The shares evidenced by this certificate are subject to
restrictions on transfer, rights of repurchase and other agreements
pursuant to the terms of an Amended and Restated Stock Transfer and
Repurchase Agreement dated as of August 27, 1993, as amended to date, by
and among certain shareholders of the Corporation and the Corporation, a
copy of which is on file at the main office of the Corporation.
Section 9. Termination
This Agreement shall terminate upon the earliest to occur of any of the
following events or dates:
(a) bankruptcy or receivership of the Company;
(b) the death of the Shareholder, if the Company (or any
shareholder or shareholders thereof) has completed an initial public
offering of the Class A Common Stock on or before such date;
(c) the purchase by the Company or the Other Shareholders of
all of the Shares;
(d) July 2, 1996, if the Company (or any shareholder or
shareholders thereof) has completed an initial public offering of the
Class A Common Stock on or before such date;
(e) the completion by the Company (or any shareholder or,
shareholders thereof) of an initial public offering of the Class A Common
Stock after July 2, 1996; or
(f) July 2, 2006.
Section 10. Miscellaneous
10.1. Duty To Take All Necessary Actions. Each party hereto agrees that
such party or the representative or successor in interest thereof shall do all
things and execute and deliver all documents which may be necessary to
consummate any purchase and sale of the Shares pursuant to this Agreement and
to carry out the terms of this Agreement.
10.2. Amendments. This Agreement may be amended only by an instrument
or instruments in writing executed by all the parties bound by this Agreement
as of the time of such amendment.
10.3. Notices. Any and all notices, requests, demands, or other
communications provided for hereunder shall be given in writing by personal
delivery or by First Class Mail, postage prepaid addressed to the Company at
its principal office, to the Shareholder at the address set forth following his
execution hereof, and to the Other Shareholders as follows:
-10-
<PAGE> 11
(a) If to Met, at:
Paul R. Crotty
MetLife
MetLife Building, 21st Floor
200 Park Avenue
New York, New York 10166
(b) If to 1985 MIP, at:
c/o Robert B. Calhoun
The Clipper Group, L.P.
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(c) If to Merchant LBO, at:
c/o Robert B. Calhoun
The Clipper Group, L.P.
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(d) If to Maypole, at:
Mr. John F. Maypole
The First Boston Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(e) If to Felker, at:
Mr. G. Stephen Felker
P.O. Box 1109
Monroe, Georgia 30655
Every notice so given shall be deemed to have been given on the date of
delivery or mailing thereof.
10.4. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
legatees, executors, administrators, successors or assigns.
10.5. Descriptive Headings. The descriptive headings of this Agreement
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
10.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.
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<PAGE> 12
10.7. Severability. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.8. Governing Law. This Agreement shall be construed under and its
validity determined by the laws of the State of Georgia, without regard for
conflict of law rules.
10.9. Third Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties hereto and their
respective permitted transferees, successors and assigns, nor is anything in
this Agreement intended to relieve or discharge the obligation or liability of
any third persons to any party to this Agreement, nor shall any provision give
any third person any right of subrogation or action over or against any party
to this Agreement.
10.10. Remedies. The parties hereto shall have all remedies for breach
of this Agreement available to them provided by law or equity. Without
limiting the generality of the foregoing, the parties agree that in addition to
all other rights and remedies available at law or in equity, the parties shall
be entitled to obtain specific performance of the obligations of each party to
this Agreement and immediate injunctive relief and that in the event any action
or proceeding is bought in equity to enforce the same, no party will urge, as a
defense, that there is an adequate remedy at law.
10.11. Entire Agreement. This Agreement represents the entire agreement
of the parties with respect to the subject matter hereof and supersedes the
Initial Agreement, as heretofore amended and restated, in its entirety.
10.12. Waiver. The Company and the Other Shareholders hereby waive any
and all breaches and violations of Section 8.3 of the Current Agreement that
otherwise would occur as a result of the consummation of the transactions
contemplated by the Merger.
10.13. Termination of Prior Agreements. The parties to the Initial
Agreement hereby agree that the Initial Agreements are hereby terminated and
shall be of no further force and effect. The parties to the Current Agreement
hereby agree that the Current Agreement is hereby terminated and shall be of no
further force and effect.
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<PAGE> 13
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the date first written above.
SHAREHOLDER
/s/ Jack R. Altherr, Jr.
-----------------------------------
Jack R. Altherr, Jr.
642 Kings Ridge Drive
Monroe, Georgia 30655
WALTON MONROE MILLS, INC.
By: /s/ Jack R. Altherr, Jr.
-------------------------------
Jack R. Altherr, Jr.
Vice President and Chief
Financial Officer
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ Richard G. Clarke
-------------------------------
Richard G. Clarke
Title: Associate General Counsel
1985 MERCHANT INVESTMENT PARTNERSHIP
By: Merchant GP, Inc.
(its General Partner)
By: /s/
-------------------------------
Title: Vice President & Asst. Cont.
MERCHANT LBO, INC.
By: /s/
-------------------------------
Title: Vice President & Asst. Cont.
<PAGE> 14
G. STEPHEN FELKER
/s/ G. Stephen Felker
-------------------------------
G. Stephen Felker
JOHN F. MAYPOLE
/s/ John F. Maypole
-------------------------------
John F. Maypole
<PAGE> 1
EXHIBIT 10.11
POST-MERGER
STOCK TRANSFER AND REPURCHASE AGREEMENT
THIS POST-MERGER STOCK TRANSFER AND REPURCHASE AGREEMENT (the
"Agreement"), is made and entered into as of August 27, 1993, by and among
WALTON MONROE MILLS, INC., a Georgia corporation (the "Company"), METROPOLITAN
LIFE INSURANCE COMPANY (a successor-in-interest to First Boston Mezzanine
Investment Partnership-2), a New York corporation ("Met"), 1985 MERCHANT
INVESTMENT PARTNERSHIP (formerly known as First Boston Investment Limited
Partnership No. 4), a New York limited partnership ("1985 MIP"), MERCHANT LBO,
INC., a New York corporation ("Merchant LBO"), G. STEPHEN FELKER, an individual
resident of the State of Georgia ("Felker"), JOHN F. MAYPOLE, an individual
resident of the State of New Jersey ("Maypole") (Met, 1985 MIP, Merchant LBO,
Felker and Maypole being hereinafter collectively referred to as the "Other
Shareholders"), and T. WAYNE SPRAGGINGS, an individual resident of the State of
Alabama (the "Shareholder");
W I T N E S S E T H:
WHEREAS, Avondale Mills, Inc., an Alabama corporation ("Avondale"), will
become, as a result of the Merger (as hereinafter defined), a wholly owned
subsidiary of the Company; and
WHEREAS, the Shareholder is serving as an employee and officer of
Avondale; and
WHEREAS, pursuant to a Stock Purchase and Transfer Agreement, dated
September 30, 1986 (the "Initial Agreement"), the Shareholder purchased 9.7917
shares of Class B Common Stock, par value $1.00 per share, of AM Acquisition,
Inc. ("Acquisition"), from Acquisition; and
WHEREAS, the Initial Agreement was amended and restated by an Amended and
Restated Stock Purchase and Transfer Agreement dated June 23, 1988 (the
"Current Agreement"); and
WHEREAS, on September 25, 1992, pursuant to the terms of the Current
Agreement, the Shareholder sold to Acquisition 1.2240 shares of Class B Common
Stock of Acquisition, and currently owns 8.5677 shares; and
WHEREAS, the Company, Acquisition, the other Shareholders (or, in the case
of Met, its predecessor-in-interest) have entered into that certain
Shareholders/Registration Rights Agreement, dated as of August 9, 1993 (the
"Shareholders Agreement"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Acquisition will be merged with and into the
<PAGE> 2
Company (the "Merger"), and the Company will be the surviving corporation in
the Merger; and
WHEREAS, in connection with the Merger, the Shareholder's 8.5677 shares of
Class B Common Stock of Acquisition (THE "Acquisition Shares") will be
converted into 578.432300362 shares of Class A Common Stock, par value $.01 per
share, of the Company (the "Class A Common Stock"); and
WHEREAS, the Shareholder, the Other Shareholders and the Company believe
it to be advisable and in the best interests of the parties hereto to enter
into this Agreement, which amends and restates in its entirety the Current
Agreement; in order to create and impose certain rights and restrictions with
respect to the sale and transfer of shares of Class A Common Stock received by
the Shareholder in connection with the Merger; and
WHEREAS, the execution and delivery of this Agreement is a condition to
the obligations of the Company and Acquisition to consummate the merger;
NOW THEREFORE, in consideration of the mutual agreements and covenants
contained herein, the parties hereto hereby agree as follows:
Section 1. Effective Time
This Agreement will become effective when the merger becomes effective
under Georgia law.
Section 2. General Restriction on Transfer of Shares
2.1. This Agreement shall apply to the 578.432300362 shares of Class A
Common Stock issued to the Shareholder in connection with the Merger and any
shares of capital stock issued to the Shareholder as a result of any share
dividends, stock splits, recapitalizations or similar transactions which are
attributable to such 578.432300362 shares of Class A Common Stock (the
"Shares").
2.2. None of the Shares shall be directly or indirectly sold,
transferred, hypothecated, pledged, assigned, alienated or otherwise disposed
of (collectively "transferred"), voluntarily or involuntarily, including by
operation of law, except in accordance with the terms and provisions of this
Agreement. Any transfer of any Shares by any person contrary to the terms of
this Agreement shall be null and void.
Section 3. Repurchase of Shares
3.1. The provisions of Sections 3.2, 3.3 and 3.4 hereof shall terminate
on the date on which the Company (or any shareholder or shareholders thereof)
completes an initial public offering of the Class A Common Stock.
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<PAGE> 3
3.2. In the event of the death of the Shareholder during the term of
this Agreement, the legal successor of the Shareholder shall be obligated to
sell the Shares owned by such legal successor and said Shares shall be
repurchased pursuant to the provisions of Section 3.3 hereunder. The legal
successor of the Shareholder shall immediately notify the Company in writing of
the death of the Shareholder, but in the event that the Company receives no
such notification, the Required Election Period (as defined in Section 3.3)
shall commence on the date on which the Chief Executive Officer of the Company
acquires actual knowledge of the death of the Shareholder. The purchase price
of the Shares shall be determined pursuant to the terms set forth in Section 4
hereof, and the terms of payment and closing of any such repurchase shall take
place pursuant to the terms of Sections 4.3 and 6 hereof.
3.3. The repurchase of Shares following the death of the Shareholder
shall be an obligation of the Company, provided, however, that if such
repurchase (i) would be in violation of applicable law or (ii) would cause the
Company to be in default under any loan agreement or other debt instrument to
which it is a party ("Events of Deferral"), then the Company shall, upon
written notice given to the legal successor of the Shareholder within 60 days
after the Company receives notice of the death of the Shareholder (the
"Required Election Period"), have the right to defer the repurchase of the
Shares until no Event of Deferral exists; provided further that if by reason
of such deferral all of the Shares have not been repurchased by the Company
within six months after the expiration of the Required Election Period, then
the Other Shareholders shall be obligated to purchase such remaining Shares on
a pro rata basis (in which each Other Shareholder shall purchase a number of
the remaining Shares equal to the result obtained by multiplying the number of
remaining Shares by a fraction, the numerator of which is the number of shares
of Class A Common Stock (or in the case of Felker, the number of shares of
Class B Common Stock, par value $.01 per share, of the Company (the "Class B
Common Stock")) owned by such Other Shareholder and the denominator of which is
the aggregate number of shares of Class A Common Stock and Class B Common Stock
owned by all of the Other Shareholders) as of the expiration of such six-month
period. The Other Shareholders shall fulfill their obligation to purchase such
remaining Shares within 60 days following expiration of said six-month period,
pursuant to the terms of Section 6 hereof.
3.4. After September 30, 1993 (the "First Put Date"), provided that no
Event of Deferral exists, the Shareholder shall have the right to sell to the
Company, and the Company shall be obligated to purchase, 42.86% of the Shares
held by the Shareholder as of the First Put Date. After September 30, 1996
(the "Second Put Date"), provided that no Event of Deferral exists, the
Shareholder shall have the right to sell to the Company, and the Company shall
be obligated to purchase, the
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<PAGE> 4
Shares held at such time by the Shareholder. The purchase price of Shares
purchased by the Company pursuant to this Section 3.4 shall be determined
pursuant to the terms set forth in Section 4 hereof, with the First or Second
Put Date (whichever is applicable) being substituted for the date of the
Shareholder's death, and the terms of payment and closing of such purchase
shall be governed by the terms of Sections 4.3 and 6 hereof. Notwithstanding
any of the above, if (i) any Put Holder (as defined in the Shareholders
Agreement) shall have exercised a Put (as defined in the Shareholders
Agreement) prior to the First or Second Put Date (whichever is applicable) and
(ii) the Put Closing (as defined in the Shareholders Agreement) in respect of
such Put shall not have occurred, then any such sale pursuant to such Put shall
have priority over, and the Put Closing thereof shall occur prior to, any sale
of Shares pursuant to this Section 3.4. If an Event of Deferral exists, then
the Company, upon written notice to the Shareholder within 60 days after the
Shareholder exercises his right to sell Shares hereunder, shall have the right
to defer the repurchase of any Shares pursuant to this Section 3.4 until no
Event of Deferral exists. The date of determination of the repurchase price
for such Shares shall be established pursuant to Section 4.4 hereof.
3.5. In the event that during the term of this Agreement the
Shareholder (i) ceases to be employed by the Company or any of its subsidiaries
for any reason other than his death, including disability, (ii) makes an
assignment for the benefit of creditors, (iii) falls to pay his debts generally
as they fall due, or (iv)commences or has commenced against him any proceeding
relating to bankruptcy or insolvency (in any case referred to in clauses (i),
(ii), (iii) or (iv) a "Terminating Event"), then the Company may at its option
repurchase the Shares pursuant to this Section 3.5. The Company may exercise
such option by giving written notice to the Shareholder at any time within 60
days after the Terminating Event (the "Exercise Period"). The purchase price
of the Shares shall be determined pursuant to the terms set forth in Section 4
hereof, with the date of the Terminating Event being substituted for the date
of the death of the Shareholder. The terms of payment and closing of any such
purchase shall be governed by the terms of Sections 4.3 and 6 hereof. If an
Event of Deferral exists, then the Company may elect upon written notice given
to the Shareholder within 60 days after the Terminating Event (the "Optional
Election Period") to defer the repurchase of the Shares until no Event of
Deferral exists; provided that if any such deferred repurchase shall not be
closed within one year after the expiration of the Optional Election Period,
then the option of the Company to repurchase the Shares pursuant to this
Section 3.5 shall expire. The Shareholder shall immediately notify the Company
in writing of any Terminating Event, but in the event that the Company receives
no such notification of any Terminating Event, the Exercise Period and the
Optional Election Period shall commence on the date on which the Chief
Executive officer of the Company acquires actual knowledge of such Terminating
Event.
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<PAGE> 5
Section 4. Determination of Purchase Price
4.1. The price to be paid upon any purchase of Shares under Section 3
shall be one of the following:
(a) The "Put Price" as defined and determined pursuant to the
terms of the Shareholders Agreement at any time within six months prior to
the date of the Shareholder's death (and, if more than one such valuation
has been made within the said six-month period, the most recent valuation
shall control).
(b) In the event that no determination of the "Put Price" has been
made pursuant to the terms of the Shareholders Agreement at any time
within six months prior to the date of the Shareholder's death, the
purchase price shall be the product of (i) the "EBITD Value" plus the
"Balance Sheet Items Adjustment," multiplied by (ii) the number of Shares
to be purchased, divided by (iii) the number of shares of Class A Common
Stock outstanding on the date of the Shareholder's death (treating for
purposes of such computation outstanding shares of Class B Common Stock as
outstanding shares of Class A Common Stock). The "EBITD Value" will be
the product of 5.0, multiplied by an amount equal to (a) the Company's
aggregate consolidated operating earnings before interest, income taxes
and depreciation ("EBITD") (excluding from such earnings the one time
charge recorded to recognize immediately the accumulated post-retirement
benefit obligation in accordance with Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Post-retirement Benefits
other than Pensions" (" FAS 106")) for the 10 fiscal quarters immediately
preceding the death of the Shareholder divided by (b) 2.5. The "Balance
Sheet Items Adjustment" will be the amount (which may be a positive or
negative number) equal to (x) the Company's consolidated cash and
short-term investments and equivalents thereof (excluding items that are
seasonal in nature) minus (y) the accrued post-retirement benefit
obligations recorded in accordance with SFAS 106 (net of related deferred
tax benefits), minus (z) the Company's total consolidated indebtedness
(excluding indebtedness that is seasonal in nature), in each case as of
the last day of the last full fiscal quarter preceding the date of the
Shareholder's death. Notwithstanding the foregoing, for purposes of
calculating the "EBITD Value," EBITD for any fiscal quarter ending on or
before August 27, 1993 shall be assumed to be an amount equal to
Acquisition's actual historical EBITD for any such quarter plus $1.7
million.
4.2. The price to be paid upon any purchase of Shares under Section 5.3
shall the lesser of the following:
(a) The book value per Share, as determined as of the end of the
last full fiscal quarter of the Company prior to the last day of the
Election Period (as defined in Section
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<PAGE> 6
5.3) in accordance with generally accepted accounting principles, without
audit, by a firm of independent certified public accountants selected by
the Company.
(b) The purchase price paid by the Shareholder for the Acquisition
Shares, plus an amount equal to the average interest earned on 90-day U.S.
Treasury Bills in the principal amount of such purchase price during the
period since the date of the Initial Agreement.
4.3. Payment by the Company of the purchase price as determined
pursuant to Section 4.1 or 4.2 hereof shall be made, at the Company's option,
either in cash or by the issuance of a senior subordinated note in a principal
amount equal to the price to be paid for such Shares. Such senior subordinated
note will be (i) senior to all subordinated indebtedness of the Company and
subordinate to any loans outstanding under the Permanent Loan Agreements (as
defined in the Shareholders Agreement), (ii) will be due and payable in full in
three equal annual installments commencing one year from its date of issue, and
(iii) will bear interest at a rate equal to 300 basis points over the yield
prevailing on the date of its issue for 18-month U.S. Treasury Notes. Any
payment for Shares purchased by the Other Shareholders pursuant to the terms of
Section 3 or 5 hereof shall be made in cash.
4.4. In the event the Company defers any purchase pursuant to Section 3
hereof, the purchase price of the Shares shall be determined as of the last day
of the first fiscal quarter of the Company after which no Event of Deferral
exists.
Section 5. Rights of First Refusal
5.1. The Shareholder may not transfer any or all of the Shares, other
than pursuant to Section 3 or 7 hereof, unless he has first complied with the
provisions of this Section 5.
5.2. If the Shareholder desires to sell any or all of the Shares, he
shall give written notice to the Company (the "Notice of Transfer") of any bona
fide offer to purchase all or part of the Shares. An offer to purchase, in
order to be bona fide, must be in writing, must be made by an individual or
entity who or which is financially able to consummate the purchase, and must be
solely for cash consideration. A copy of such offer to purchase shall be
included with the Notice of Transfer, and the Notice of Transfer shall state
the name of the proposed transferee, the number of Shares proposed to be
transferred (the "Offered Shares"), the price per Offered Share proposed to be
paid, and the terms of payment.
5.3. Upon receipt of a Notice of Transfer, the Company shall have the
right to purchase all or part of the Offered Shares from the Shareholder. If
the Company receives such Notice of Transfer prior to the termination of
Shareholder's employment with the
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<PAGE> 7
Company and any of its subsidiaries, (i) the purchase price of the Offered
Shares shall be as determined under Section 4.2 hereof, and (ii) the terms of
payment of any such purchase shall be governed by the terms of Section 4.3
hereof. If the Company receives such Notice of Transfer subsequent to the
termination of Shareholder's employment with the Company and any of its
subsidiaries, such purchase shall be at the price and upon the terms set forth
in the Notice of Transfer; provided that the receipt of the Notice of Transfer
shall not prejudice the Company's ability to exercise its rights under Section
3.5, notwithstanding that the purchase price for the Shares pursuant to Section
3.5 may be lower than the purchase price set forth in the Notice of Transfer.
The Company may exercise its right to purchase by giving written notice to the
Shareholder within 30 days following receipt of the Notice of Transfer (the
"Election Period"). The closing of any purchase of the Offered Shares pursuant
to this Section 5.3 shall take place in accordance with the terms of Section 6
hereof.
5.4. In the event that the Company elects not to purchase all of the
Offered Shares, the Company shall give written notice within the Election
Period to both the Shareholder and the Other Shareholders specifying the number
of Shares which the Company elects not to purchase. The Other Shareholders
shall then have the right, within 30 days following receipt of such written
notice (the "Other Shareholders Election Period"), to elect to purchase, at the
price and upon the terms available to the Company pursuant to Section 5.3, all
or part of the Offered Shares not purchased by the Company on a pro rata basis
(in which each Other Shareholder shall purchase a number of the remaining
Offered Shares equal to the result obtained by multiplying the number of
remaining Offered Shares by a fraction, the numerator of which is the number of
shares of Class A Common Stock (or in the case of Felker, the number of shares
of Class B Common Stock) owned by such Other Shareholder and the denominator of
which is the aggregate number of shares of Class A Common Stock and Class B
Common Stock owned by all of the Other Shareholders). The Other Shareholders
shall exercise such right of purchase by giving written notice to the
Shareholder within the Other Shareholders Election Period. In the event that
any Other Shareholder elects not to purchase its full pro rata portion of the
Offered Shares, the remaining Other Shareholders shall have the right to
purchase such Offered Shares, based upon their mutual agreement. The closing
of any purchase of the Offered Shares pursuant to this Section 5.4 shall take
place in accordance with the terms of Section 6 hereof.
5.5. In the event the Company and the Other Shareholders elect not to
purchase all of the Offered Shares, then the Shareholder may sell the remaining
Offered Shares not so purchased to the proposed transferee named in the Notice
of Transfer at a price equal to or greater than that specified in the Notice of
Transfer, and on such other terms and subject to such other conditions no less
favorable to the Shareholder than those specified in the Notice of Transfer;
provided, however, that such
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<PAGE> 8
sale is consummated within 60 days following termination of the Other
Shareholders Election Period; and provided further that such proposed
transferee, prior to the transfer of any of the Offered Shares, shall agree in
writing (the "Transferee's Agreement") to hold such Offered Shares subject to
all the provisions of this Agreement in the same manner as if such Offered
Shares continued to be owned by the Shareholder, except that:
(i) the rights of the Shareholder under Section 3.4 shall not be
exercisable by such transferee; and
(ii) no subsequent transfer of any of such Offered Shares shall be
made or permitted under the provisions of Section 7.1 hereof.
Such Transferee's Agreement shall provide that following the transfer of the
Offered Shares (x) the transferee shall have the rights and obligations of the
Shareholder, and shall be subject to the limitations and restrictions imposed
on the Shareholder, as set forth in Sections 2, 5 and 7.2, (y) the transferee
(in place of the Shareholder and the legal representative of the Shareholder),
the Company and the Other Shareholders shall have their respective rights and
obligations under Sections 3.2 and 3.3 upon the death of the Shareholder, and
(z) the Company shall have the rights set forth in Section 3.5 with respect to
the Shares owned by the transferee, in the event of a Terminating Event with
respect to the Shareholder.
Section 6. Delivery of and Payment for Shares
6.1. If, pursuant to Section 3.3 or 3.4, the Company or the Other
Shareholders (the "Purchaser") become obligated to purchase all or part of the
Shares, or if, pursuant to Section 3.5 or 5, the Purchaser elects to purchase
all or part of the Shares, the Shareholder or his legal representative shall
deliver to the principal office of the Purchaser, or to such other location as
shall be agreed upon by the Shareholder and the Purchaser, the certificate or
certificates representing the Shares to be sold, duly endorsed in blank for
transfer or accompanied by an appropriate stock power, together with all other
documents necessary or appropriate for an effective transfer, free and clear of
any claims, liens or encumbrances, at a date, designated by the Purchaser,
within 60 days after either (i) an obligation to purchase such Shares has
become fixed, or (ii) the Purchaser has given written notice to the Shareholder
of its or his intention to purchase such Shares.
6.2. The Purchaser shall, simultaneously with the delivery of such
Shares as hereinabove provided, pay to the Shareholder or his legal
representative the purchase price as determined pursuant to Section 4 or 5
hereof.
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<PAGE> 9
Section 7. Permissible Transfers
7.1. Notwithstanding anything contained herein to the contrary, the
Shareholder may transfer any or all of the Shares to his spouse, child or
grandchild, or to any trust for the benefit of the Shareholder or his spouse,
child or grandchild; provided that any such transferee shall remain bound by
all the terms and provisions of this Agreement as if the transferred Shares
were still owned by the Shareholder, and no such transfer shall be effected or
be valid unless and until such transferee (including a trustee under a trust)
consents in writing to be bound by the terms hereof.
7.2. Notwithstanding anything contained herein to the contrary, the
Shareholder may transfer the Shares pursuant to any merger, reorganization,
sale of assets or similar transaction involving the Company that has been
approved or consented to by the holders of the Class A Common Stock and Class B
Common Stock, voting either together or separately as a class (in accordance
with applicable law and the Company's Restated and Amended Articles of
Incorporation and Bylaws), or pursuant to any offer to purchase the Shares for
the same price and on the same terms as the holders of a majority of the shares
of Class A Common Stock have sold, or agreed to sell, such shares.
Section 8. Legend on Stock Certificates
8.1. Each certificate representing any Shares now or hereafter held by
the Shareholder shall contain legends in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
ANY STATE SECURITIES LAWS OR THE SECURITIES ACT OF 1933, AS AMENDED (THE
"FEDERAL ACT"). THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF, NOR WILL ANY ASSIGNEE OR TRANSFEREE THEREOF BE RECOGNIZED BY
THE COMPANY AS HAVING ANY INTEREST IN SUCH SHARES, UNLESS SUCH SHARES ARE
THE SUBJECT OF (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE FEDERAL
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (II) AN OPINION OF COUNSEL
(WHICH COUNSEL MAY BE THE COMPANY'S COUNSEL), WHICH OPINION AND COUNSEL
SHALL BE SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE TRANSACTION
BY WHICH SUCH SHARES WILL BE OFFERED FOR SALE, HYPOTHECATED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACTS OR LAWS OR IS OTHERWISE IN COMPLIANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACTS OR LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER, RIGHTS OF REPURCHASE AND OTHER AGREEMENTS PURSUANT TO THE
TERMSOF A POST-MERGER STOCK TRANSFER AND REPURCHASE AGREEMENT DATED AS OF
AUGUST 1, 1993
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<PAGE> 10
BY AND AMONG CERTAIN SHAREHOLDERS OF THE COMPANY AND THE COMPANY, A COPY
OF WHICH IS ON FILE AT THE MAIN OFFICE OF THE COMPANY.
Section 9. Termination
This Agreement shall terminate upon the earliest to occur of any of the
following events or dates:
(a) bankruptcy or receivership of the Company;
(b) the death of the Shareholder, if the company (or any
shareholder or shareholders thereof) has completed an initial public
offering of the Class A Common Stock on or before such date;
(c) the purchase by the Company or the Other Shareholders of all
of the Shares;
(d) July 2, 1996, if the Company (or any shareholder or
shareholders thereof) has completed an initial public offering of the
Class A Common Stock on or before such date;
(e) the completion by the Company (or any shareholder or
shareholders thereof) of an initial public offering of the Class A Common
Stock after July 2, 1996; or
(f) July 2, 2006.
Section 10. Miscellaneous
10.1. Duty To Take All Necessary Actions. Each party hereto agrees that
such party or the representative or successor in interest thereof shall do all
things and execute and deliver all documents which may be necessary to
consummate any purchase and sale of the Shares pursuant to this Agreement and
to carry out the terms of this Agreement.
10.2. Amendments. This Agreement may be amended only by an instrument
or instruments in writing executed by all the parties bound by this Agreement
as of the time of such amendment.
10.3. Notices. Any and all notices, requests, demands, or other
communications provided for hereunder shall be given in writing by personal
delivery or by First Class Mail, postage prepaid addressed to the Company at
its principal office, to the Shareholder at the address set forth following his
execution hereof, and to the Other Shareholders as follows:
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<PAGE> 11
(a) If to Met, at:
Paul R. Crotty
MetLife
MetLife Building, 21st Floor
200 Park Avenue
New York, New York 10166
(b) If to 1985 MIP, at:
c/o Robert B. Calhoun
The Clipper Group, L.P.
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(c) If to Merchant LBO, at:
c/o Robert B. Calhoun
The Clipper Group, L.P.
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(d) If to Maypole, at:
Mr. John F. Maypole
The First Boston Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(e) If to Felker, at:
Mr. G. Stephen Felker
P.O. Box 1109
Monroe, Georgia 30655
Every notice so given shall be deemed to have been given on the date of
delivery or mailing thereof.
10.4. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
legatees, executors, administrators, successors or assigns.
10.5. Descriptive Headings. The descriptive headings of this Agreement
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
10.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.
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10.7. Severability. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.8. Governing Law. This Agreement shall be construed under and its
validity determined by the laws of the State of Georgia, without regard for
conflict of law rules.
10.9. Third Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties hereto and their
respective permitted transferees, successors and assigns, nor is anything in
this Agreement intended to relieve or discharge the obligation or liability of
any third persons to any party to this Agreement, nor shall any provision give
any third person any right of subrogation or action over or against any party
to this Agreement.
10.10. Remedies. The parties hereto shall have all remedies for breach
of this Agreement available to them provided by law or equity. Without
limiting the generality of the foregoing, the parties agree that in addition to
all other rights and remedies available at law or in equity, the parties shall
be entitled to obtain specific performance of the obligations of each party to
this Agreement and immediate injunctive relief and that in the event any action
or proceeding is bought in equity to enforce the same, no party will urge, as a
defense, that there is an adequate remedy at law.
10.11. Entire Agreement. This Agreement represents the entire agreement
of the parties with respect to the subject matter hereof and supersedes the
Initial Agreement, as heretofore amended and restated, in its entirety.
10.12. Waiver. The Company and the Other Shareholders hereby waive any
and all breaches and violations of Section 8.3 of the Current Agreement that
otherwise would occur as a result of the consummation of the transactions
contemplated by the Merger.
10.13. Termination of Prior Agreements. The parties to the Initial
Agreement hereby agree that the Initial Agreement is hereby terminated and
shall be of no further force and effect. The parties to the Current Agreement
hereby agree that the Current Agreement is hereby terminated and shall be of no
further force and effect.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
on the date first written above.
SHAREHOLDER
/s/ T. Wayne Spraggins
-----------------------------------
T. Wayne Spraggins
705 Lang Road
Sylacauga, Alabama 35150
WALTON MONROE MILLS, INC.
By: /s/ Jack R. Altherr, Jr.
-------------------------------
Jack R. Altherr, Jr.
Vice President and Chief
Financial Officer
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ Richard G. Clarke
-------------------------------
Richard G. Clarke
Title: Associate General Counsel
1985 MERCHANT INVESTMENT PARTNERSHIP
By: Merchant GP, Inc.
(its General Partner)
By: /s/
-------------------------------
Title: Vice President & Asst. Cont.
MERCHANT LBO, INC.
By: /s/
-------------------------------
Title: Vice President & Asst. Cont.
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<PAGE> 14
G. STEPHEN FELKER
/s/ G. Stephen Felker
-------------------------------
G. Stephen Felker
JOHN F. MAYPOLE
/s/ John F. Maypole
-----------------------------------
John F. Maypole
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<PAGE> 1
EXHIBIT 10.12
AVONDALE INCORPORATED
STOCK OPTION PLAN
<PAGE> 2
<TABLE>
<CAPTION>
Table of Contents
Page
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<S> <C> <C>
SECTION 1. PURPOSE 1
SECTION 2. DEFINITIONS 1
2.1. Associate ........................................ 1
2.2. Board ............................................ 2
2.3. Change in Control ................................ 2
2.4. Code ............................................. 2
2.5. Company .......................................... 2
2.6. Compensation Committee ........................... 2
2.7. Exchange Act ..................................... 3
2.8. Fair Market Value ................................ 3
2.9. Insider .......................................... 4
2.10. ISO .............................................. 4
2.11. Non-ISO .......................................... 4
2.12. Option ........................................... 4
2.13. Option Certificate ............................... 4
2.14. Option Price ..................................... 4
2.15. Parent Corporation ............................... 4
2.16. Plan ............................................. 4
2.17. Rule 16b-3 ....................................... 5
2.18. Stock ............................................ 5
2.19. Subsidiary ....................................... 5
2.20. Ten Percent Shareholder .......................... 5
SECTION 3. SHARES RESERVED UNDER THE PLAN .......................... 5
SECTION 4. EFFECTIVE DATE .......................................... 6
SECTION 5. ADMINISTRATION .......................................... 6
SECTION 6. ELIGIBILITY ............................................. 7
SECTION 7. GRANT OF OPTIONS ........................................ 7
7.1. Compensation Committee Action ...................... 7
7.2. $100,000 Limit ..................................... 8
SECTION 8. OPTION PRICE ............................................ 9
SECTION 9. EXERCISE PERIOD .........................................10
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 10. NONTRANSFERABILITY ....................................... 11
SECTION 11. SECURITIES REGISTRATION .................................. 11
SECTION 12. LIFE OF PLAN ............................................. 13
SECTION 13. ADJUSTMENT ............................................... 13
SECTION 14. SALE OR MERGER OR CHANGE IN CONTROL ...................... 14
14.1. Sale or Merger ..................................... 14
14.2. Change in Control .................................. 16
SECTION 15. AMENDMENT OR TERMINATION ................................. 16
SECTION 16. MISCELLANEOUS ............................................ 18
16.1. No Shareholder Rights .............................. 18
16.2. No Contract of Employment .......................... 18
16.3. Other Conditions ................................... 19
16.4. Withholding ........................................ 19
16.5. Construction ....................................... 20
</TABLE>
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<PAGE> 4
AVONDALE INCORPORATED
STOCK OPTION PLAN
Section 1.
PURPOSE
The purpose of this Plan is to promote the interests of the Company and
its shareholders by granting Options to purchase Stock to Associates in order
(a) to provide an additional incentive to each Associate to work to increase
the value of the Company's Stock, and (b) to provide each Associate with a
stake in the future of the Company which corresponds to the stake of each of
the Company's shareholders.
Section 2.
DEFINITIONS
Each term set forth in this Section 2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.
2.1. Associate -- means any full-time associate of the Company or a
Subsidiary who the Compensation Committee, acting in its absolute discretion,
has determined to be eligible for the grant of an option under this Plan.
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<PAGE> 5
2.2. Board -- means the Board of Directors of the Company.
2.3. Change in Control -- means (a) the acquisition of the power to
direct, or cause the direction of, the management and policies of the Company
by a person (not previously possessing such power), acting alone or in
conjunction with others, whether through the ownership of Stock, by contract or
otherwise, or (b) the acquisition, directly or indirectly, of the power to vote
more than 50% of the outstanding voting power of the Stock by any person or by
two or more persons acting together, except an acquisition from the Company or
by the Company, the Company's management or a Company-sponsored employee
benefit plan. For purposes of this definition, (1) the term "person" means a
natural person, corporation, partnership, joint venture, trust, government or
instrumentality of a government, and (2) customary agreements with or between
underwriters and selling group members with respect to a bona fide public
offering of Stock shall be disregarded.
2.4. Code -- means the Internal Revenue Code of 1986, as amended..
2.5. Company -- means Avondale Incorporated, a Georgia corporation, and
any successor to such corporation.
2.6. Compensation Committee -- means the committee appointed by the Board
to administer this Plan which at all times
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shall consist of two or more members of the Board. At such time as the Company
becomes subject to the reporting requirements under Section 16(b) of the
Exchange Act, each member of the Compensation Committee shall be a
"disinterested person" within the meaning of Rule 16b-3.
2.7. Exchange -Act -- means the Securities Exchange Act of 1934, as
amended.
2.8. Fair Market Value -- means (a) the closing price on any date for a
share of Stock as reported by The Wall Street Journal under the New York Stock
Exchange Composite Transactions quotation system (or under any successor
quotation system) or, (b) if the Stock is not traded on the New York Stock
Exchange, under the quotation system under which such closing price is reported
or, (c) if The Wall Street Journal does not report such closing price, such
closing price as reported by a newspaper or trade journal selected by the
Compensation Committee or, (d) if no such closing price is available on such
date, such closing price as so reported or so quoted in accordance with Section
2.8(a) for the immediately preceding business day, or, (e) if no newspaper or
trade journal reports such closing price or if no such price quotation is
available, the price which the Compensation Committee acting in good faith
determines through any reasonable valuation method that a share of Stock might
change hands between
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<PAGE> 7
a willing buyer and a willing seller, neither being under any compulsion to buy
or to sell and both having reasonable knowledge of the relevant facts.
2.9. Insider --- means any individual who is subject to Section 16(a) of
the Exchange Act.
2.10. ISO -- means an option granted under this Plan to purchase Stock
which is intended by the Company to satisfy the requirements of Code Section
422.
2.11. Non-ISO -- means an option granted under this Plan to purchase
Stock which is not intended by the Company to satisfy the requirements of Code
Section 422.
2.12. Option --- Means an ISO or a Non-ISO.
2.13. Option Certificate -- means the written certificate or instrument
which sets forth the terms of an Option granted to an Associate under this Plan.
2.14. Option Price -- means the price which shall be paid to purchase one
share of Stock upon the exercise of an Option granted under this Plan.
2.15. Parent Corporation -- means any corporation which is a parent of the
Company within the meaning of Section 424(e) of the Code.
2-16. Plan -- means this Avondale Incorporated Stock Option Plan, as
amended from time to time.
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<PAGE> 8
2.17. Rule 16b-3 -- means Rule 16b)-3 under Section 16(b) of the Exchange
Act or any successor to such rule.
2.18. Stock -- means the $.Ol par value Class A Common Stock of the
Company.
2.19. Subsidiary -- means a corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) of the Company.
2.20. Ten Percent Shareholder -- means a person who owns (after taking
into account the attribution rules of Code Section 424(d)) more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company, a Subsidiary or a Parent Corporation.
Section 3.
SHARES RESERVED UNDER THE PLAN
There shall be 4,325 shares of Stock reserved for use under this Plan,
and such shares of Stock shall be reserved to the extent that the Company
deems appropriate from authorized but unissued shares of Stock and from shares
of Stock which have been reacquired by the Company. Furthermore, any shares of
Stock subject to an Option which remain unissued after the cancellation,
expiration or exchange of such Option thereafter shall again become available
for use under this Plan.
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<PAGE> 9
Section 4.
EFFECTIVE DATE
The effective date of this Plan shall be the date it is adopted by the
Board, provided that the shareholders of the Company shall approve this Plan
after the date of its adoption in accordance with Rule 16b-3 and, to the
extent this Plan provides for the issuance of ISOs, the shareholders of the
Company shall approve those portions of this Plan related to the granting of
ISOs within twelve (12) months after the date of adoption. If any options
are granted under this Plan before the date of such shareholder approval, such
Options automatically shall be granted subject to such approval.
Section 5.
ADMINISTRATION
This Plan shall be administered by the Compensation Committee. The
Board may from time to time remove members from, or add members to, the
Compensation Committee. Vacancies on the Compensation Committee shall be
filled by the Board. The Compensation Committee shall select one of its
members as Chairman and shall hold meetings at such times and places as it may
determine. The Compensation Committee acting in its absolute discretion shall
exercise such powers and take such action as expressly called for under this
Plan and, further, the
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<PAGE> 10
Compensation Committee shall have the power to interpret this Plan and
(subject to Rule 16b-3) to take such other action (except to the extent the
right to take such action is expressly and exclusively reserved for the Board or
the Company's shareholders) in the administration and operation of this Plan as
the Compensation Committee deems equitable under the circumstances, which
action shall be binding on the Company, on each affected Associate and on each
other person directly or indirectly affected by such action.
Section 6.
ELIGIBILITY
Only Associates shall be eligible for the grant of Options under this
Plan.
Section 7.
GRANT OF OPTIONS
7.1. Compensation Committee Action. The Compensation Committee, acting in
its absolute discretion, shall have the right to grant options to Associates
under this Plan from time to time to purchase shares of Stock and, further,
shall have the right to grant new Options in exchange for outstanding options
which have a higher or lower Option Price. Each grant of an
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<PAGE> 11
Option to an Associate shall be evidenced by an Option Certificate, and each
such Option Certificate shall (a) specify whether the option is an ISO or
Non-ISO and (b) incorporate such other terms and conditions as the Compensation
Committee, acting in its absolute discretion, deems consistent with the terms of
this Plan, including (without limitation) a restriction on the number of shares
of Stock subject to the Option which first become exercisable during any
calendar year. If the Compensation Committee grants an ISO and a Non-ISO to an
Associate on the same date, the right of the Associate to exercise one such
Option shall not be conditioned on his or her failure to exercise the other such
Option.
7.2. $100,000 Limit. To the extent that the aggregate Fair Market Value
of Stock (determined as of the date the ISO is granted) with respect to which
ISOs first become exercisable in any calendar year exceeds $100,000, such
Options shall be treated as Non-ISOs. The Fair Market Value of the Stock
subject to any other option (determined as of the date such option was
granted) which (a) satisfies the requirements of Section 422 of the Code and
(b) is granted to an Associate under a plan maintained by the Company, a
Subsidiary or a Parent Corporation shall be treated (for purposes of this
$100,000 limitation) as if granted under this Plan. This $100,000
limitation shall be administered in accordance with the rules under Section
422(d) of the Code.
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<PAGE> 12
Section 8.
OPTION PRICE
The Option Price for each share of Stock subject to an ISO shall be no
less than the Fair Market Value of a share of Stock on the date the ISO is
granted; provided, however, if the Option is an ISO granted to a Ten Percent
Shareholder, the Option Price for each share of Stock subject to such ISO shall
be no less than 110% of the Fair Market Value of a share of Stock on the date
such ISO is granted. The Option Price for each share of Stock subject to a
Non-ISO which is granted to an Associate may (in the absolute discretion of the
Compensation Committee) be more or less than or equal to the Fair Market Value
of a share of Stock on the date the Non-ISO is granted; provided, however, that
in no event shall the Option Price be less than adequate consideration as
determined by the Compensation Committee. The Option Price shall be payable in
full upon the exercise of any Option and, at the discretion of the Compensation
Committee, an Option Certificate can provide for the payment of the Option
Price either in cash, by check, or in Stock acceptable to the Compensation
Committee or in any combination of cash, check, and Stock acceptable to the
Compensation Committee. Any payment made in Stock shall be treated as equal to
the Fair Market Value of such Stock on the date the properly endorsed
certificate for
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<PAGE> 13
such Stock is delivered to the Compensation Committee or its delegate.
Section 9.
EXERCISE PERIOD
Each Option granted under this Plan to an Associate shall be exercisable
in whole or in part at such time or times as set forth in the related Option
Certificate, but no Option Certificate shall make an Option granted to an
Associate exercisable after the earlier of
(a) the date such Option is exercised in full,
(b) the date which is the fifth anniversary of the date the
Option is granted, if the Option is an ISO and the
Associate is a Ten Percent Shareholder on the date the
Option is granted, or
(c) the date which is the tenth anniversary of the date the Option is
granted, if the Option is (i) a Non-ISO or (ii) an ISO which is
granted to an Associate who is not a Ten Percent Shareholder on
the date the option is granted.
An Option Certificate may provide for the exercise of an Option granted to an
Associate after the employment of such Associate has terminated for any reason
whatsoever, including death or disability; provided, however, in no event shall
an Option Certificate provide for the exercise of an Option later than 30
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<PAGE> 14
days after the employment of such Associate has terminated for any reason
whatsoever other than death or disability or 180 days after such employment
terminates as a result of death or disability.
Section 10.
NONTRANSFERABILITY
No Option granted under this Plan shall be transferable by an Associate
other than by will or by the laws of descent and distribution, and such Option
shall be exercisable during the lifetime of an Associate only by such
Associate. The person or persons to whom an Option is transferred by will or
by the laws of descent and distribution thereafter shall be treated as the
Associate under this Plan.
Section 11.
SECURITIES REGISTRATION
Each Option Certificate shall provide that, upon the receipt of shares of
Stock as a result of the exercise of an Option, the Associate shall, if so
requested by the Company, hold such shares of Stock for investment and not with
a view to resale or distribution to the public and, if so requested by the
Company, shall deliver to the Company a written statement
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<PAGE> 15
satisfactory to the Company to that effect. Each Option Certificate also
shall provide that, if so requested by the Company, the Associate shall make
a written representation to the Company that he or she will not sell or offer
to sell any of such Stock unless a registration statement shall be in effect
with respect to such Stock under the Securities Act of 1933, as amended ("1933
Act") and any applicable state securities law or unless he or she shall have
furnished to the Company an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required. Certificates representing the Stock transferred upon the
exercise of an Option granted under this Plan may at the discretion of the
Company bear a legend to the effect that such Stock has not been registered
under the 1933 Act or any applicable state securities law and that such Stock
may not be sold or offered for sale in the absence of an effective registration
statement as to such Stock under the 1933 Act and any applicable state
securities law or an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required.
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<PAGE> 16
Section 12.
LIFE OF PLAN
No Option shall be granted under this Plan on or after
the earlier of
(a) the tenth anniversary of the effective date of this Plan (as
determined under Section 4 of this Plan) and, after the tenth
anniversary, this Plan thereafter shall continue in effect until all
outstanding options have been exercised in full or no longer are
exercisable, or
(b) the date on which all of the Stock reserved under Section 3 of
this Plan has (as a result of the exercise of options granted under this
Plan) been issued or no longer is available for use under this Plan, in
which event this Plan also shall terminate on such date.
Section 13.
ADJUSTMENT
The number of shares of Stock reserved under Section 3 of this Plan, the
number of shares of Stock subject to options granted under this Plan and the
Option Price of such Options shall be adjusted by the Compensation Committee in
an equitable manner to reflect any change in the capitalization of the Company,
including, but not limited to, such changes resulting
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<PAGE> 17
from stock dividends or stock splits. The Compensation Committee shall have
the right to adjust (in a manner which satisfies the requirements of Section
424(a) of the Code) the number of shares of Stock reserved under Section 3 of
this Plan, the number of shares of Stock subject to Options granted under this
Plan, and the Option Price of such Options in the event of any corporate
transaction described in Section 424(a) of the Code which provides for the
substitution or assumption of Options in order to take into account on an
equitable basis the effect of such transaction. If any adjustment under this
Section 13 would create a fractional share of Stock or a right to acquire a
fractional share of Stock, such fractional share shall be disregarded and the
number of shares of Stock reserved under this Plan and the number subject to
any Options granted under this Plan shall be the next lower number of shares
of Stock, rounding all fractions downward. An adjustment made under this
Section 13 by the Compensation Committee shall be conclusive and binding on
all affected persons.
Section 14.
SALE OR MERGER OR CHANGE IN CONTROL
14.1. Sale or Merger. If the Company agrees to sell all or substantially
all of its assets for cash or property or for a combination of cash and
property or agrees to any merger, consolidation, reorganization, division or
other corporate
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<PAGE> 18
transaction in which Stock is converted into another security or into the right
to receive securities or property and such agreement does not provide for the
assumption or substitution of the Options granted under this Plan in accordance
with Section 13 on a basis that is fair and equitable to holders of such
Options as determined by the Compensation Committee, each Option granted to an
Associate at the direction and discretion of the Compensation Committee, (a)
may (subject to such conditions, if any, as the Compensation Committee deems
appropriate under the circumstances) be cancelled unilaterally by the Company
in exchange for (1) a transfer to such Associate of the number of whole shares
of Stock, if any, determined by the Compensation Committee on a date set by the
Compensation Committee for this purpose by dividing (i) the excess of the then
Fair Market Value of the Stock then subject to exercise under such Option (as
determined without regard to any vesting schedule for such Option) over the
Option Price of such Stock by (ii) the then Fair Market Value of a share of
such Stock or (2) the right to exercise his or her outstanding Option in full
on any date before the date as of which the Compensation Committee unilaterally
cancels such Option in full, (b) if the exchange described in Section 14.1(a)
would result in a violation of Section 16 of the Exchange Act for an Associate,
may (subject to such conditions, if any, as the Compensation
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<PAGE> 19
Committee deems appropriate under the circumstances) be cancelled unilaterally
by the Company after advance written notice to such Associate, or (c) may be
cancelled unilaterally by the Company if the Option Price equals or exceeds the
Fair Market Value of a share of Stock on such date.
14.2. Change in Control. If there is a Change in Control of the Company
or a tender or exchange offer is made for Stock other than by the Company, the
Compensation Committee thereafter shall have the right to take such action with
respect to any unexercised Options granted to Associates, or all such Options,
as the Compensation Committee deems appropriate under the circumstances to
protect the interest of the Company in maintaining the integrity of such grants
under this Plan, including following the procedures set forth in Section 14.1
for a sale or merger of the Company with respect to such Options. The
Compensation Committee shall have the right to take different action under this
Section 14.2 with respect to different Associates or different groups of
Associates, as the Compensation Committee deems appropriate under the
circumstances.
Section 15.
AMENDMENT OR TERMINATION
This Plan may be amended by the Compensation Committee
from time to time to the extent that the Compensation Committee
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<PAGE> 20
deems necessary or appropriate; provided, however (a) no such amendment shall
be made absent the approval of the shareholders of the Company required under
Section 422 of the Code (1) to increase the number of shares of Stock reserved
under Section 3, or (2) to change the class of employees eligible for Options
under Section 6, (b) at such time as the Company becomes subject to the
reporting requirements of Section 16(b) of the Exchange Act and to the extent
shareholder approval is required in order for the exemption set forth in Rule
16b-3 to be available in respect of Options granted pursuant to this Plan, the
Compensation Committee shall not amend this Plan absent the approval of the
shareholders of the Company in accordance with Rule 16b-3, (1) to increase
materially (within the meaning of Rule 16b-3) the benefits accruing to any
Insider under this Plan, (2) to increase materially (within the meaning of Rule
16b-3) the number of securities which may be issued under this Plan to
Insiders, or (3) otherwise modify materially (within the meaning of Rule 16b-
3) the requirements as to eligibility by Insiders for participation in this
Plan, and (c) no provision of this Plan shall be amended more than once every 6
months if amending such provision would result in the loss of an exemption
under Rule 16b-3. Any amendment which specifically applies to Non-ISOs shall
not require shareholder approval unless such approval is
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<PAGE> 21
necessary to comply with Section 16 of the Exchange Act. The Compensation
Committee also may suspend the granting of Options under this Plan at any
time and may terminate this Plan at any time; provided, however, the
Compensation Committee shall not have the right unilaterally to modify, amend
or cancel any Option granted before such suspension or termination unless (1)
the Associate consents in writing to such modification, amendment or
cancellation or (2) there is a dissolution or liquidation of the Company or a
transaction described in Section 13 or Section 14 of this Plan.
Section 16.
MISCELLANEOUS
16.1. No Shareholder Rights. No Associate shall have any rights as a
shareholder of the Company as a result of the grant of an Option to him or to
her under this Plan or his or her exercise of such Option pending the actual
delivery of Stock subject to such Option to such Associate.
16.2. No Contract of Employment. The grant of an Option to an Associate
under this Plan shall not constitute a contract of employment or a right to
continue to serve on the Board and shall not confer on any Associate any rights
upon his or her termination of employment or service in addition to those
rights, if any, expressly set forth in the Option Certificate which evidences
his or her Option.
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<PAGE> 22
16.3. Other Conditions. Each Option Certificate may require that an
Associate (as a condition to the exercise of an Option) enter into any
agreement or make such representations prepared by the Company, including any
agreement which restricts the transfer of Stock acquired pursuant to the
exercise of such Option or provides for the repurchase of such Stock by the
Company under certain circumstances.
16.4. Withholding. The exercise of any option granted under this Plan
shall constitute full and complete consent by an Associate to whatever action
the Compensation Committee deems necessary to satisfy the federal and state tax
withholding requirements, if any, which the Compensation Committee acting in
its discretion deems applicable to such exercise. The Compensation Committee
also shall have the right to provide in an Option Certificate that an Associate
may elect to satisfy federal and state withholding requirements through a
reduction in the number of shares of Stock actually transferred to him or her
under this Plan, and if the Associate is subject to the reporting requirements
under Section 16 of the Exchange Act, any such election and any such reduction
shall be effected so as to satisfy the conditions to the exemption under Rule
16b-3 under the Exchange Act.
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<PAGE> 23
16.5. Construction. This Plan shall be construed under the laws of the
State of Georgia.
IN WITNESS WHEREOF, the Conipany has caused its duly authorized officer to
execute this Plan this _______ day of __________, 1993 to evidence its adoption
of this Plan.
AVONDALE INCORPORATED
BY:
--------------------------------
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<PAGE> 1
EXHIBIT 10.13
AVONDALE MILLS, INC.
ASSOCIATE PROFIT SHARING AND SAVINGS PLAN
AS AMENDED AND RESTATED
EFFECTIVE AS OF OCTOBER 1, 1993
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Section 1. DEFINITIONS 2
1.1. Account 2
1.2. Active Member 2
1.3. Actual Deferral Percentage 3
1.4. Actual Matching Percentage 3
1.5. Adjustment 4
1.6 Associate 5
1.7. Authorized Leave of Absence 5
1.8. Average Actual Deferral Percentage 5
1.9. Average Actual Matching Percentage 6
1.10. Balanced Investment Fund 6
1.11. Before-Tax Account 6
1.12. Before-Tax Contribution 6
1.13. Beneficiary 6
1.14. Board 7
1.15. Break in Service 6
1.16. Code 7
1.17. Company 8
1.18. Compensation 8
1.19. Contribution Date 8
1.20. Effective Date 8
1.21. Election Form 9
1.22. Eligible Associate 9
1.23. Employing Company 9
1.24. Employment Date 9
1.25. ERISA 9
1.26. Excess Aggregate Contributions 10
1.27. Excess Compensation 10
1.28. Excess Contributions 10
1.29. Excess Elective Deferrals 10
1.30. Fiscal Year 11
1.31. Fiscal Year Compensation 11
1.32. Forfeiture 12
1.33. Fund 12
1.34. Highly Compensated Associate 12
1.35. Hour of Service 16
1.36. Insurance Contract 16
1.37. Integration Amount 17
1.38. Loan Fund 17
1.39. Matching Account 17
1.40. Matching Contribution 17
1.41. Member 17
1.42. Nonhighly Compensated Associate 17
1.43. Normal Retirement Age 17
1.44. Plan 17
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1.45. Plan Year 18
1.46. Profit Sharing Account 18
1.47. Profit Sharing Contribution 18
1.48. Related Employer 18
1.49. Rollover Account 19
1.50. Rollover Contribution 19
1.51. Social Security Integration Percentage 19
1.52. Social Security Wage Base 19
1.53. Stable Income Fund 19
1.54. Transfer Account 19
1.55. Trust Agreement 20
1.56. Trustee 20
1.57. Valuation Date 20
1.58. Vested Account 20
1.59. Year of Service 20
Section 2. PARTICIPATION 20
2.1. General Rule 20
2.2. Grandfather Rule 21
2.3. Reemployment 21
Section 3. CONTRIBUTIONS 22
3.1. Before-Tax Contributions 22
(a) Amount 22
(b) Individual Dollar Limitations 22
(1) This Plan 22
(2) Other Plans or Arrangements 22
(A) Application 22
(B) Claims Procedure 23
(C) Refund of Excess Elective
Deferrals 23
(D) Determination of Investment
Gain or Loss 24
(c) Limitations on Before-Tax
Contributions for Highly
Compensated Associates 25
(1) General 25
(2) Special Rules 26
(A) Other Plan or Arrangements 26
(B) Other Requirements 26
(3) Refund of Excess Contributions 26
(4) Determination of Investment Gains or Loss 27
(5) Correction of Family Members 28
3.2. Election Rules for Before-Tax Contributions 29
(a) Initial Election 29
(b) Termination of Election 29
(1) Voluntary 29
(2) Involuntary 29
(3) Minimum Period 30
(c) Revised Election 30
(d) Resumption After Termination 30
(e) Timeliness and Election Procedures 30
3.3. Matching Contributions 31
(a) Amount 31
(1) Quarterly Contributions 31
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(2) Cumulative Make-Up Contributions 31
(3) Forfeitures 32
(b) No Matching on Refunds 32
(c) Limitations on Matching Contributions
for Highly Compensated Associates 32
(1) General 32
(2) Special Rules 33
(A) Other Plan or Arrangements 33
(B) Other Requirements 34
(C) Multiple Use Limitation 34
(3) Distribution or Forfeiture of Excess
Aggregate Contributions 34
(4) Determination of Investment Gain
or Loss 35
(5) Correction of Family Members 36
3.4. Profit Sharing Contributions 36
3.5. Member Contributions 36
3.6. Account Investments 37
(a) General 37
(b) Elections 37
(c) Investment Mix Alternatives 38
(d) Effective Date 38
(e) Timeliness and Election Procedures 38
(f) Former Associates and Beneficiaries 39
(g) Company Securities 39
Section 4. ALLOCATIONS TO ACCOUNTS 39
4.1. Year End Allocations 39
(a) Top Heavy Determination 39
(b) Allocation of Adjustment, Before-Tax
Contributions and Matching
Contributions 39
(c) Forfeitures 39
(1) General 40
(2) Profit Sharing Contributions 40
(3) Matching Contributions 40
4.2. Profit Sharing Contribution 40
4.3. Quarterly Allocations 41
(a) General 41
(b) Before-Tax Contributions 41
(c) Allocation of Adjustment 41
(d) Matching Contributions 42
4.4. Other Limitations on Contributions and
Allocations 43
(a) General Rule 43
(b) Section 415 Limitations 43
(1) General Rule 43
(2) Coordination Rules 44
(3) Corrections 45
(c) Limitations on Deductibility 45
(d) Withholding Obligations and Account
Balance 46
4.5. Allocation Corrections 46
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Section 5. PLAN BENEFITS 46
5.1. Retirement Benefit 46
5.2. Disability Benefit 47
(a) Full Vesting 47
(b) Definition 47
5.3. Death Benefit 48
(a) Full Vesting for Associates 48
(b) Beneficiary 48
5.4. Vested Benefit 49
(a) General Rule 49
(b) Vesting Schedule 50
(c) Years of Service 50
(d) Plant Closing or Sale 51
5.5. Preretirement Withdrawals 52
(a) Hardship Withdrawal 52
(b) Special 59-1/2 Rules 54
5.6. Loans 55
(a) Request 55
(b) Conditions 55
(c) Accounting 59
(d) Special Powers 60
5.7. Missing Claimant 60
Section 6. BENEFIT DISTRIBUTION 62
6.1. Normal Payment Form 62
6.2. Optional Form of Benefits 62
6.3. Election Procedures and Timing 64
(a) General 64
(b) Procedures 65
6.4. Lump Sum Payments 66
6.5. Distribution Deadlines 66
(a) General Rule 66
(b) Statutory Deadline 67
(1) Member 67
(2) Beneficiary 67
(c) Deferral of Benefit Payment 67
6.6. Claim for Benefit 68
6.7. Direct Rollovers 68
Section 7. NAMED FIDUCIARY 70
Section 8. ADMINISTRATION 70
8.1. Company 70
8.2. Records 71
8.3. Information from Others 71
8.4. Indemnification 72
Section 9. INSURANCE 72
9.1. Election 72
9.2. Provisions of Insurance Contracts 73
9.3. Subsequent Elections 74
9.4. Substandard Risk 75
9.5. Amounts Expendable for Premiums 75
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(a) Limitation 75
(b) Compliance with Limitation 76
(c) Sale of Distribution to Member 76
(d) Premium Payments 78
9.6. Beneficiary of Insurance Contracts 78
9.7. Reliance by Trustee 78
9.8. Reliance by Insurer 78
9.9. Commencement of Coverage under
Insurance Contracts 78
9.10. Treatment of Insurance Contracts 78
(a) General Rule 79
(b) Election to Receive Distribution 79
Section 10. AMENDMENT AND TERMINATION 80
10.1. Amendment 80
10.2. Termination 81
Section 11. MISCELLANEOUS 81
11.1. Headings 81
11.2. Construction 82
11.3. Spendthrift Clause 82
11.4. Legally Incompetent 82
11.5. Benefits Supported Only by Fund 83
11.6. Claims 83
11.7. Nonreversion 83
11.8. Merger or Consolidation 84
11.9. Agent for Service of Process 84
11.10. Qualified Domestic Relations Order 84
11.11. Top Heavy Plan 86
(a) General 86
(b) Determination 86
(c) Special Top Heavy Plan Rules 88
(1) Minimum Contributions 88
(2) Vesting Schedule 89
(3) Other Requirements 89
11.12. Not a Contract of Employment 89
11.13. Rollover Contributions 90
11.14. Trustee to Trustee Transfer 90
(a) Authorization 90
(b) Transfer Accounts 91
Section 12. SPECIAL PROVISIONS FOR TRANSFERRED ASSOCIATES 91
12.1. General 91
12.2. Eligibility 91
12.3. Vesting 92
12.4. Account Balance 92
12.5. Forfeitures 92
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AVONDALE MILLS, INC.
ASSOCIATE PROFIT SHARING AND SAVINGS PLAN
AS AMENDED AND RESTATED
EFFECTIVE AS OF OCTOBER 1, 1993
This Plan is an amendment and restatement of the Avondale Mills, Inc.
Associate Profit Sharing and Savings Plan ("Plan") to reflect the merger of the
Walton Monroe Mills, Inc. Associate Profit Sharing and Savings Plan ("Walton
Plan") into this Plan and the addition of Avondale Incorporated as an Employing
Company under this Plan effective as of October 1, 1993.
Except as otherwise expressly provided for in this Plan, this Plan shall
apply only to Associates who work for or continue to work for, an Employing
Company on or after October 1, 1993. The rights and benefits, if any, of any
person who participated in this Plan or the Walton Plan, whose employment
terminated before October 1, 1993 and who is not reemployed by an Employing
Company on or after that day shall (except as expressly provided in this Plan)
be determined in accordance with the
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provisions of the Plan in which such person was a participant as in effect as
of the date his employment so terminated.
Section 1.
DEFINITIONS
The following terms (in alphabetical order) shall have the meanings set
forth opposite such terms for purposes of this Plan.
1.1. Account - means the bookkeeping account established and maintained
under this Plan to show as of any Valuation Date the contributions made by, or
on behalf of, a Member under this Plan, plus the investment gains and less the
investment losses on such contributions. An Account shall cease to exist when
exhausted through distributions or Forfeitures made in accordance with this
Plan. If a member is employed, simultaneously or successively, by two or more
Employing Companies as an Eligible Associate, separate Accounts shall be
maintained with respect to such Member's employment by each such Employing
Company.
1.2. Active Member - means for any Plan Year (a) a Member who has
completed 1,000 or more Hours of Service during the Fiscal Year ending within
such Plan Year as an Eligible Associate and (b) who is (1) an Eligible
Associate on the last day of the Fiscal Year ending within such Plan Year, (2)
on a Leave of Absence from the Company on the last day of the Fiscal Year
ending within such Plan Year, or (3) transferred during the Fiscal Year ending
within such Plan Year to the employment of a Related Employer or Walton Monroe
Mills, Inc. or its subsidiaries
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("Walton") at the request, or for the convenience, of the Company and the
Related Employer or Walton and who is an Eligible Associate of such Related
Employer or Walton on the last day of the Fiscal Year ending within such Plan
Year, and (c) each Member who was an Active Member during the immediately
preceding Plan Year and who ceases to be an Eligible Associate during the Plan
Year by reason of his death, his retirement under Section 5.1 or his
disability under Section 5.2. In the event of a transfer to Walton described
in Section 1.2(b)(3), employment for Walton shall be treated as employment for
the Company solely for purposes of Section 1.2(a).
1.3. Actual Deferral Percentage - means for each Plan Year for each Member
who was an Eligible Associate at any time during the Plan Year the ratio
(expressed as a percentage) of (a) the Before-Tax Contribution, if any, made on
behalf of such Member for such Plan Year to (b) his Compensation for such Plan
Year. For purposes of determining the Actual Deferral Percentage of each
Highly Compensated Associate, the Before-Tax Contributions and Compensation of
his "family members" (as described in Code Section 414(q)(6)) shall be treated
solely as the Before-Tax Contributions and Compensation of such Highly
Compensated Associate. The Actual Deferral Percentage of a Member who is
eligible to make, but does not make, Before-Tax Contributions shall be zero.
1.4. Actual Matching Percentage - means for each Plan Year for each Member
who was an Eligible Associate at any time during the Plan Year the ratio
(expressed as a percentage) of (a) the Matching Contribution, if any, made on
behalf of such
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Member for such Plan Year to (b) his Compensation for such Plan Year. For
purposes of determining the Actual Matching Percentage of each Highly
Compensated Associate, the Matching Contributions and Compensation of his
"family members" (as described in Code Section 414(q)(6)) shall be treated
solely as the Matching Contribution and Compensation of such Highly Compensated
Associate. The Actual Matching Percentage of a Member who is eligible to make,
but falls to make, Before-Tax Contributions and who, as a result of such
failure, does not receive a Matching Contribution shall be zero.
1.5. Adjustment - means the net investment gain or loss (whether realized
or unrealized and including accrued income) as determined by the Trustee
separately for the Stable Income Fund, the Balanced Investment Fund and each
other sub-fund, if any, then in effect under the Fund except the Loan Fund.
The net investment gain or loss for each such sub-fund shall be based on the
fair market value of the assets of each such sub-fund for each period which
begins immediately after one Valuation Date and ends on the immediately
following Valuation Date and shall be determined after deducting the expenses
allocable to each such sub-fund. Further, the portion of the net investment
gain or loss of the Stable Income Fund which is attributable to the non-vested
subaccounts of Members who have incurred a separation from service but which is
not credited to such subaccounts due to the application of Section 4.3(c)
shall be allocated pro rata among each sub-fund for which net investment gain
or loss is determined based on the total fair market value
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of such sub-fund less, in the case of the Stable Income Fund, the fair market
value of the non-vested subaccounts invested in the Stable Income Fund.
1.6. Associate - means a person who is a regular or part-time employee of
a Related Employer or who is treated as a "leased employee" of a Related
Employer under Code Section 414(n), and a person's status as an Associate for
purposes of this Plan shall be deemed to begin on the first date he is so
employed or so treated and end
(a) as of the first date thereafter that he dies, retires, quits, or is
discharged as an employee or "leased employee" of a Related Employer, or
(b) as of the last day of his first Authorized Leave of Absence
after which event he fails to resume active employment as an Associate upon
expiration of such Authorized Leave of Absence, or in the event of an
absence due to military service, upon expiration of any reemployment rights
required by law.
1.7. Authorized Leave of Absence - means any leave of absence authorized
by a Related Employer under its standard personnel practice or policy;
provided, that all Associates shall, under similar circumstances, be treated
alike in the granting of such leaves of absence.
I.8. Average Actual Deferral Percentage - means for each Plan Year the
average (expressed as a percentage) of the Actual Deferral Percentages computed
separately (a) for the group of Members who are Highly Compensated Associates
during such Plan
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Year and (b) for the group of Members who are Nonhighly Compensated Associates
during such Plan Year.
1.9. Average Actual Matching Percentage - means for each Plan Year the
average (expressed as a percentage) of the Actual Matching Percentages computed
separately (a) for the group of Members who are Highly Compensated Associates
during such Plan Year and (b) for the group of Members who are Nonhighly
Compensated Associates during such Plan Year.
1.10. Balanced Investment Fund - means the sub-fund which is established
within the Fund for the benefit of those Members who have as their primary
investment goal (to the extent they elect to invest in this fund) the
production of investment income and capital appreciation and which consists of
investments in diversified securities and in such other investments as deemed
appropriate under the circumstances.
1.11. Before-Tax Account - means the bookkeeping subaccount maintained as
part of a Member's Account to show his vested interest in the Fund attributable
to the Before-Tax Contributions made on his behalf under this Plan.
1.12. Before-Tax Contribution - means that part of a Member's Compensation
which he elects that an Employing Company contribute to this Plan on his behalf
under Section 3.1 and which is not intended to be includible in his gross
income for federal income tax purposes solely by reason of the application of
Code Section 401(k) to such contribution.
1.13. Beneficiary - means the person or persons so designated by a Member
in accordance with Section 5.3.
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1.14. Board - means the Board of Directors of the Company.
1.15. Break in Service - means each Plan Year during which an Associate
fails to complete more than 500 Hours of Service. Solely for purposes of
determining whether an Associate has a Break in Service, an Associate who is
absent from work for "maternity or paternity reasons" shall be credited with
each Hour of Service for which he would otherwise have been credited but for
such absence or, if such Hours of Service cannot be determined, with 8 Hours of
Service for each day of such absence. However, the total number of Hours of
Service so credited to such Associate shall not exceed 501 Hours of Service.
The Hours of Service so credited for maternity or paternity reasons shall be
credited in the Plan Year in which such absence begins if such credit is
necessary to prevent a Break in Service in such Plan Year or, if such credit is
unnecessary, in the immediately following Plan Year. An absence for "maternity
or paternity reasons" under this definition of a Break in Service means an
absence (a) by reason of the pregnancy of the Associate, (b) by reason of the
birth of a child of the Associate, (c) by reason of the placement of a child
with the Associate in connection with the adoption of such child by such
Associate, or (d) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
1.16. Code - means the Internal Revenue Code of 1986, as amended, or any
successor statute and, if an amendment to the Code renumbers a section of the
Code referred to in this Plan,
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any such reference to such section automatically shall become a reference to
such section as renumbered.
1.17. Company - means Avondale Mills, Inc., an Alabama corporation, and
any successor to such corporation.
1.18. Compensation - means the lesser of
(a) (1) the actual compensation paid by an Employing Company for a Plan
Year to an Associate which is characterized under his Employing Company's
payroll system as wages, salary, bonuses, overtime, commissions, cash
profit sharing and incentive pay, plus
(2) any contributions made on his behalf by the Employing
Company to this Plan or a cafeteria plan pursuant to a salary reduction
agreement which is not includible in his gross income for federal
income tax purposes as a result of Code Section 125 or Code Section
402(a)(8), or
(b) $200,000.00 for periods prior to January 1, 1994 and $150,000 for
periods after December 31, 1993, as determined in accordance with the
family attribution rules under Code Section 401(a)(17) and as adjusted for
inflation from time to time by the Secretary of the Treasury in accordance
with such section of the Code.
1.19. Contribution Date - means the last day of each calendar quarter
within each Plan Year.
1.20. Effective Date - means the effective date of this amended and
restated Plan, which shall be January 1, 1990; provided, however, that the
provisions of this Plan as set forth
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in Exhibit A shall be effective retroactive to Plan Years beginning before
January 1, 1990 in accordance with the terms of Exhibit A.
1.21. Election Form - means the form provided by the Company for making
the elections and designations called for under this Plan, and no such form
shall be effective unless properly completed and timely delivered in accordance
with the terms of this Plan or, where the terms of this Plan fail to specify
the time or the manner of delivery, in accordance with such rules as the
Company shall adopt from time to time.
1.22. Eligible Associate - means each Associate of an Employing Company
other than an Associate (a) who is treated as such exclusively as a result of
the leased employee rules under Code Section 414(n) or (b) who is a member of
a collective bargaining unit (unless the Company and such collective bargaining
unit have agreed that he shall be eligible to participate in this Plan).
1.23. Employing Company - means the Company, Avondale Incorporated, and
each other corporation which is eligible to file a consolidated federal income
tax return with the Company and which is designated as an Employing Company by
the Board and by its Board of Directors.
1.24. Employment Date - means the first day on which an Associate performs
an Hour of Service (a) in his first employment period or, (b) if he is
reemployed as an Associate, in his most recent employment period following a
Break in Service.
1.25. ERISA - means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute and,
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if an amendment to ERISA renumbers a section of ERISA referred to in this Plan,
any such reference to such section automatically shall become a reference to
such section as renumbered.
1.26. Excess Aggregate Contributions - means for each Plan Year the excess
of (a) the Matching Contributions actually made on behalf of Highly Compensated
Associates for such Plan Year over (b) the maximum amount of such contributions
permitted for such Plan Year under Code Section 401(m)(2)(A), where such
maximum shall be determined by reducing Matching Contributions made on behalf
of such Highly Compensated Associates in order of their Actual Matching
Percentages, beginning with the highest of such percentages.
1.27. Excess Compensation - means for each Plan Year for each Member the
excess, if any, of his Fiscal Year Compensation for such year over the Social
Security Wage Base for such year.
1.28. Excess Contributions - means for each Plan Year the excess of (a)
the Before-Tax Contributions actually made on behalf of Highly Compensated
Associates for such Plan Year over (b) the maximum amount of such contributions
permissible for such Plan Year under Code Section 401(k)(3)(A), where such
maximum shall be determined by reducing Before-Tax Contributions made on behalf
of such Highly Compensated Associates in order of their Actual Deferral
Percentages, beginning with the highest of such percentages.
1.29. Excess Elective Deferrals - means for each Member for each Plan Year
the Before-Tax Contributions for such
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Plan Year that he designates as exceeding the $7,000.00 limit set forth in Code
Section 402(g), as such limit is adjusted for cost of living increases in
accordance with Code Section 402(g), pursuant to the claims procedure set
forth in Section 3.1(b)(2)(B).
1.30. Fiscal Year - means the fiscal year ending each August 31.
1.31. Fiscal Year Compensation - means for each Plan Year the lesser of
(a) (1) the actual compensation paid by the Employing Company during
the Fiscal Year ending within the Plan Year to an Associate which is
characterized under his Employing Company's payroll system as wages,
salary, bonuses, overtime, commissions, cash profit sharing and incentive
pay, plus
(2) any contributions made on his behalf by the Employing
Company to this Plan or a cafeteria plan pursuant to a salary reduction
agreement for such Fiscal Year which is not includible in his gross
income for federal income tax purposes as a result of Code Section 125
or Code Section 402(a)(8), or
(b) $200,000.00 for periods prior to January 1, 1994 and $150,000 for
periods after December 31, 1993, as determined in accordance with the
family attribution rules under Code Section 401(a)(17) and as adjusted for
inflation from time to time by the Secretary of the Treasury in accordance
with such section of the Code.
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All such compensation paid by a Related Employer to a Member who is
transferred to the employment of such Related Employer at the request of the
Company shall be treated as if paid by the Company for purposes of this
definition.
1.32. Forfeiture - means the dollar amount of any Account which is
forfeited from such Account in accordance with this Plan.
1.33. Fund - means the assets held by the Trustee in accordance with the
Trust Agreement.
1.34. Highly Compensated Associate - means for each Plan Year each
Associate who performs service during the determination year and who is
described in one or more of the following groups:
(a) an Associate who is a 5% owner as defined in Code Section
416(i)(1)(A)(iii) at any time during the determination year or the look-back
year;
(b) an Associate who receives compensation in excess of $75,000
(indexed in accordance with Code Section 415(d)) during the look-back year;
(c) an Associate who receives compensation in excess of $50,000
(indexed in accordance with Code Section 415(d)) during the look-back year
and is a member of the top-paid group for the look-back year;
(d) an Associate who is an officer, within the meaning of Code Section
416(i), during the look-back year and who receives compensation in the
look-back year greater than 50% of the
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dollar limitation in effect under Code Section 415(b)(1)(A) for the
calendar year in which the look-back year begins;
(e) an Associate who is described in Sections 1.34(b), (c) or (d) when
such sections are modified to substitute the determination year for the
look-back year and who is one of the 100 Associates who received the most
compensation from the Company during the determination year.
For purposes of this Section 1.34,
(1) The determination of which Associates are Highly Compensated
Associates shall at all times be subject to Code Section 414(q) and any
regulations, rulings, notices or procedures thereunder.
(2) The determination year is the Plan Year for which the determination
of who is highly compensated is being made, and the look-back year is the 12
month period immediately preceding the determination year.
(3) The top-paid group consists of the top 20% of Associates ranked on
the basis of compensation received during the applicable year, and for
purposes of determining the number of Associates in the top-paid group, the
following Associates shall be excluded: (i) Associates who have not completed
6 months of service, (ii) Associates who normally work less than 17 1/2 hours
per week, (iii) Associates who normally work during less than 6 months during
any year, (iv) Associates who have not attained age 21, and (v) except to the
extent provided in regulations, Associates who are included in a unit of
Associates covered by an agreement
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which the Secretary of Labor finds to be a collective bargaining
agreement between employee representatives and the Company, which agreement
does not provide for participation in this Plan.
(4) The number of officers taken into account is limited to 50 (or if
less, the greater of 3 Associates or 10% of Associates) excluding those
Associates who may be excluded in determining the top-paid group as set forth
in (3) above.
(5) When no officer has compensation in excess of 50% of the dollar
limitation in effect under Code Section 415(b)(1)(A), the highest paid
officer is treated as a Highly Compensated Associate.
(6) "Compensation" for purposes of this Section 1.34 shall be
determined in accordance with Code Section 415(c)(3), provided that
Before-Tax Contributions shall be included in "compensation."
(7) Employers aggregated under Code Section 414(b), (c), (m) or (o)
shall be treated as a single employer for purposes of this Section 1.34.
(8) For purposes of the family aggregation rules under Code Section
414(q), individuals who are family members include, with respect to any
Associate or former Associate, such Associate's or former Associate's spouse
and lineal ascendants or descendants and the spouses of such lineal
ascendants and descendents. In determining whether an individual is a family
member with respect to an Associate
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or former Associate, legal adoptions shall be taken into account.
1.35. Hour of Service - means
(a) Each hour for which an Associate is paid, or entitled to payment, for
the performance of duties as an Associate.
(b) Each hour for which an Associate is directly or indirectly paid, or
entitled to payment, for a period of time (without regard to whether the
employment relationship is terminated) when he performs no duties as an
Associate due to vacations, holidays, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence, provided,
however, that
(1) no moire than 501 Hours of Service shall (except as otherwise
required under federal law) be credited to an Associate for any single
continuous period during which he performs no duties as an Associate,
(2) an hour for which an Associate is paid, or entitled to payment, on
account of a period in which he performs no duties as an Associate shall not
be credited as an Hour of Service if such payment is made or is due under a
plan maintained solely to comply with applicable workmen's compensation laws,
unemployment compensation laws or disability insurance laws, and
(3) an Hour of Service shall not be credited to an Associate on
account of a payment which solely reimburses
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such Associate for medical, or medically related, expenses incurred by
or on behalf of the Associate.
(c) Each hour for which an Associate is paid for any reason an amount as
"back pay," irrespective of mitigation of damages. Crediting of Hours of
Service for back pay awarded or agreed to with respect to periods described in
paragraph (b) shall be subject to the limitations in paragraph (b).
(d) An Associate shall also receive credit for an unpaid Authorized Leave
of Absence, provided the credit under this paragraph (d) shall not exceed 2
years.
(e) The same Hours of Service shall not be credited under more than one
paragraph (a), (b), (c) or (d).
(f) Hour of Service credit, if any, for periods when no duties are
performed as an Associate shall be calculated in accordance with then
applicable Department of Labor Hour of Service regulations.
(g) In lieu of actually recording each Hour of Service which is completed
by an Associate, each Associate who completes at least one Hour of Service in a
week automatically shall receive credit for 45 Hours of Service for that week.
1.36. Insurance Contract - means an insurance contract or contracts
providing ordinary or term life insurance for a Member (or for a Member's
spouse or children) which is purchased by the Trustee from a properly licensed,
legal reserve life insurance company which is designated by the Company as an
acceptable insurer under this Plan.
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1.37. Integration Amount - means for each Plan Year the product of (a) the
total Fiscal Year Compensation for all Active Members and the total Excess
Compensation of all Active Members and (b) the Social Security Integration
Percentage for such Plan Year.
1.38. Loan Fund - means the sub-fund which is established within the Fund
by the Trustee to account for loans made under Section 5.6.
1.39. Matching Account - means the bookkeeping subaccount maintained as
part of a Member's Account to show his interest in the Fund attributable to the
Matching Contributions made on his behalf under this Plan.
1.40. Matching Contribution - means the contribution made by an Employing
Company in accordance with Section 3.3.
1.41. Member - means for any Plan Year (a) an Eligible Associate who has
satisfied the eligibility requirements of Section 2 or (b) a former Eligible
Associate who has an Account under this Plan.
1.42. Nonhighly Compensated Associate - means for each Plan Year each
Member other than a Highly Compensated Associate and his "family members" (as
described in Code Section 414(q)(6)).
1.43. Normal Retirement Age - means age 65.
1.44. Plan - means this Avondale Mills, Inc. Associate Profit Sharing
and Savings Plan as set forth in this document, and all amendments to this
document or, when required by the context, the Plan as in effect at any time
before January 1, 1990.
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1.45. Plan Year - means the calendar year.
1.46. Profit Sharing Account - means the bookkeeping subaccount
maintained as part of a Member's Account to show his interest in the Fund
attributable to the Profit Sharing Contributions made on his behalf under this
Plan.
1.47. Profit Sharing Contribution - means any payment by an Employing
Company to the Fund with respect to a Plan Year in accordance with Section
3.4.
1.48. Related Employer - means as of any date the Company and
(a) any parent, subsidiary or brother-sister corporation which (as of such
date) is a member of a controlled group of corporations (as defined in Section
1563(a) of the Code, disregarding Section 1563(a)(4) and Section 1563(e)(3)(C))
of which the Company is a member,
(b) any trade or business, whether or not incorporated, which (as of such
date) is considered to be under common control with the Company under
regulations prescribed by the Secretary of the Treasury pursuant to Section
414(c) of the Code, and
(c) any person or organization which (as of such date) is a member
of an affiliated service group (as defined in Code Section 414(m)) with
the Company; provided, solely for purposes of Section 4.4(b), the phrase "more
than 50 percent" shall be substituted for "at least 80 percent" whenever such
phrase appears in Code Section 1563(a)(1).
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1.49. Rollover Account - means the bookkeeping subaccount maintained as
part of a Member's Account to show his vested interest in the Fund attributable
to his Rollover Contribution under this Plan.
1.50. Rollover Contribution - means any rollover contribution made to this
Plan as described in Section 11.13.
1.51. Social Security Integration Percentage means the lesser of (a) the
percentage figure set for each Plan Year by the Board in its sole discretion or
(b) the greater of (i) 5.7% or (ii) the portion of the rate of tax under
Section 3111(a) of the Code which is attributable to old-age insurance and
which is in effect on the first day of such Plan Year.
1.52. Social Security Wage Base - means for each Plan Year the
contribution and benefit base which is in effect as of the first day of such
Plan Year under the system of old-age, survivors and disability insurance
established under Title II of the Social Security Act and the Federal Insurance
Contribution Act.
1.53. Stable Income Fund - means the sub-fund which is established within
the Fund for the benefit of those Members who have as their primary investment
goal (to the extent they elect to invest in this fund) preservation of capital
and which consists of investments in interest-bearing securities and in such
other investments as deemed appropriate under the circumstances.
1.54. Transfer Account - means the bookkeeping subaccount maintained as
part of a Member's Account to show his
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interest in the Fund attributable to a transfer to this Plan made on his behalf
under Section 11.14.
1.55. Trust Agreement - means the trust agreement which is attached to
this Plan as Exhibit A, as such trust agreement may be amended from time to
time.
1.56. Trustee - means the person or persons acting from time to time as
the trustee for the Fund.
1.57. Valuation Date - means the last day of each calendar quarter within
the Plan Year, and any additional date or dates within a Plan Year which in
light of economic or other circumstances the Company directs the Trustee to
treat as such.
1.58. Vested Account - means the bookkeeping subaccount maintained as part
of a Member's Account to show his vested interest in the Fund (a) as
established under the Plan as of August 31, 1980 or (b) as established under
the Plan on August 31, 1986.
1.59. Year of Service - means each Plan Year during which an Associate has
completed 1,000 or more Hours of Service as an Associate of a Related Employer.
Section 2.
PARTICIPATION
2.1. General Rule. Each Eligible Associate whose most recent Employment
Date is on or after January 1, 1990 shall become a Member in this Plan on the
earlier of the January 1 or July 1 coinciding with or immediately following the
date he completes 1,000 Hours of Service, provided he is an Eligible Associate
on such date. If an Eligible Associate fails to
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complete at least 1,000 Hours of Service before the first anniversary of such
Employment Date, he thereafter shall be required to complete at least 1,000
Hours of Service in a 12 consecutive month period which begins on an
anniversary of such Employment Date. If an Associate fails to become a Member
because he is not an Eligible Associate on the appropriate date, he thereafter
shall become a Member in this Plan on the earlier of the January 1 or July 1 on
which he is an Eligible Associate.
2.2. Grandfather Rule. Each Eligible Associate who was a Member in the
Plan on December 31, 1989 shall continue as a Member of this Plan on January 1,
1990 if he is an Eligible Associate on such date.
2.3. Reemployment. A former Associate whose employment terminated after
he had satisfied the eligibility requirements under Section 2.1 or Section
2.2 shall be treated as a Member as of the first day he performs an Hour of
Service as a result of his reemployment as an Eligible Associate if
(a) he is reemployed before he has at least 5 consecutive Breaks in
Service or
(b) he had a vested interest in his Account before his employment
terminated.
Each other reemployed person shall become a Member in accordance with the
general rule set forth in Section 2.1.
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Section 3.
CONTRIBUTIONS
3.1. Before-Tax Contributions.
(a) Amount. Subject to the rules set forth in this
Section 3.1, Section 3.2 (Election Rules) and Section 4.4 (Limitations on
Contributions and Allocations), a Member (who is an Eligible Employee) may elect
that the Employing Company make contributions on his behalf in 1% increments of
his Compensation, from 2% to 12% of his Compensation, for each pay day in a Plan
Year. All such contributions shall be made exclusively through payroll
deductions from such Member's Compensation, and such contributions shall be
transferred by the Employing Company to the Trustee as soon as reasonably
practicable after such contributions are so deducted.
(b) Individual Dollar Limitations.
(1) This Plan. No Member shall be permitted to have
Before-Tax Contributions made on his behalf under this Plan during any
Plan Year in excess of $7,000.00 (as adjusted in accordance with Code
Section 402(g)(5) to account for increases in the cost of living).
(2) Other Plans or Arrangements.
(A) Application. If any contributions are made for a
calendar year on behalf of a Member as "elective
deferrals" (as defined in Code Section 402(g)(3)) or to any
pension plan which is funded exclusively by employee
contributions and which is described under Code Section
501(c)(18) or to any salary reduction agreement for
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the purchase of an annuity contract under Code Section 403(b)
or, if a Member's Code Section 403(b) limitation is determined
under Code Section 402(g)(8)(A)(iii), to any eligible deferred
compensation plan under Code Section 457, such contributions
also shall be aggregated with and treated as such Member's
Before-Tax Contributions for such calendar year under Section
3.1(b)(1).
(B) Claims Procedure. If a Member's Before-Tax
Contributions for a Plan Year, when added to the other
contributions made on his behalf for such Plan Year (as
described in Section 3.1(b)(2)(A)) exceed the dollar limitation
set forth in Section 3.1(b)(1), such Member shall have the
right to elect to have such excess (or, if less, his Before-Tax
Contributions) refunded to him from this Plan if he files a
written claim with the Company no later than March 1 of the
following Plan Year. A Member's claim under this Section
3.1(b)(2)(B) shall specify the dollar amount of the excess for
the preceding Plan Year and shall include a written statement
that if such amounts are not refunded to such Member, his
Before-Tax Contributions, when added to amounts deferred under
other plans or arrangements described in Section 3.1(b)(2)(A),
will exceed the limit imposed on the Member by Code Section
402(g) for the Plan Year for which the deferral was made.
(C) Refund of Excess Elective Deferrals.
Notwithstanding any other provision of this Plan,
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Excess Elective Deferrals, plus any investment gain and
minus any investment loss allocable to such Excess Elective
Deferrals, shall be refunded no later than April 15 of any Plan
Year to Members (ii) to whose Account Excess Elective Deferrals
were allocated for the preceding Plan Year and (ii) who claim
such allocable Excess Elective Deferrals for such preceding
Plan Year in accordance with the claims procedure set forth in
this Section 3.1(b)(2).
(D) Determination of Investment Gain or Loss. Excess
Elective Deferrals shall be adjusted for investment gain
or loss, and such adjustment shall be determined by the Company
in accordance with this Section 3.1(b)(2)(D).
(i) For the Plan Year during which such Excess
Elective Deferrals were made, such adjustment shall be
the product of (i) the ratio of Excess Elective
Deferrals invested in such investment fund to the sum of
all Accounts and Excess Elective Deferrals invested in
such investment fund for the Plan Year and (ii) the
actual earnings of such investment fund for such Plan
Year.
(ii) For the period between the last day of such
Plan Year in which the Excess Elective Deferrals were
made and the last day of the month preceding the date
of the refund ("Gap Period"),
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the adjustment shall be an amount equal to the product
of (i) the sum of such Excess Elective Deferrals plus or
minus the adjustment determined under (A) above and (ii)
the rate of return for the Trustee's short term
investment fund for the Gap Period.
(iii) For Plan Years beginning on or after January
1, 1992, Section 3.1(b)(2)(D)(ii) shall not apply and
Excess Elective Deferrals shall not be adjusted for
any investment gains or losses for the Gap Period.
(c) Limitations on Before-Tax Contributions for Highly
Compensated Associates.
(1) General. The Average Actual Deferral Percentage for
Members who are Highly Compensated Associates for any Plan Year shall
not exceed the greater of
(A) the Average Actual Deferral Percentage
for Members who are Nonhighly Compensated Associates
for such Plan Year multiplied by 1.25, or
(B) the lesser of (i) the Average Actual Deferral
Percentage for Members who are Nonhighly Compensated
Associates for such Plan Year multiplied by 2, or (ii) the
Average Actual Deferral Percentage for Members who are
Nonhighly Compensated Associates plus 2 percentage points, or
such smaller number of percentage points as may be prescribed
by the Secretary of the Treasury.
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(2) Special Rules.
(A) Other Plan or Arrangements. For purposes of this
Section 3.1(c), the Actual Deferral Percentage for any Member who is a
Highly Compensated Associate for the Plan Year and who is eligible to
have "elective deferrals" (as described in Code Section 402(g)(3)(A))
allocated to his account under two or more plans or arrangements
described in Code Section 401(k) that are maintained by a Related
Employer shall be determined as if all such contributions were made
under this Plan. If this Plan satisfies the requirements of Code
Section 410(b) only if aggregated with one or more other plans, or if
one or more other plans satisfy the requirements of Code Section 410(b)
only if aggregated with this Plan, then this Section 3.1(c) shall be
applied by determining the Actual Deferral Percentages of Members as
if all such plans were a single plan.
(B) Other Requirements. The determination and treatment
of the Before-Tax Contributions and the Actual Deferral
Percentage of any Member shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury.
(3) Refund of Excess Contributions. Notwithstanding any other
provision of this Plan, Excess Contributions made for any Plan Year, plus any
investment gain and minus any investment loss allocable to such Excess
Contributions, shall be refunded in accordance with Code Section 401(k) and the
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related regulations, no later than the last day of the immediately following
Plan Year to Highly Compensated Associates on whose behalf such Excess
Contributions were made. Such refunds shall be made from the Accounts of such
Highly Compensated Associates in amounts determined under the following method:
the Actual Deferral Percentage of the Highly Compensated Associate with the
highest Actual Deferral Percentage shall be reduced to equal the Actual
Deferral Percentage of the Highly Compensated Associate with the next highest
Actual Deferral Percentage; provided, however, that if a lesser reduction will
enable the Plan to satisfy the limits set forth in Section 3.1(c)(1), only this
lesser reduction shall be made. This process shall be repeated until the Plan
satisfies the limits set forth in Section 3.1(c)(1) and the Excess
Contributions have been refunded in full. The Excess Contributions which would
otherwise be refunded to a Highly Compensated Associate shall be reduced, in
accordance with federal income tax regulations, by the Excess Elective
Deferrals refunded to such Highly Compensated Associate under Section
3.1(b)(2).
(4) Determination of Investment Gain or Loss. Excess Contributions
shall be adjusted for investment gain or loss, and such adjustment shall be
determined by the Company in accordance with this Section 3.1(c)(4).
(A) For the Plan Year during which such Excess Contributions
were made, such adjustment shall be the product of (i) the ratio of
Excess Contributions
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invested in such investment fund to the sum of all Accounts and Excess
Contributions invested in such investment fund for the Plan Year and
(ii) the actual earnings of such investment fund for such Plan Year.
(B) For the period between the last day of such Plan Year in
which the Excess Contributions were made and the last day of the
month preceding the date of the refund ("Gap Period"), the adjustment
shall be an amount equal to the product of (i) the sum of such
Excess Contributions plus or minus the adjustment determined under (A)
above and (ii) the rate of return for the Trustee's short term
investment fund for the Gap Period.
(C) For Plan Years beginning on or after January 1, 1992,
Section 3.1(c)(4)(B) shall not apply and Excess Contributions shall
not be adjusted for investment gains or losses for the Gap Period.
(5) Correction of Family Members. In the case of a Highly Compensated
Associate whose Actual Deferral Percentage is determined under the family
aggregation rules, the determination of the amount of the refund of such
Associate's Excess Contributions shall be accomplished by reducing the Actual
Deferral Percentage as set forth under Section 3.1(c)(3) and allocating the
Excess Contributions for the family group among all family members in
proportion to the Before-Tax Contributions of each such family member which
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have been taken into account to determine such Actual Deferral
Percentage.
3.2. Election Rules for Before-Tax Contributions.
(a) Initial Election. A Member's initial election
under Section 3.1 for any period of employment shall be effective as of the
first pay day which occurs on or immediately after the date as of which he
becomes a Member, provided he timely delivers a properly completed Election
Form to the Company and he is an Eligible Associate on such date. An election
shall remain in effect until revised or terminated. No Member shall be
required to make an election under Section 3.1, and no benefits (other than the
benefits from a Before-Tax Account and a Matching Account) shall be conditioned
on a Member making such an election.
(b) Termination of Election.
(1) Voluntary. A Member shall have the right to
completely terminate an election under Section 3.1 at any time during
a Plan Year, and any such termination shall become effective as of the
first pay day which occurs immediately after the date he timely
delivers a properly completed Election Form to the Company.
(2) Involuntary. Any Member who ceases to be an Eligible
Associate shall be deemed to have properly completed and delivered an
Election Form to completely terminate his election, if any, under
Section 3.1 as of the date his status as an Eligible Associate so
terminates.
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(3) Minimum Period. A termination election under either
Section 3.2(b)(1) or Section 3.2(b)(2) shall remain in effect
for at least 90 days.
(c) Revised Election. An election, once effective, can be
revised by a Member not more than one time each calendar quarter within
each Plan Year by timely delivering a properly completed Election Form to the
Company, and a revision shall be effective as of the first pay day which occurs
on or immediately after the Company receives such Election Form; provided,
however, the Company shall have the right at any time to unilaterally reduce
the contributions which Members (who are Highly Compensated Associates) elect
to be made on their behalf if the Company acting in its absolute discretion
determines that such reduction might be necessary to satisfy the limitations
under Section 4.4.
(d) Resumption After Termination. A Member whose election
terminates in accordance with Section 3.2(b) thereafter may elect to resume
contributions under Section 3.1 only as of a January 1 or July 1 within any
Plan Year which follows the date his termination election had been in effect
for at least 90 days, and such election shall be effective as of the first pay
day which occurs on or immediately after such January 1 or July 1, provided (1)
he timely delivers a properly completed Election Form to the Company before
such date and (2) he is an Eligible Associate on such date.
(e) Timeliness and Election Procedures. The Company from time
to time shall establish and shall communicate in
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writing to Members such reasonable deadlines, rules and procedures for making
the elections described in this Section 3.2 as the Company in its absolute
discretion deems appropriate under the circumstances for the proper
administration of this Plan.
3.3. Matching Contributions.
(a) Amount.
(1) Ouarterly Contributions. Each Employing Company shall
(subject to the conditions set forth in this Section 3.3 and in Section 4.4)
make a Matching Contribution as of each Contribution Date on behalf of each
Member who is an Eligible Associate as of such Contribution Date in an amount
equal to 25% of such Member's Before-Tax Contributions made for the period since
the immediately preceding Contribution Date, provided that such Matching
Contribution in no event shall (except as provided in Section 3.3(a)(2)) exceed
.75% of a Member's Compensation for such period.
(2) Cumulative Make-Up Contributions. Subject to the
limitations set forth in this Section 3.3 and in Section 4.4, each Employing
Company shall make a Matching Contribution as of each Contribution Date within a
Plan Year on behalf of each Member who is an Eligible Associate as of such
Contribution Date and who has revised or terminated his Before-Tax Contributions
at any time during such Plan Year for any reason, in an amount equal to the
excess, if any, of (1) 25% of his cumulative Before-Tax Contributions made for
the Plan Year or .75% of his Compensation for such Plan Year, whichever is less,
over (2) the sum of the
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Matching Contributions made on his behalf for all previous Contribution Dates
within such Plan Year.
(3) Forfeitures. Each Employing Company's obligation to
make the Matching Contributions called for under Section 3.3(a)(1) for the
Contribution Date which coincides with the last day of a Plan Year shall be
reduced by Forfeitures from the Accounts of Members employed by such Employing
Company which are attributable to prior Matching Contributions and which are
effected as of such Contribution Date, and such Forfeitures shall be treated
as part of such Employing Company's contribution under this Section 3.3(a).
(b) No Matching on Refunds. No Matching Contribution
shall be made with respect to any contributions refunded under Section 3.1(b) or
Section 3.1(c) and, if Matching Contributions are allocated to a Matching
Account for any Plan Year and the Company thereafter determines that any part
of such Matching Contributions are attributable to contributions refunded under
Section 3.1(b) or Section 3.1(c), such part of such Matching Contributions
shall be deleted from such Matching Account and shall be treated as a
Forfeiture under this Plan to the extent permissible under the Code.
(c) Limitations on Matching Contributions for Highly
Compensated Associates.
(1) General. The Average Actual Matching Percentage for
Members who are Highly Compensated Associates for any Plan Year shall not
exceed the greater of
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(A) the Average Actual Matching Percentage for Members who
are Nonhighly Compensated Associates for such Plan Year multiplied by 1.25, or
(B) the lesser of (i) the Average Actual Matching Percentage
for Members who are NonHighlyy Compensated Associates for such Plan Year
multiplied by 2, or (ii) the Average Actual Matching Percentage for Members who
are NonHighlyy Compensated Associates plus 2 percentage points, or such smaller
number of percentage points as prescribed by the Secretary of the Treasury.
(2) Special Rules.
(A) Other Plan or Arrangementss. For purposes of this
Section 3.3(c), the Actual Matching Percentage for any Member who is a Highly
Compensated Associate for the Plan Year and who is eligible to have "employee
contributions" (within the meaning of Code Section 401(m)) or "matching
contributions" (as described in Code Section 401(m)(4)) allocated to his account
under two or more plans or arrangements described in Code Section 401(a) or
Section 401(k) that are maintained by a Related Employer shall be determined as
if all such contributions were made under this Plan. If this Plan satisfies the
requirements of Code Section 410(b) only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of Code Section
410(b) only if aggregated with this Plan, then this Section 3.3(C) shall be
applied by determining the Actual Matching Percentages of Members as if all such
plans were a single plan.
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(B) Other requirements. The determination and treatment of
the Matching Contributions and the Actual Matching Percentage of any
Member shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
(C) Multiple Use Limitation. The Company shall reduce the
Actual Matching Percentages of all Highly Compensated Associates
(beginning with the highest of such percentages) to the extent required
under Code Section 401(m) and the regulations issued under that section
to prevent multiple use of the alternative test described in Section
3.1(c) for Before-Tax Contributions and in this Section 3.3(c) for
Matching Contributions in the same Plan Year. Any such reduction shall
be treated as an Excess Aggregate Contribution.
(3) Distribution or Forfeiture of Excess Aggregate
Contributions. Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions made for any Plan Year on behalf of Highly Compensated
Associates, plus any investment gain and minus any investment loss allocable to
such Excess Aggregate Contributions, shall be forfeited (to the extent
forfeitable under Section 6.1(a)) or distributed to such Participants (to the
extent not so forfeitable) from the Accounts of such Highly Compensated
Associates no later than the last day of the immediately following Plan Year.
Such distributions or forfeitures shall be made from the Accounts of such Highly
Compensated Associates in amounts determined under the following method: the
Actual Matching Percentage of the Highly Compensated
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Associate with the highest Actual Matching Percentage shall be reduced to equal
the Actual Matching Percentage of the Highly Compensated Associate with the
next highest Actual Matching Percentage; provided, however, that if a lesser
reduction will enable the Plan to satisfy the limits set forth in Section
3.3(c)(1), only this lesser reduction shall be made. This process shall be
repeated until the Plan satisfies the limits set forth in Section 3.3(c)(1)
and the Excess Aggregate Contributions have been distributed or forfeited in
full. Amounts forfeited by Highly Compensated Associates under this Section
3.3(c) shall become part of the Matching Contribution for the Plan Year in
which the forfeiture is made in accordance with this Section 3.3.
(4) Determination of Investment Gain or Loss. Excess
Aggregate Contributions shall be adjusted for investment gain or loss, and such
adjustment shall be determined by the Company in accordance with this Section
3.3(c)(4).
(A) For the Plan Year during which such Excess Aggregate
Contributions were made, such adjustment shall be the product of (i) the ratio
of Excess Aggregate Contributions invested in such investment fund to the sum
of all Accounts and Excess Aggregate Contributions invested in such investment
fund for the Plan Year and (ii) the actual earnings of such investment fund for
such Plan Year.
(B) For the period between the last day of such Plan Year
in which the Excess Aggregate Contributions were made and the last day of the
month preceding the date of the refund ("Gap Period"), the adjustment shall be
an amount
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equal to the product of (i) the sum of such Excess Aggregate
Contributions plus or minus the adjustment determined under (A) above
and (ii) the rate of return for the Trustee's short term investment
fund for the Gap Period.
(C) For Plan Years beginning on or after January 1, 1992,
Section 3.3(c)(4)(B) shall not apply and Excess Aggregate
Contributions shall not be adjusted for investment gains or losses
for the Gap Period.
(5) Correction of Family Members. In the case of a Highly
Compensated Associate whose Actual Matching Percentage is determined under the
family aggregation rules in Section 1.3(a), the determination of the amount of
such Associate's Excess Aggregate Contributions to be forfeited or distributed
shall be accomplished by reducing the Actual Matching Percentages as set forth
under Section 3.3(c)(3) and allocating the Excess Aggregate Contributions for
the family group among all family members in proportion to the Matching
Contributions of each such family member which have been taken into account to
determine such Actual Matching Percentage.
3.4. Profit Sharing Contributions. Subject to the limitations
set forth in Section 4.4, the Board acting in its discretion shall determine the
amount, if any, which each Employing Company shall contribute as a Profit
Sharing Contribution to the Fund for each Plan Year.
3.5. Member Contributions. No contributions shall be made
under this Plan by Members other than through Before-Tax
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Contributions made by payroll deduction and Rollover Contributions.
3.6. Account Investments.
(a) General. Except as provided in Section 3.6(b), each
Member and each Beneficiary shall have the right effective as of January 1 and
July 1 of each Plan Year to direct the investment of contributions made to his
Account and the balance in his Account, subject to the terms and conditions of
this Section 3.6, in the Stable Income Fund, the Balanced Investment Fund and,
subject to the terms and conditions of Section 9, in Insurance Contracts and
each other sub-fund, if any, in effect under the Fund and available for the
investment of such contributions and Accounts.
(b) Elections. Except as otherwise provided in this Section
3.6(b), each Member and Beneficiary shall have the right to elect how the
investment of his Account shall be divided between the investment funds
maintained under Section 3.6(a), provided he timely files a properly completed
Election Form in accordance with the procedures established by the Company and
communicated in writing to Members on a timely basis. Each election by a
Member shall cover both the contributions to be credited to his Account (other
than for the purchase of an Insurance Contract) after the effective date of
such election and the balance in such Account and shall be made in writing,
shall specify (in 25% increments) how such contributions and Account shall be
invested between such investment funds, shall be signed by the Member and shall
be filed by the Member with the Company on the appropriate Election Form on or
before the deadline set by the Company. Once
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an election is made, that election shall continue in effect until such election
is revised in accordance with the rules under this Section 3.6. Elections with
respect to subaccounts that are fully vested can be revised after a Member's
employment as an Associate terminates. The non-vested subaccounts of Members
whose employment as an Associate has terminated and the Accounts of Members for
whom no investment election is in effect under this Section 3.6(b) (together
with all contributions to such Accounts) shall be invested automatically in the
Stable Income Fund.
(c) Investment Mix Alternatives. Contributions to be credited
to an Account (other than for the purchase of an Insurance Contract) after the
effective date of an election and the balance in such Account may be divided
for investment purposes in accordance with such rules as established from time
to time by the Company.
(d) Effective Date. An election shall be initially made or
subsequently modified in accordance with the procedures established by the
Company and communicated to Members on a timely basis. An election shall
remain in effect until modified or until the Member's Account no longer exists.
The Trustee shall effect the asset transfers required to implement such
elections and to allocate investment gains and losses to such transferred
assets in accordance with such administrative procedures as the Company deems
reasonable and equitable.
(e) Timeliness and Election Procedures. The Company from time
to time shall establish and shall communicate in writing to Members such
reasonable deadlines, rules and
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procedures for making the investment elections described in this Section 3.6.
(f) Former Associates and Beneficiaries. A non-vested
subaccount maintained for the benefit of a member who is a former Associate
shall be invested in the Stable Income Fund. Fully-vested subaccounts
maintained for the benefit of a Member who is a former Associate or a
Beneficiary shall be invested as elected by such former Associate or
Beneficiary in accordance with this Section 3.6.
(g) Company Securities. No securities issued by the Company or
any Related Employer shall be purchased by the Fund after December 31, 1989.
Section 4.
ALLOCATIONS TO ACCOUNTS
4.1. Year End Allocations.
(a) Top Heavy Determination. The Company as the first
step in the Plan Year end allocations shall determine whether this Plan is "top
heavy" under Section 11.11 and, if this Plan is "top heavy", shall proceed with
the allocations under this Section 4.1 as modified by Section 11.11(c)(1).
(b) Allocation of Adjustment, Before-Tax Contributions
and Matching Contributions. The Company as the second step in the Plan Year
end allocations shall perform the allocations called for as of each Valuation
Date under Section 4.3.
(c) Forfeitures.
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(1) General. The Company as the third step in the Plan
Year end allocations shall effect all Forfeitures called for under this
Plan for such Plan Year.
(2) Profit Sharing Contributions. Subject to the
limitations set forth in Section 3 and Section 4.4, the Company as the
fourth step in the Plan Year end allocations shall allocate, the
Forfeitures attributable to the Profit Sharing Accounts of former Members
of each Employing Company for the Plan Year among the Profit Sharing
Accounts of Members who are employed as Eligible Associates by such
Employing Company as of such Valuation Date and who completed at least
1,000 Hours of Service during such Plan Year in the same proportion that
the Compensation of each such Member bears to the total Compensation of all
such Members for such Plan Year.
(3) Matching Contributions. All Forfeitures attributable
to Matching Contributions shall be applied to reduce Matching
Contributions in accordance with Section 3.3.
4.2. Profit Sharing Contribution. Subject to the
limitations set forth in Section 3 and Section 4.4, the Company as of each
September 30 or December 31 Valuation Date (whichever allocation date the Board
acting in its discretion picks) shall allocate each Employing Company's Profit
Sharing Contribution for the Plan Year which includes such date among the
Accounts of Active Members employed by such Employing Company as follows:
(1) First, the Company shall allocate an amount equal to the
lesser of (i) the Profit Sharing Contribution or (ii)
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the Integration Amount for the Plan Year among the Active
Members' Profit Sharing Accounts in the same proportion that the
sum of the Fiscal Year Compensation and the Excess Compensation
of each Active Member for such Plan Year bears to the sum of the
total Fiscal Year Compensation and the total Excess Compensation
of all such Active Members for such Plan Year; and
(2) Second, the Company shall allocate the balance, if any,
of each Employing Company's Profit Sharing Contribution among
the Active Members' Profit Sharing Accounts in the same
proportion that each Member's total Fiscal Year Compensation for
such Plan Year bears to the total Fiscal Year Compensation of
all Active Members for such Plan Year.
4.3. Ouarterly Allocations.
(a) General. The Company as of each Valuation Date
shall perform the allocations called for in this Section 4.3.
(b) Before-Tax Contributions. Subject to the limitations
set forth in Section 3 and Section 4.4, the Company as the first step in the
allocations called for under this Section 4.3 shall complete the allocation of
the Before-Tax Contributions made on behalf of each Member under Section 3.1(a)
for the period beginning after the immediately preceding Valuation Date and
ending on the current Valuation Date to his Before-Tax Account.
(c) Allocation of Adjustment. The Company as the second
step in the allocations called for under this Section 4.3 shall determine the
amount of the Adjustment attributable to the Stable Income Fund and Balanced
Investment Fund and each other sub-fund,
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if any, then in effect under the Fund other than the Loan Fund for the period
beginning after the immediately preceding Valuation Date and ending on the
current Valuation Date and shall then allocate the Adjustment attributable to
each sub-fund among the Accounts invested in such sub-fund (other than
non-vested subaccounts of Members who have incurred a separation from service in
accordance with Code Section 401(k)(2)(B)) in the proportion that the balance of
each such Account invested in such sub-fund (after deducting 50% of the
Before-Tax Contributions allocated to such Account for the period beginning
after the immediately preceding Valuation Date) bears to the total balance of
all Accounts (other than non-vested subaccounts of former Members) invested in
such sub-fund (after deducting 50% of all Before-Tax Contributions allocated to
such sub-fund for the period beginning after the immediately preceding Valuation
Date). The non-vested subaccounts of former Members maintained under Section
5.4(b) shall not share in the allocation of the Adjustment.
(d) Matching Contributions. Subject to the limitations set
forth in Section 3 and Section 4.4, the Company as the third step in the
allocations called for under this Section 4.3 shall allocate the Matching
Contributions (including any Forfeitures applied to reduce an Employing
Company's obligation to make Matching Contributions under Section 3.3(a)) made
on behalf of each Member (who is an Eligible Associate as of such Valuation
Date) for the period beginning after the immediately preceding Valuation Date
and ending on the current Valuation Date to such Member's Matching Account.
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4.4. Other Limitations on Contributions and
Allocations.
(a) General Rule. The contributions made under
Section 3 and the allocation of such contributions to a Member's Account under
this Section 4 shall be subject to the limitations of this Section 4.4, which
limitations shall be applied, where applicable, by the Company in the
following order: the Code Section 415 limitations under S 4.4(b), the
individual dollar limitations under Section 3.1(b), the limitations on
Before-Tax Contributions for Highly Compensated Associates under Section
3.1(c), the limitations on Matching Contributions for Highly
Compensated Associates under Section Section 3.3(c), the limitations on
deductibility under Section 4.4(c), and withholding limitations under Section
4.4(d).
(b) Section 415 Limitations.
(1) General Rule. The term "limitation year" as
incorporated in Code Section 415 and the corresponding
regulations shall mean the Plan Year, and for any Plan Year
the sum of the amounts (including any Forfeitures) allocated
to a Member's Account for such Plan Year as Matching
Contributions, as Before-Tax Contributions and as Profit
Sharing Contributions, when added to the contributions which
are treated under Section 4.4(b)(2) as made on behalf of such
Member, shall not exceed the lesser of
(A) 25% of the Member's "compensation" for
such Plan Year as determined in accordance with Section
1.415-2(d) of the regulations under Code Section 415
and Code Section 401(a)(17),
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(B) $30,000 or, if greater, one-fourth of
the defined benefit dollar limitation set forth in Code
Section 415(b)(1) as in effect for such Plan Year, or
(C) such amount as the Company deems
necessary or appropriate to satisfy the requirements of
Code Section 415 (including any applicable transition
rules) in light of Section 4.4(b)(2) and the benefits,
if any, accrued and the contributions, if any, made
for such Member under any other employee benefit plan
maintained by a Related Employer.
(2) Coordination Rules.
(A) If a contribution is made
for any Plan Year by or for any Member under any other
defined contribution plan (as defined in Code Section
414(i)) maintained by any Related Employer, such
contribution shall be treated under this Section 4.4(b)
as made under this Plan.
(B) If a defined benefit plan (as
defined in Code Section 414(j) is adopted or maintained
by any Related Employer under which a benefit is
accrued on behalf of a Member under this Plan, any
adjustment required to satisfy the requirements of
Code Section 415 as a result of HIS participation in
such plan and in this Plan shall be made exclusively
in such defined benefit plan.
(C) Contributions allocated to an
"individual medical benefit account" described in Code S
415(l) and contributions credited under a welfare
benefit fund
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maintained by any Related Employer for any year to a
reserve for post-retirement medical benefits for a
Member who is a "key employee" within the meaning of
Code Section 416(i) shall be treated as a contribution
made on his behalf under this Plan when, and to the
extent required under Code Section 415 or Code
Section 419A(d).
(3) Corrections. If the Company determines that the
allocation of contributions or Forfeitures to a Member's
Account will exceed the limitations set forth in this
Section 4.4(b) for any Plan Year, the Company in lieu of
such allocation shall transfer any such excess from his
Account to a suspense account, and amounts credited to such
suspense account thereafter shall be applied in full to
offset the Matching Contributions and Profit Sharing
Contributions made in the following Plan Year (and
succeeding Plan Years) in accordance with Section 3.3 and
Section 3.4. No additional Matching Contributions or
Profit Sharing Contributions shall be made by the Employing
Company while there is a balance credited to such suspense
account. No investment gains or losses shall be allocated to
such suspense account and, if any amount remains in a suspense
account upon the termination of this Plan, such amount
automatically shall revert to the Employing Company.
(c) Limitations on Deductibility. The sum of the
Profit Sharing Contributions, Matching Contributions and Before Tax
Contributions allocated to Members' Accounts for any year shall not exceed the
amount allowable as a deduction for such
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year for federal income tax purposes for contributions to this Plan.
(d) Withholding Obligations and Account Balance.
Any distributions to or forfeitures by a Member which are required under S 3 or
this S 4.4 shall not exceed the value (as of the date of such distribution or
forfeiture) of his Before-Tax Account, his Matching Account, or his Profit
Sharing Account, whichever is applicable, and the amount of any such
distributions shall be reduced as the Company deems necessary or appropriate to
satisfy any applicable tax withholding requirements with respect to such
distributions.
4.5. Allocation Corrections. If an error or
omission is discovered in any Account, the Company shall make an appropriate
equitable adjustment in order to remedy such error or omission as of the Plan
Year in which the error or omission is discovered.
Section 5.
PLAN BENEFITS
5.1. Retirement Benefit. The Matching Account,
Profit Sharing Account and Transfer Account, if any, of an Associate shall
become vested no later than the date he reaches his Normal Retirement Age,
provided he is an Associate on such date, and his Account shall be paid to him
in accordance with Section 6. Any Member who remains an Eligible Associate
after he reaches his Normal Retirement Age shall remain eligible to continue to
participate in this Plan until the date he actually retires and his Account
shall be paid in accordance with Section 6.
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5.2. Disability Benefit.
(a) Full Vesting. In order to compensate for
disability and to provide a measure of security to the disabled Member and his
family, the Matching Account, Profit Sharing Account and Transfer Account, if
any, of an Associate whose employment with a Related Employer is terminated by
reason of being disabled shall become fully vested on the date his employment is
so terminated, and his Account shall be paid to him in accordance with Section
6.
(b) Definition. A Member shall be treated as
disabled for purposes of this Section 5.2 if the Company determines that he is
unable to engage in any substantially gainful activity at his most recent level
of Compensation or competence and responsibility as an Associate on account of
any medically determinable physical or mental impairment which has continued
for not less than 6 consecutive months and which can be expected to result in
death or to be of continued and indefinite duration. The Company may consider
whether a person is disabled upon its own motion or upon the written request of
such person and shall base its determination on a consideration of all the
facts and circumstances which it deems pertinent, including reports from one or
more licensed physicians or psychiatrists appointed by the Company to examine
the Associate. Any determination by the Company of whether a person is
disabled for purposes of this Plan shall be conclusive.
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5.3. Death Benefit.
(a) Full Vesting for Associates. If a Member
dies while he is an Associate, his Matching Account, Profit Sharing Account and
Transfer Account, if any, shall become fully vested on the date of his death,
and the Account of each deceased Member shall be paid to his Beneficiary in
accordance with Section 6.
(b) Beneficiary. The term Beneficiary means the
person or persons so designated in writing by a Member on a properly completed
Election Form which he delivers to the Company before his death; provided,
however, if a Member designates as his Beneficiary a person other than the
person who is his spouse on his date of death and the Company reasonably
determines (from the Company's records or from evidence timely furnished by the
person who claims to be such spouse) that he had a spouse on his date of death,
the Company shall disregard the Beneficiary designation which the Member had
made and shall treat such spouse as his Beneficiary under this Plan unless such
spouse specifically consents on an Election Form in writing before a notary
public to the specific Beneficiary designation made by the Member (or such
spouse had expressly consented to any designations made by the Member without
any requirement of further consent by such spouse) or unless such designation is
otherwise permissible under federal law. If (a) no such designation is made,
(b) no person so designated survives the Member, or (c) if after checking his
last known mailing address, the whereabouts of the person so designated is
unknown and no death benefit claim is submitted to the Company by such person
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within one year after the date of the Member's death, the Member's Beneficiary
shall be
(1) the Member's surviving spouse or, if there is no
surviving spouse,
(2) the personal representative of such Member, if any has
qualified within one year from the date of the Member's death or, if
no personal representative has so qualified,
(3) any heirs at law of the Member (as determined under the
laws of the state of Alabama by the Company) whose whereabouts are
known by the Company.
If no Beneficiary is identified and located by the end of the two year period
beginning on the date of death of the Member, the Company may elect to apply to
a court of applicable jurisdiction to determine when and to whom the deceased
Member's Account should be paid, and payment shall be made in accordance with
such judicial determination, or the Company may take such other action or
inaction regarding such Account as the Company in the exercise of its absolute
discretion deems appropriate and permissible under applicable law. Finally, the
Beneficiary of a deceased Member shall have the right to designate his own
Beneficiary under this Section 5.3(b) without regard to any of the rules
whatsoever in this section which operate in favor of a spouse.
5.4. Vested Benefit.
(a) General Rule. The vested portion of the Account of a
Member who as of the date of his separation from service (within the meaning of
Code Section 401(k)(2)(B)) as an Associate is
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ineligible for any other benefit payment under this Plan shall be payable as a
result of such separation and shall be paid in accordance with Section 6.
(b) Vesting Schedule. A Member's Before-Tax Account,
Rollover Account and Vested Account, if any, shall be vested at all times and
his Matching Account, Profit Sharing Account and Transfer Account, if any, shall
be vested upon his completion of at least 5 Years of Service. If a Member fails
to complete at least 5 Years of Service, his Profit Sharing Account and Transfer
Account, if any, shall be forfeited as of the last day of the Plan Year which
includes the Member's fifth consecutive Break in Service, and his Matching
Account shall be forfeited as of the last day of the Plan Year in which the
Member incurs a separation from service in accordance with Code Section 401(k)
(2)(B)).
If a former Associate is reemployed as an Associate before he
has 5 consecutive Breaks in Service and his Matching Account had been treated
as a Forfeiture under this Section 5.4(b), the Company shall restore the dollar
amount of his Matching Account which was forfeited no later than as of the end
of the Plan Year in which such former Associate is reemployed.
(c) Years of Service. For purposes of Section 5.4(b), an
Associate's Years of Service shall not include service in:
(1) all Plan Years which precede five consecutive Breaks in
Service, if the Associate's vested percentage in his Matching Account, Profit
Sharing Account and Transfer Account, if any, was zero at all times during such
prior Plan Years;
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(2) any Year of Service completed by a Member prior to
September 1, 1985 which would have been disregarded for purposes of determining
the vested percentage of his Account under the terms of this Plan as in effect
before September 1, 1985; and
(3) for purposes of determining the vested percentage of
an Account established for a Member who is reemployed after his employment has
terminated and after he has a Break in Service, any Plan Year which ended
before such Break in Service, unless in a Plan Year following such Break in
Service he completes 1,000 or moire Hours of Service as an Associate.
(d) Plant Closing or Sale
Any Member who is an Associate at a Company plant at the time
the Company announces that such plant will close and who ceases to be an
Associate at such closing shall have a vested interest in his Account at the
time he ceases to be an Associate. If such a. person thereafter again becomes
an Eligible Associate, a new Account shall be established for him and his
vested interest in his new Account shall be determined in accordance with the
provisions of this Section 5.4.
Any Member who is an Associate at a Company plant at the time
the Company announces the sale of all, or substantially all, of the operating
assets of such plant (except to a Related Employer) and who ceases to be an
Associate as a result of such sale shall have a vested interest in his Account
at the time he ceases to be an Associate. If such a person thereafter again
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becomes an Eligible Associate, a new Account shall be established for him and
his vested interest in his new Account shall be determined in accordance with
the provisions of this Section 5.4.
5.5. Pre-retirement Withdrawals.
(a) Hardship Withdrawal. A Member shall have the right to request
a withdrawal of all or any portion of his Before-Tax Account (other than the
investment gains allocated to such Before-Tax Account) at any time before he
has a separation from service under Section 5.4, and the Company shall grant
such request if, and to the extent that, the Company determines (based on all
the relevant facts and circumstances and in accordance with the regulations
under Code Section 401(k)) that the withdrawal is necessary to satisfy an
"immediate and heavy financial need" of the Member.
An "immediate and heavy financial need" shall mean
(1) medical expenses described in Code Section 213(d)
previously incurred by the Member, his spouse or his dependents (as
defined in Code Section 152) or necessary for these persons to
obtain medical care described in Code Section 213(d).
(2) the purchase (excluding mortgage payments) of a
principal residence for the Member,
(3) the payment of tuition and related educational fees for
the next 12 months of post-secondary education for the Member, his
spouse, his children or his dependents,
(4) the prevention of the eviction of the Member from his
principal residence or foreclosure on the mortgage of the Member's
principal residence, or
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(5) such other events as the Internal Revenue Service
deems appropriate for a hardship distribution from a plan intended
to satisfy the requirements of Code Section 401(k).
A withdrawal shall be deemed to be necessary to satisfy such
immediate and heavy financial need only if
(1) the withdrawal is not in excess of the amount of such
need, and
(2) the Member has obtained all distributions (other than
hardship distributions) and all nontaxable loans currently available
from this Plan and all other plans maintained by the Company.
The amount of the withdrawal may include any amounts necessary
to pay any federal, state or local income taxes or any penalties under Code
Section 4975 reasonably anticipated to result from the withdrawal.
A Member who receives a withdrawal for a financial hardship
under this Section 5.5(a) shall not be eligible to make any Before-Tax
Contributions under Section 3.1(a) for the twelve month period following the
date of such withdrawal. Further, such Member's Before-Tax Contributions for
the calendar year immediately following the calendar year in which such
withdrawal occurs shall not exceed the dollar limitation under Code Section
402(g) for such calendar year (as described in Section 3.1(b)) reduced by the
amount of his Before-Tax Contributions for the immediately preceding calendar
year.
Any request for a withdrawal for a financial hardship shall be
made in writing and shall set forth in detail the nature
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of such hardship and the amount of the withdrawal needed as a result of such
hardship, and the Member shall supplement such request with such additional
information as the Company requests consistent with this Section 5.5(a). The
amount of any hardship withdrawal under this Section 5.5(a) shall be deducted
from the Member's Before-Tax Account at the time such hardship withdrawal is
made.
Finally, the hardship withdrawal rules set forth in this
Section 5.5(a) are intended to satisfy the "safe harbor" requirements under the
Code Section 401(k) regulations as in effect on January 1, 1990, and the
Company shall have the power to modify these rules and to implement additional
rules to the extent permissible under such regulations as such regulations
might be amended from time to time.
(b) Special 59-1/2 Rule. If a Member has reached at least
age 59-1/2, he shall have the right to request a withdrawal of all or any
portion of his Before-Tax Account at any time before he has a separation from
service under Section 5.4, and the Company shall grant such request if, and to
the extent that, the amount so requested does not exceed the value of the
Member's Before-Tax Account as determined as of the Valuation Date immediately
preceding the date as of which the withdrawal shall be made, less the amount of
any distributions made from such Account since that Valuation Date. The
Company shall direct that the Trustee make the distribution, and such
distribution shall be made as soon as practicable after the request is approved
and
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shall be paid in accordance with this Section5.5(b) to or on behalf of the
member in a lump sum.
5.6. Loans.
(a) Request. A loan may be made under this Plan to each Member or
to each Beneficiary who is a "party in interest" (as defined in ERISA Section
3(14)), from his Before-Tax Account on or after January 1, 1991, if he properly
completes and delivers to the Company a loan application on a form provided by
the Company for this purpose. All such loans shall be made on a reasonably
equivalent basis (within the meaning of Section 4975(d)(1)(A) of the Code and
Section 408(b)(1)(A) of ERISA) subject to the conditions set forth in Section
5.6(b).
(b) Conditions.
(1) No loan shall be available to a Member under this Section
5.6 if he is eligible for a hardship withdrawal due to "immediate and
heavy financial need" as described in Section 5.5(a).
(2) The principal amount of a loan made under this Plan to a
Member or Beneficiary together with the outstanding principal amount of any
loan made under any plan maintained by any Related Employer which satisfies the
requirements of Section 401 of the Code shall not exceed the lesser of (A), (B)
or (C), where
(A) equals 50% of the vested portion in his Account reduced
by the outstanding balance of any existing loan;
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(B) equals 75% of his Before-Tax Account reduced by the
outstanding balance of any existing loan (excluding the portion of such
Account attributable to cash surrender values in any Insurance Contracts);
and
(C) equals $50,000, reduced by the excess (if any) of (i) the
highest outstanding balance of any previous loans from the Plan and any
other plan maintained by a Related Employer during the one-year period
ending immediately before the date on which such current loan is made over
(ii) the outstanding balance of such previous loans on the date on which
such current loan is made;
(3) The principal amount of a loan made under this Plan shall not be
less than $1,000;
(4) Each loan shall be made for a period of 54 months or less
("short-term loan") unless the loan is made as a home mortgage which qualifies
for the exception to the 5 year repayment rule in Code Section 72(p) ("home
mortgage loan"), and a home mortgage loan may be made for a period of 15 years
or less;
(5) Any loan made to a Member or Beneficiary under this Plan shall be
secured by 50% of the vested portion in his Account;
(6) No more than one short-term loan and one home mortgage loan shall be
made under this Plan to a Member or Beneficiary at any one time;
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(7) The interest rate for a loan made under this Plan shall be set by
the Trustee at a rate commensurate with the prevailing interest rate charged by
lending institutions for similar commercial loans at the time the loan is
approved by the Company;
(8) A loan made under this Plan shall require that periodic repayment be
made through payroll withholding while a Member is a paid Associate and through
such other means as the Company deems appropriate for a Beneficiary or a Member
who is not a paid Associate; provided that (A) the loan repayment schedule shall
require the repayment of such loan in level monthly installments reflecting
principal and interest, (B) a loan may be repaid in full at any time prior to
the expiration of the installment period of such loan by a single sum payment to
the Trustee of the outstanding principal balance then due plus any accrued but
unpaid Interest, and (C) the Employing Company shall transfer all such
repayments made to the Employing Company to the Trustee as soon as practicable
after the Employing Company deducts them or receives them;
(9) The loan shall become due and payable in full if
(A) a Member's employment as an Associate terminates for any
reason whatsoever,
(B) if the Trustee concludes that the Member or Beneficiary no
longer is a good credit risk, or (C) if his obligation to repay the loan
has been discharged through a bankruptcy or any other legal
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process or action which did not actually result in payment in full and, if
such loan is not actually repaid in full, such loan shall be cancelled on
the Trustee's books and records and the amount otherwise distributable to
such Member or Beneficiary under this Plan shall be reduced by the
principal amount of the loan then due plus any accrued but unpaid interest
as determined without regard to whether the loan had been discharged
through a bankruptcy or any other legal process or action which did not
actually result in payment in full;
(10) For purposes of determining the maximum permissible loan
amount under Section 5.6(b)(2)(A), the balance of a Member's or
Beneficiary's Rollover Account, if any, shall be deemed to be zero and
such Rollover Account shall be used as security for any such loan only
to the extent permissible under applicable law; and
(11) The Company shall be responsible for the administration of
the loan program under this Plan, and any loan made under this Plan shall
be subject to such other terms, conditions and procedures as the Company
from time to time shall deem necessary or appropriate, including, but not
limited to, executing an application, promissory note, security agreement
and, if applicable, a financing statement approved by the Company, paying
any applicable loan fee as set by the Company with his application for the
loan, and reimbursing this Plan for any other reasonable expenses
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which this Plan incurs to make and service such loan. Any written loan
procedures and loan documents approved by the Company hereby are expressly
incorporated by reference as part of this Plan.
(c) Accounting. A loan to a Member or Beneficiary under this
Plan shall be made from his Before-Tax Account as of any date acceptable to
the Company and the Trustee, and such loan shall be an asset of such
subaccount and the interest paid on such loan shall be credited exclusively to
such subaccount in accordance with the rules set forth in this Section 5.6(c).
The principal amount of such loan at the time such loan is made shall be
deducted (for statement reporting purposes) from the Member's or Beneficiary's
Before-Tax Account as of the date the loan is made from the Account maintained
for such Member or Beneficiary, and such principal amount shall be credited to
a special "loan account" for such member or Beneficiary in the Loan Fund from
which (for statement reporting purposes) such loan shall be made. The
principal and interest payments thereafter made by the Member or Beneficiary
on his loan shall be credited when made directly to his special "loan account"
in the Loan Fund, and such credits shall be transferred periodically by the
Trustee to his Before-Tax Account and invested among the investment funds in
accordance with the investment election then in effect for such Member or
Beneficiary. A Member's or Beneficiary's interest in his special "loan
account" as of any Valuation Date shall (after the credit transfer called for
under this Section 5.6(c)) equal the outstanding principal payments and
accrued interest then due
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under his loan. Solely for purposes of sharing in the investment gains and
losses of the Fund, credits which are transferred from a Member's or
Beneficiary's special "loan account" under this Section 5.6(c) to a Member's or
Beneficiary's Before-Tax Account shall be treated as a Before-Tax Contribution
to such Account and the deduction of the principal amount as of the date the
loan is made shall be treated as a distribution from such Account. A Member's
or Beneficiary's special "loan account" shall be cancelled when his loan is
paid in full or when the note which evidences such loan is distributed as part
of the distribution of his Account.
(d) Special Powers. The Trustee shall have the power to take such
action as the Trustee deems necessary or appropriate to stop the payment of an
Account to or on behalf of a Member who fails to repay a loan (without regard
to whether his obligation to repay such loan had been discharged through a
bankruptcy or any other legal process or action) until his Account has been
reduced by the principal due (without regard to such discharge) on such loan
or to distribute the note which evidences such loan in full satisfaction of
any interest in such Account which is attributable to the unpaid balance of
such loan.
5.7. Missing Claimant. If no Beneficiary of a deceased Member is
identified and located pursuant to the procedure set forth in Section 5.3(c),
or if an Account of a Member becomes payable under Section 5 by reason other
than his death and the Company is unable to locate such Member after sending
written notice to his last known mailing address and the last known mailing
address of any Beneficiary he may have designated, the
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Company may treat the Account of such Member as a Forfeiture as of the last day
of the Plan Year which includes the fifth anniversary of the date the Account
of such Member first became payable or as of the last day of any subsequent
Plan Year. However, if such missing Beneficiary or member in a subsequent Plan
Year files a written claim with the Company for such Account while this Plan
remains in effect and proves to the satisfaction of the Company his identity as
the person then entitled to such Account under the terms of this Plan, the
Company shall direct that the Trustee pay to such Beneficiary or Member an
amount which equals dollar for dollar the amount which had been treated as a
Forfeiture and which was attributable to his vested interest in his Account.
Such payment shall be deducted from Forfeitures under this Plan, and no
Forfeitures thereafter shall be reallocated or applied to reduce Matching
Contributions as provided under Section 4.1(c) until such payment has been
made in full. If this Plan is terminated and the Company (after taking the
action described in this Section 5.7) cannot locate a Member or Beneficiary,
then such person shall be presumed dead and, if there is no Beneficiary for
such person or such Beneficiary cannot be located, all the Members in this Plan
on the date of such termination shall be treated as such person's Beneficiary
and such Member'S Account shall be divided equally among such Members.
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Section 6.
BENEFIT DISTRIBUTION
6.1. Normal Payment Form. Unless a Member otherwise elects in
accordance with Section 6.3, the vested portion of the Account of a Member
shall be paid only to him or, in the case of his death, only to his
Beneficiary, by a cash payment in a single lump sum.
6.2. Optional Forms of Benefits. Except as provided in Section
6.4 and subject to Section 6.3, each Member may elect to have the vested
portion of hisAccount paid to him in accordance with the forms available
under the Plan as in effect on December 31, 1989. If any such form requires
payment in the form of an annuity, the Company shall direct that payment be
made through the purchase of an annuity contract from an insurance company.
If the annuity purchase price for any annuity contract selected by the Company
is unacceptable to a Member or his Beneficiary, such Member or Beneficiary
shall (subject to the ERISA prohibited transaction rules) have the right to
request that the purchase be made from the insurance company of his choice at
the price and other terms negotiated by such Member.
A Member may also elect to have the vested portion of his Account
paid to him in a series of monthly installments over a specified period (in
accordance with the minimum installment rules set forth below).
(a) The period over which installments shall be paid shall not
exceed
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(1) When such installments are first payable to a Member,
(A) such Member's life expectancy, or
(B) the joint life and last survivor expectancy of the
Member and the Member's specifically designated individual
Beneficiary;
(2) When such installments are first payable to a
specifically designated individual Beneficiary, the life expectancy of
such Beneficiary;
(3) When such installments are first payable to a
Beneficiary other than a specifically designated individual Beneficiary,
5 years; and
(4) When such installments are first paid to a Member who
dies before all such installments have been paid, the period remaining at
the Member's death.
(b) Notwithstanding the installment period elected, each monthly
installment for each Plan Year shall not be less than the greater of (1) $50, or
(2) the quotient obtained by dividing the vested balance of an Account at the
beginning of such Plan Year by the life expectancy (expressed in months) of the
Member or his specifically designated individual Beneficiary (or the joint life
expectancy, expressed in months, of the Member and his specifically designated
individual Beneficiary), which life expectancy (or joint life expectancy) shall
be determined by use of the return multiples set forth in Section 1.72-9 of the
regulations under Section 72 of the Code.
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(c) The life expectancy of a Member or his specifically designated
individual Beneficiary (or the joint life expectancy of a Member and his
specifically designated individual Beneficiary) may be recalculated no more
frequently than annually during any installment period, provided his Beneficiary
is his spouse.
(d) If a Member's specifically designated individual Beneficiary is not
his spouse, (1) such specifically designated individual Beneficiary's life
expectancy shall be determined as of the date as of which such installments are
scheduled to begin under this Plan and thereafter such life expectancy shall be
decreased by the number of whole years which have passed since such date and (2)
such installments shall satisfy the applicable incidental death benefit
distribution requirements under Section 401(a)(9) of the Code.
(e) The Company shall have the right to distribute the remaining balance
of an Account in a lump sum, or otherwise to accelerate such distribution, if
this Plan is terminated or if the Member or, in the event of his death, his
Beneficiary requests such an accelerated distribution in writing.
6.3. Election Procedures and Timing.
(a) General. Subject to Section 6.3(b), a Member may elect on an
Election Form delivered to the Company at any time within the ninety-day period
ending on the date as of which payment is scheduled to begin under this Plan to
have his benefit paid in one of the optional benefit payment forms described in
Section 6.2.
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(b) Procedures. If a Member desires to elect an optional
form of benefit payment which is an annuity, the Company shall (consistent with
the regulations under Code Section 417) furnish to such Member within a
reasonable period of time before the date as of which payment is scheduled to
begin written notice of
(1) the terms and conditions of the benefit payment forms
described in this Section 6,
(2) a Member's right (subject to the written consent of such
Member's spouse) to elect an optional benefit payment form other than
a joint and 50% survivor annuity with his spouse as the joint
annuitant and the effect, if any, of such election,
(3) the right of a Member's spouse to negate his election of
an optional benefit payment form other than a joint and 50% survivor
annuity through a failure to consent in writing before a notary public
to such election,
(4) the Company's right to rely on a spouse's properly
executed and notarized consent to the payment of Plan benefits in one
of the optional forms other than a joint and 50% survivor annuity
described in Section 6.2, which consent shall be irrevocable with
respect to such spouse under this Plan, and
(5) a married Member's right to revoke an election that his
benefit be paid in a form other than a joint and 50% survivor annuity
with his spouse as the joint annuitant.
Any election or revocation of an election shall be made by delivering the form
provided for this purpose to the Company, and
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the last properly completed form delivered to the Company before the end of the
ninety-day period described in Section 6.3(a) shall control the payment of
benefits under this Plan.
6.4. Lump Sum Payments. If the vested portion of a Member's
Account is $3,500.00 or less, payment of such benefit shall automatically be
made in the form of a lump sum cash payment to the Member or, where applicable,
his Beneficiary, as soon as practicable after such Member separates from
service (within the meaning of Code Section 401(k)(2)(B)) as an Associate.
6.5. Distribution Deadlines.
(a) General Rule. Subject to the consent requirements under
Section 411(a)(11) of the Code and to Section 6.3(b), the payment of the vested
portion of a Member's Account which exceeds $3,500 shall be made, or shall
commence, as soon as practicable after the later of
(1) the thirtieth day following the Company's receipt of
written request for payment signed by the Member or by the Beneficiary
of a deceased Member, or
(2) for a Member who retires under Section 5.1 or whose
employment terminates for any reason other than death or disability,
the date he separates from service (within the meaning of Code Section
401(k)(2)(B)) as an Associate,
(3) for a Member whose employment is terminated by reason of
disability under Section 5.2, the date as of which the Company
determines that such Member first meets the requirements for a
disability benefit under this Plan, and
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(4) for a Beneficiary of a deceased Member, the thirtieth day
following the date of such Member's death.
(b) Statutory Deadlines.
(1) Member. The distribution of the vested portion of a
Member's Account shall be made to him, or shall commence, no later
than April 1 of the calendar year which follows the calendar year in
which he reaches age 70 1/2 unless the Secretary of the Treasury
determines that a later date is permissible.
(2) Beneficiary. If a distribution is first made to a
Member's Beneficiary, such distribution shall (regardless of any
request made by the Beneficiary) be made, or shall commence and shall
be completed, before the fifth anniversary of the date of the Member's
death unless such Beneficiary was an individual specifically
designated by the Member as such and such distribution began no later
than (A) one year after the Member's death or (B) the deadline set
forth in the regulations under Code Section 401(a)(9).
(c) Deferral of Benefit Payment
(1) If, on the date payment of a benefit is otherwise due to
be made, all allocations as of the immediately preceding Valuation
Date have not been completed, such payment shall be delayed if
necessary to avoid underpayment or overpayment until such allocations
have been completed.
(2) If payment of a benefit to a Member or Beneficiary is to
be made, in whole or in part, by the purchase and delivery to the
Member or Beneficiary of an annuity contract
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and the Company does not have sufficient time to provide for the
purchase of an annuity contract for such Member or Beneficiary which
shall provide for payments actually starting on the date payment of
such Member's or Beneficiary's benefit is otherwise to commence, the
payment of such benefit shall be made retroactive to such date. If
the payment of a benefit to a Member or Beneficiary is to be made, in
whole or in part, in the form of cash payments from the Fund and the
Company does not have sufficient time to cause such payment to be made
or started on the date such payment is otherwise to be made or
started, such payment or payments shall be made retroactive to the due
date.
6.6. Claim for Benefit. Subject to Section 6.4 and Section
6.5(b), the Company may require as a condition to the payment of any benefit
under this Plan that a claim for such benefit be filed in writing with the
Company on a form provided for that purpose, and all such claims (and any other
claims by a Member) shall be processed in accordance with the claims procedure
set forth in the summary plan description for this Plan.
6.7. Direct Rollovers.
(a) This Section 6.7 applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this Section
6.7, a distributee may elect, at the time and in the manner prescribed by the
Company, to have any portion of an eligible rollover distribution paid directly
to an eligible
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retirement plan specified by the distributee in a direct rollover.
(b) Definitions.
(1) Eligible rollover distribution. An eligible rollover
distribution is any distribution of all or any portion of the balance
to the credit of the distributee, except that an eligible rollover
distribution does not include:
(i) any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary,
or for a specified period of ten years or more;
(ii) any distribution to the extent such
distribution is required under Code Section 401(a)(9); and
(iii) the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
(2) Eligible retirement plan. An eligible retirement plan is
an individual retirement account described in Code Section 408(a), an
individual retirement annuity described in Code Section 408(b), an
annuity plan described in Code Section 403(a), or a qualified trust
described in Code Section 401(a), that accepts the distributee's
eligible rollover distribution. However, in
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the case of an eligible rollover distribution to the surviving spouse,
an eligible retirement plan is an individual retirement account or
individual retirement annuity.
(3) Distributee. A distributee includes an employee or
former employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Code Section 414(p), are distributees
with regard to the interest of the spouse or former spouse.
(4) Direct rollover. A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee.
Section 7.
NAMED FIDUCIARY
The Company shall be the named fiduciary responsible for the
control, management and administration of this Plan, and the Company, as the
named fiduciary, or a person designated by the Company to perform any
responsibility of the Company as the named fiduciary, may employ one or more
persons to render advice with respect to any responsibility the Company has
under this Plan or such person has by virtue of such designation.
Section 8.
ADMINISTRATION
8.1. Company. Except to the extent expressly set forth
elsewhere under this Plan, the Company shall be the "plan
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administrator" under ERISA and shall have the exclusive responsibility and
complete discretionary control over the operation, management and
administration of this Plan, with all powers necessary to enable it properly to
carry out such responsibility, including the power to construe this Plan and to
resolve all administrative, interpretative, operational, equitable and other
questions of any kind or description that shall arise under this Plan. The
Company shall (except as otherwise expressly set forth in this Plan) act
through its Chairman and Chief Executive Officer or his delegate, and the
Company's decisions on all matters within the scope of its authority shall be
final and binding upon all Associates, Members, former Members and
Beneficiaries. The Company may administer this Plan through a committee. All
actions, determinations or decisions of the committee on all matters within the
scope of its authority shall be final and binding upon all persons.
8.2. Records. The records of the Plan shall be maintained by
the Company.
8.3. Information from Others. Each Employing Companies'
officers, directors and agents shall be entitled to rely upon all information
and data in any certificate or report or other material prepared by any
actuary, accountant, attorney or other consultant or advisor selected by the
Company to perform services on behalf of this Plan and shall (to the extent
permissible under the Company's charter and by-laws and applicable law) be
indemnified and held harmless by the Company
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for any costs, expenses, losses, liabilities or assessments arising out of any
action taken or omitted by them in good faith in reliance upon the advice or
opinion of any such person and all action so taken or omitted shall be
conclusive upon each of them and upon all other persons interested in this Plan.
8.4. Indemnification. The Company (to the extent permissible
under the Company's charter and by-laws and applicable law) shall indemnify
each of its officers and Associates from and against any liability, assessment,
loss, expense or other cost of any kind or description whatsoever, including
legal fees and expenses, actually incurred by him on account of any action or
proceeding, actual or threatened, which arises as a result of his acting within
the scope of his authority on behalf of the Company under this Plan, provided
(1) such action or proceeding does not arise as a result of his own negligence,
willful misconduct or lack of good faith and (2) such protection is not
otherwise provided through insurance.
Section 9.
INSURANCE
9.1. Election. Any Member for whom a Before-Tax Account is
maintained may elect to have an Insurance Contract purchased on his behalf by
executing and filing with the Company an Election Form for such Insurance
Contract. Such Election Form shall specify the type of Insurance Contract
designated as permissible by the Company which such Member may elect to have
purchased on his behalf and shall also specify the amount of the contributions
to his Before-Tax Account which the Member wishes
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to have expended to pay the annual premiums payable for such Insurance Contract
each Plan Year; provided, that such amount shall not exceed the limits as set
forth in Section 9.5(a). Such Election Form shall promptly be forwarded to the
Trustee, and the Trustee shall thereupon, in accordance with the provisions of
this Section 9, purchase an Insurance Contract for such Member.
9.2. Provisions of Insurance Contracts. The Insurance
Contract purchased for a Member shall be in such aggregate face amount as may
be purchased from the insurer for an annual premium equal to the lesser of the
amount which the Member elected to have expended for such purpose in his
Election Form for an Insurance Contract or the aggregate amount available in
his Before-Tax Account for payment of annual premiums on an Insurance Contract
for such Member pursuant to Section 9.5(a). Any Insurance Contract purchased
for a Member shall provide that:
(a) Prior to the distribution of the Insurance Contract to
the Member pursuant to Section 9.5(c), all right, title, interest and
control of the Insurance Contract shall be vested in the Trustee and
the Trustee shall have power to surrender, transfer, change the
beneficiary, elect settlement options, or otherwise deal with such
Insurance Contract,
(b) If such Insurance Contract provides whole life coverage
as opposed to term coverage, dividends or refunds of any premium on
such Insurance Contract shall be accumulated at interest with the
insurer to be added to the Insurance Contract's cash surrender value,
to purchase paid
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up additions which may be converted to pay premiums, or otherwise to
be applied to premium payments at the direction of the Trustee, and
(c) Each Insurance Contract shall be dated January 1 or
July 1.
9.3. Subsequent Elections. On or before December 1 or June 1
of any Plan Year, a Member for whom an Insurance Contract has been purchased
may, by executing and filing an Election Form with the Company, direct that the
Trustee take any of the following actions, effective as of the following
January 1 or July 1:
(a) increase the amount which is to be used to pay premiums
on an Insurance Contract for such Member to an amount up to, but not
in excess of, the limits as set forth in Section 9.5(a);
(b) continue to pay premiums on an Insurance Contract
currently in force as such premiums become due, but purchase no
additional amounts of life insurance coverage under an Insurance
Contract currently in force;
(c) convert an Insurance Contract held by the Trustee into a
single premium paid-up policy in such face amount as may be purchased
with the cash value of such Insurance Contract and discontinue further
premium payments;
(d) discontinue further premium payments, surrender such
Insurance Contract for the cash surrender value thereof, and then
credit such Member's Account with such cash surrender value; and
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(e) surrender, hold, or convert such Insurance Contract in
such manner and continue or discontinue premium payments as the Member
may direct.
9.4. Substandard Risk. If the Trustee is advised by the
insurer that a Member is uninsurable or insurable only at substandard risk
rates or otherwise falls to comply with any requirement of the insurer for any
reason (including failure by the Company to have delivered to the Trustee an
executed Election Form for an Insurance Contract for such Member), no Insurance
Contract shall be purchased for such Member unless the Company shall have
delivered an executed Election Form for, and direct that the Trustee in writing
purchase, another type of Insurance Contract for such Member with a higher
premium because the Member is a substandard risk; provided, however, that no
Insurance Contract shall be purchased hereunder if such purchase would
adversely affect the qualified status of the Plan.
9.5. Amounts Expendable for Premiums.
(a) Limitation. Notwithstanding anything to the contrary in
this Section 9, if only ordinary life insurance protection has been purchased
for a Member, no premium shall be paid for such protection to the extent such
payment (together with all previous premium payments) would equal or exceed 50%
of the aggregate amount of Before-Tax Contributions credited to such Member's
Account since such Member became a Member. If only term life insurance
protection has been purchased for a Member, or term life protection and
ordinary life protection has been purchased for a Member, no premium shall be
paid for such
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protection to the extent such payment (together with 50% of all premiums, if
any, paid since such Member became a Member on ordinary life insurance
protection for such Member and the amount of all premiums paid since such
Member became a Member on term life insurance protection) would equal or exceed
25% of the aggregate amount of Before-Tax Contributions credited to such
Member's Account since such Member became a Member.
(b) Compliance with Limitation. If payment of the annual
renewal premiums becoming due on an Insurance Contract purchased for a Member
would violate the limitations set forth in Section 9.5(a), or if Before-Tax
Contributions are insufficient for any reason to make the premium payments, and
such Insurance Contract is not distributed or sold to such Member pursuant to
the provisions of Section 9.5(c), the Trustee shall
(1) surrender such Insurance Contract for the cash value,
invest the proceeds therefrom, and credit such Member's Account with
the amount equal to such proceeds;
(2) convert such Insurance Contract into a single paid-up
policy in the face amount or amounts purchasable with the cash
surrender value of such Insurance Contract;
(3) reduce the face amount or amounts of such Insurance
Contract so that the annual renewal premiums shall not violate the
requirements of Section 9.5(a); or
(4) take any one or any combination of the actions as
described in this Section 9.5(b).
(c) Sale or Distribution to Member. In the event that it
appears that it will otherwise be necessary to surrender (or
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convert) an Insurance Contract purchased for a Member pursuant to the
provisions of Section 9.5(b), the Company shall notify the Member in
writing. If the Member shall, within ten days after receipt of such
notice, advise the Company in writing that he does not wish to have
such Insurance Contract surrendered (or converted) the Company may, in
its discretion, instruct that the Trustee in writing either
(1) distribute to the Member as part of his benefit (when his
benefit otherwise becomes distributable under the terms of this Plan)
the Insurance Contract which the Member has indicated he prefers not
to have surrendered (or converted) or
(2) offer to sell to the Member the Insurance Contract which
the Member has indicated he prefers not to have surrendered (or
converted) for an amount equal to the cash surrender value thereof.
In determining which alternative is to be adopted, the Company may, but need
not, consult with the Member and shall not be bound by the wishes of the
Member. In the event alternative (2) is adopted and the offer is accepted by
the Member, the amount of the cash surrender value of the Insurance Contract
sold to the Member shall be credited to the Member's Before-Tax Account as of
the date of the Trustee's receipt of such amount from the Member. Any such
Insurance Contract which is not distributed or sold to the Member pursuant to
the provisions of this Section 9.5(c) shall be surrendered as provided in
Section 9.5(b)(1).
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(d) Premium Payments. Any amount applied by the Trustee to
payment of the premium on an Insurance Contract shall be charged to such
Member's Before-Tax Account.
9.6. Beneficiary of Insurance Contracts. The Trustee shall
the beneficiary of an Insurance Contract covering a Member and the proceeds of
each such Insurance Contract shall be payable to the Trustee. To the extent
that an Insurance Contract is purchased on the life of a Member's spouse or
children, the beneficiary of such Insurance Contract shall be the Member, to
the extent of the excess of the proceeds over the cash surrender value, if
any, at the time of the death of the insured, and the beneficiary of the
balance of the proceeds shall be the Trustee.
9.7. Reliance by Trustee. The Trustee shall be authorized to
rely absolutely upon any information supplied to him in accordance with this
Section 9 in obtaining and maintaining Insurance Contracts for Members.
9.8. Reliance by Insurer. Any insurer issuing an Insurance
Contract shall be entitled to rely solely upon the Trustee's signature for any
change made in the Insurance Contract or in the disposition or surrender of
such Insurance Contract.
9.9. Commencement of Coverage under Insurance Contracts.
Coverage under any Insurance Contract purchased for a Member shall not commence
unless and until the Insurance Contract applied for is actually issued to the
Trustee or put into effect in accordance with the rules of the insurer issuing
such Insurance Contracts.
9.10. Treatment of Insurance Contracts.
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(a) General Rule. Except as provided in Section 9.10(b), the
Trustee shall be advised of the day as of which any Member for whom an
Insurance Contract has been purchased ceases to be an Associate, and the
Trustee shall, promptly upon receipt of such notice surrender such Insurance
Contract for its cash surrender value. The amount of such cash surrender value
shall thereupon be credited to such Member's Account for ultimate use in
providing a benefit to such Member, his spouse or Beneficiary pursuant to the
provisions of Section 6.
(b) Election to Receive Distribution. If a Member for whom
an Insurance Contract has been purchased ceases to be an Eligible Associate,
such Member may elect to receive a distribution of any Insurance Contract
purchased for him in lieu of having such Insurance Contracts surrendered under
Section 9.10(a). Such election may be effected by such Member's execution and
delivery of an Election Form to the Company before the date he ceases to be an
Eligible Associate. Any election so made may be revoked at any time before the
first day of the calendar month during which payment of his benefit is to
commence by such Member's execution and filing an Election Form with the
Company. An election so revoked may be reinstituted at any time prior to the
first day of the calendar month during which payment of his benefit is to
commence in the same manner as an initial election may be made. The Trustee
shall as promptly as practicable be notified in writing of any such election,
or revocation or reinstitution of such an election. Any Member who has made an
election pursuant to this Section 9.10(b) which is still in effect on
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the first day of the calendar month during which payment of his benefit is to
commence shall be entitled to receive a distribution of such Insurance Contract
as he has elected to receive. Any such Insurance Contract which such a Member
has not elected to receive shall, on the first day of the calendar month during
which payment of such Member's benefit is to commence, be surrendered for its
cash surrender value, and such cash surrender value shall be credited to such
Member's Account for use in providing a benefit to such Member, his spouse or
Beneficiary, as the case may be, pursuant to Section 6.
Section 10.
AMENDMENT AND TERMINATION
10.1. Amendment. The Company reserves the right at any time
and from time to time to amend this Plan through action of the Board, and any
such amendment shall be binding upon all Employing Companies without further
action; provided, that no amendment shall be made which would (1) divert any of
the assets of the Fund.to any purpose other than the exclusive benefit of
Members and Beneficiaries, (2) change the rights and duties of the Trustee
without his consent or (3) eliminate or reduce an early retirement subsidy or
eliminate an optional form of benefit except to the extent permissible under
Code Section 411(d)(6). Notwithstanding the foregoing, this Plan may be
amended retroactively to affect the Account maintained for any person if
necessary to cause this Plan to be exempt from income taxes under the Code.
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10.2. Termination. The Company expects this Plan to be
continued indefinitely but, of necessity, it reserves the right to terminate or
to partially terminate this Plan or to discontinue contributions at any time by
action of the Board.
Should this Plan be terminated or partially terminated under
this Section 10.2, or should the Company in writing declare a permanent
discontinuance of contributions to this Plan, the Account of each Member who is
then an Associate shall become fully vested from the date of such termination
or on the date of such declaration of such a discontinuance, as the case may be.
If this Plan is terminated as to any Employing Company, or if
any Employing Company shall declare a discontinuance of its contributions under
this Plan, the Account of each Member (who then is an Associate) maintained
with respect to his employment by such Employing Company shall become fully
vested.
In the case of such a termination or discontinuance the
Company shall determine when and in what amounts the Trustee shall distribute
Accounts to Members and Beneficiaries and shall direct that the Trustee make
such distributions.
Section 11.
MISCELLANEOUS
11.1. Headings. The headings and subheadings in this Plan
have been inserted for convenience of reference only and are to be ignored in
construction of the provisions of this Plan, and all references to sections and
to subsections shall be to sections and to subsections of this Plan unless
otherwise indicated.
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11.2. Construction. In the construction of this Plan, the
masculine shall include the feminine and the singular shall include the plural
in all cases where such meanings would be appropriate. This Plan shall be
construed in accordance with the laws of the State of Alabama to the extent
that such laws are not preempted by federal law and, further, shall not be
construed to grant, nor shall grant, any rights or interests to Members or
Beneficiaries in addition to those minimum rights and interests required under
ERISA. Further, the Fund is intended to be tax exempt under the Code and any
provision of this Plan which is required solely to satisfy the requirements of
the Code shall be construed to provide only those minimum rights and interests
required for tax exempt status under the Code and shall not be construed to
grant, nor shall grant, to any person any right to or interest in the Fund
under ERISA.
11.3. Spendthrift Clause. Except to the extent permitted by
law or Internal Revenue Service regulations or Section 11.10, no Account,
benefit, payment or distribution under this Plan shall be subject to the claim
of any creditor of a Member or Beneficiary, or to any legal process by any
creditor of such person and no Member or Beneficiary shall have any right to
alienate, commute, anticipate, or assign all or any portion of his Account,
benefit, payment or distribution under this Plan.
11.4. Legally Incompetent. The Company may in its discretion
direct that payment be made, and the Trustee shall make such payment, directly
to an incompetent or disabled person, (whether because of minority or mental or
physical disability),
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to the guardian of such person, or to the person having custody of such person,
without further liability either on the part of the Company or the Trustee for
the amount of such payment to the person on whose account such payment is made.
11.5. Benefits Supported Only by Fund. Any person having any
claim for any benefit under this Plan shall look solely to the assets of the
Fund for satisfaction. In no event shall the Company, an Employing Company, or
any officers, Associates, Board members or agents of the Company or an
Employing Company, be liable in their individual capacities to any person
whomsoever for the payment of benefits under the provisions of this Plan.
11.6. Claims. Any payment to a Member or Beneficiary, or to
the legal representative or heirs-at-law of either, made in accordance with the
provisions of this Plan shall to the extent thereof be in full satisfaction of
all claims under this Plan against the Trustee or the Company, any of whom may
require such person, his legal representative or heirs-at-law, as a condition
precedent to such payment, to execute a receipt and release therefore in such
form as shall be determined by the Trustee or the Company, as the case may be.
11.7. Nonreversion. No part of the Fund shall ever be used
for or be diverted to purposes other than for the exclusive benefit of members
and Beneficiaries except
(a) as expressly provided otherwise in this Plan;
(b) a contribution which is made by an Employing Company by a
mistake of fact shall be refunded by the
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<PAGE> 90
Trustee to the Employing Company within one year after the payment of
such contribution; and
(c) a contribution for which the Internal Revenue Service
denies an income tax deduction to the Company shall be refunded by the
Trustee to the Company within one year after the denial of such
deduction, all such contributions being made expressly on the
condition that such contributions are deductible in full for federal
income tax purposes.
11.8. Merger or Consolidation. In the case of any merger or
consolidation of this Plan with, or transfer of assets or liabilities of this
Plan to, any other employee benefit plan, each person for whom an Account is
maintained shall be entitled to receive a benefit from such other plan which,
if it were then terminated, is equal to or greater than the benefit he would
have been entitled to receive immediately before such merger, consolidation or
transfer, if this Plan then had been terminated; provided, no assets shall be
transferred from any other plan directly to this Plan which are attributable to
contributions made under any other plan which provides for the payment of
benefits in the form of an annuity.
11.9. Agent for Service of Process. The agent for service of
process for this Plan shall be the person currently listed in the records of
the Secretary of State of Alabama as the agent for service of process for the
Company.
11.10. Qualified Domestic Relations Order. In accordance
with uniform and nondiscriminatory procedures
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<PAGE> 91
established by the Company from time to time, the Company upon the receipt of a
domestic relations order which seeks to require the distribution of a Member's
Account in whole or in part to an "alternate payee" (as that term is defined in
Code Section 414(p)(8)) shall
(1) promptly notify the Member and such "alternate payee" of
the receipt of such order and of the procedure which the Company will
follow to determine whether such order constitutes a "qualified
domestic relations order" within the meaning of Code Section 414(p),
(2) determine whether such order constitutes a "qualified
domestic relations order", notify the Member and the "alternate payee"
of the results of such determination and, if the Company determines
that such order does constitute a "qualified domestic relations order",
(3) transfer such amounts, if any, as the Company determines
necessary or appropriate from the Member's Account to a separate,
special account for such "alternate payee"; provided, no such
separate, special account shall include any portion of a Member's
Account which is attributable to a loan under Section 5.6, and
(4) make such distributions to such "alternate payee" from
such separate, special account as the Company deems called for under
the terms of such order in accordance with Code Section 414(p) without
regard to whether a distribution would be permissible at such time to
the Member under the terms of this Plan.
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<PAGE> 92
An "alternate payee" under this Section 11.10 shall be treated
the same as a Beneficiary of a deceased Member (except under Section
5.6) pending the distribution of such "alternate payee's" entire
interest under this Plan.
11.11. Top Heavy Plan.
(a) General. The Company as of the last day of each Plan
Year shall determine the sum of the present value of the accrued benefits of
"key employees" (as defined in Section 416(i)(1) of the Code) and the sum of
the present value of the accrued benefits of all other Associates in accordance
with the rules set forth in Section 416(g) of the Code or shall take such
other action as the Company deems appropriate to conclude that no such
determination is necessary under the circumstances. If the sum of the present
value of the accrued benefits of such key employees exceeds 60% of the sum of
the present value of the accrued benefits of all Associates as of the last day
of the Plan Year, this Plan shall be "top heavy" for the immediately following
Plan Year.
(b) Determination. For purposes of this Section 11.11 the
present value of the accrued benefit of each Associate shall be equal to the
sum of
(1) the balance of his Account under this Plan (determined
for this purpose as of the last day of each Plan Year);
(2) the present value of his accrued benefit, if any,
(determined as of the valuation date which coincides with or precedes
the determination date for such plan) under
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<PAGE> 93
(A) each qualified plan (as described in Section
401(a) of the Code) maintained by a Related Employer (i) in
which a key employee is a participant or (ii) which enables
any plan described in subclause (i) to meet the requirements
of Section 401(a)(4) or Section 410 of the Code, and
(B) each other qualified plan maintained by a
Related Employer (other than a plan described in clause (A))
which may be aggregated with this Plan and the plans described
in clause (A), provided such aggregation group (including a
plan described in this clause (B)) continues to meet the
requirements of Section 401(a)(4) and Section 410 of the Code;
and
(3) the value of any distributions made from this Plan and
such plans during the 5 year period ending on such determination date
and the value of any contributions due under this Plan and such plans
but as yet unpaid as of such determination date; provided, however,
the accrued benefit of any Associate shall be disregarded if such
Associate has not performed any services for an Employing Company at
any time during the 5 year period ending on the date as of which such
determination is made. For purposes of the present value calculations
called for under a plan described in Section 11.11(b)(2) which is a
defined benefit plan, such value shall be determined by using (i) the
Unisex Pension 1984 Mortality Table with a one year age setback for
Members and a three year age setback for spouses and other
Beneficiaries; (ii) an interest rate of five percent (5%)
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<PAGE> 94
per annum; (iii) no mortality discount for the period before
retirement; and (iv) the assumption that each married Member is the
same age as his spouse.
(c) Special Top Heavy Plan Rules. If the Company determines
that this Plan is "top heavy" for any Plan Year, the special rules set forth in
this Section 11.11(c) shall apply notwithstanding any other rules to the
contrary set forth elsewhere in this Plan.
(1) Minimum Contributions. A contribution shall be made for
such Plan Year for each Member who is an Eligible Associate on the
last day of such Plan Year which,
(A) when added to the Profit Sharing Contribution
actually credited for such Plan Year to such Member's Account,
is equal to the lesser of (i) 3% of his "compensation" for
such year (as determined in accordance with Section 1.415-2(d)
of the regulations under Code Section 415) which does not
exceed $200,000.00 (as adjusted from time to time by the
Secretary of the Treasury in accordance with Code Section
401(a)(17)) or (ii) the percentage at which contributions are
made (or are required to be made) for such year to the key
employee for whom such percentage is the highest, or
(B) when added to the contributions made or the
benefits accrued on behalf of such Member under any other
defined contribution plan or defined benefit plan for such
Plan Year, shall satisfy the minimum
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<PAGE> 95
requirements of Code Section 416(c), as modified by Code
Section 416(h)(2)
(2) Vesting Schedule. The vested portion of a member's
Profit Sharing Account, Matching Account and Transfer Account, if any,
shall be determined in accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Applicable Vested Percentage
---------------- ----------------------------
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 or more 100%
</TABLE>
In the event that the Plan later ceases to be "top heavy", the rules
in Section 5.4 shall once again apply; provided, however, the vested
portion of a Member's Profit Sharing Account, Matching Account and
Transfer Account shall not thereafter be less than the vested portion
of such Account before the Plan ceased to be "top heavy".
(3) Other Requirements. The Company shall take such action
as necessary to satisfy the requirements of Code Section 415(e) and
Code Section 416(h) if it determines that this Plan fails to meet the
requirements set forth in Code Section 416(h)(2)(B).
11.12. Not a Contract of Employment. This Plan does not
constitute a contract of employment, and participation in this Plan shall not
give any person the right to be retained in the employ of any Related Employer
or, upon the termination of such employment, to have any interest or right in
the Fund other than as expressly set forth in this Plan.
-89-
<PAGE> 96
11.13. Rollover Contributions. If the Company decides on a
uniform and nondiscriminatory basis to permit Rollover Contributions to this
Plan, a Member may contribute on his own behalf as a Rollover Contribution to
this Plan one or more than one amount which qualifies under Code Section
402(a)(5) as a rollover amount from a qualified trust, or one or more than one
amount which qualifies under Code Section 408(d)(3) as a rollover amount from a
qualified individual retirement account, provided that any such amount is in
cash or in a form which is acceptable to the Trustee. The Trustee shall
establish a Rollover Account on behalf of such Member to receive his Rollover
Contribution, and his interest in his Rollover Account shall be vested at all
times. No Matching Contributions, Profit Sharing Contributions or Forfeitures
shall be allocated to his Rollover Account, but his Rollover Account shall
share in the allocation of investment gains and losses (under Section 4.3(b)).
Such investment gains and losses, however, shall not be allocated for the
period ending on the first Valuation Date following the date his Rollover
Contribution is made unless such contribution is made immediately after the
preceding Valuation Date. A Member's Rollover Account shall be distributed to
him under the same terms and conditions as applicable to his Profit Sharing
Account except that such Rollover Account shall be vested at all times.
11.14. Trustee to Trustee Transfer.
(a) Authorization. The Company may authorize that the
Trustee accept a transfer of assets on behalf of a Member from the trustee of
any other plan which, to the best knowledge and
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<PAGE> 97
belief of the Company, satisfies the requirements of Code Section 401(a), and
the Trustee shall accept such a transfer if made in cash or if made in assets
acceptable to the Trustee.
(b) Transfer Accounts. Any assets transferred to the Trustee
under this Section 11.14 shall be maintained for the Member on whose behalf the
transfer is made in a separate Transfer Account in such Member's Account. No
contributions or Forfeitures under this Plan shall be credited to such Transfer
Account, but such Transfer Account shall (subject to such special rules as the
Trustee deems appropriate for the Plan Year in which the transfer of the
related assets is made to this Plan if such transfer is made other than as of a
Valuation Date in such year) share in the investment gains and losses of the
Fund on the same basis as each other Account under Section 4.3(b) and shall be
distributed in accordance with the rules generally applicable to such Member's
Account.
Section 12.
SPECIAL PROVISIONS FOR TRANSFERRED ASSOCIATES
12.1. General. This Section 12 sets forth the special rules
applicable to an Associate who, at the request of the Employing Company or any
of its subsidiaries, or Walton Monroe Mills, Inc. or its subsidiaries
("Walton"), is transferred from Walton to the employ of the Employing Company.
Such an Associate shall be referred to in this Section 12 as a "Transferred
Associate."
12.2. Eligibility. A Transferred Associate shall become a
Member in this Plan on his Employment Date with the Employing Company.
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<PAGE> 98
12.3. Vesting. Years of Service under this Plan for each
Transferred Associate shall be determined as a general rule under the terms and
conditions of this Plan, but each Transferred Associate's employment by Walton
shall be treated as employment by the Employing Company; provided, however, if
a Transferred Associate was a participant in the Dacotah Mills, Inc. Profit
Sharing Plan ("Dacotah Plan") or the Walton Monroe Mills, Inc. Profit Sharing
Plan ("Walton Plan"), his Years of Service under this Plan shall never be less
than the number of years of service credit he had for vesting purposes under
such plan or plans as of the date of his transfer to the Employing Company.
12.4. Account Balance. If a Transferred Associate has an
account balance under the Dacotah Plan or Walton Plan, such account balance
shall be transferred in full to this Plan (subject to Section 11.14) and a
Transfer Account shall be established for such account balance on behalf of the
Transferred Associate. A Transferred Associate's vested interest in his
Transfer Account shall be determined under the vesting rules set forth in this
Plan, provided his vested interest in such account shall never be less than his
vested interest in his account balance under the Dacotah Plan or the Walton
Plan.
12.5. Forfeitures. If a Transferred Associate subsequently
has a termination of his employment with a Related Employer which results in
the forfeiture of all or a portion of his Transfer Account, the Company shall
direct that the Trustee return such forfeiture to the Dacotah Plan or to the
Walton Plan,
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<PAGE> 99
whichever was the source of the account balance transferred to this Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed by its duly authorized officer and its seal to be affixed as of this
_______________ day of ____________________, 1993.
AVONDALE MILLS, INC.
BY:
------------------------------------
Title:
---------------------------------
(CORPORATE SEAL)
ATTEST:
By:
----------------------------------
Title:
-------------------------------
-93-
<PAGE> 1
EXHIBIT 10.14
November 18, 1994
TO: G. Stephen Felker
FROM: Richard Monk
I am pleased to inform you that you have been approved to participate
in the management incentive plan for fiscal 1995. You will participate in the
plan based on an individual percentage award of 100%.
For fiscal 1995, the amount of your actual incentive award will be
based on two factors: (1) Financial Goals, and (2) Personal Goals, as set forth
below.
Financial Goals
The Financial Goals for your fiscal 1995 award are as follows:
<TABLE>
<CAPTION>
Corporate
Operating Earnings
Performance (Thousands of Dollars)
Level (EBDLIT)
----- --------
<S> <C>
50% $50,000
100% 60,000
</TABLE>
The portion of your actual incentive award based on Financial Goals
will be determined by multiplying your total base salary paid in fiscal 1995
times your individual percentage award times the Performance Level achieved as
set forth above and will be calculated by the Company. Any such award will be
prorated when the Performance Level achieved falls between the 50% and 100%
levels. No incentive award based on Financial Goals will be paid if the
Performance Level is below 50%, and no additional incentive award will be paid
for any financial results which exceed the 100% Performance Level.
Personal Goals
An additional incentive award of up to 25% of your individual
percentage award may be made to you by the Compensation Committee of the Board
of Directors at their discretion.
The general guidelines of the plan for fiscal 1995 are as follows:
<PAGE> 2
G. Stephen Felker
November 18, 1994
Page 2
1. Operating earnings (EBDLIT) will be defined an reported in the
Company's financial statements.
2. Your actual incentive award will be paid on an annual basis,
with payment to be made as soon as practical after the fiscal
year audit is completed.
3. No incentive award will be paid if you are not in the employ
of the Company on the last day of the fiscal year (effective
date of severance must be on or after fiscal year end).
4. In the event you are reassigned or given a now position and
responsibilities during the fiscal year (promotion or
demotion), payment of the incentive award will be determined
on a case-by-case basis. The Company reserves the right to
deny payment or to reduce the incentive award in the case of
demotions.
Please indicate your understanding of the plan, the performance goals
and your potential incentive award by signing and returning this letter to me.
A copy is provided for your personal files.
/s/ Richard Monk
--------------------
Richard Monk
RHMJr/cas
Acknowledged: /s/ G. Stephen Felker
---------------------
Date: 11/21/94
------------------------------
<PAGE> 1
EXHIBIT 10.15
November 18, 1994
TO: Jack Altherr
FROM: Richard H. Monk, Jr.
I am pleased to inform you that you have been approved to participate
in the management incentive plan for fiscal 1995. You will participate in the
plan based on an individual percentage award of 50%.
For fiscal 1995, the amount of your actual incentive award will be
based on two factors: (1) Financial Goals, and (2) Personal Goals, as set
forth below.
Financial Goals
The Financial Goals for your fiscal 1995 award are as follows:
<TABLE>
<CAPTION>
Corporate
Operating Earnings
Performance (Thousands of Dollars)
Level (EBDLIT)
----- --------
<S> <C>
50% $50,000
100% 60,000
</TABLE>
The portion of your actual incentive award based on Financial Goals
will be determined by multiplying your total base salary paid in fiscal 1995
times your individual percentage award times the Performance Level achieved as
set forth above and will be calculated by the company. Any such award will be
prorated when the Performance Level achieved falls between the 50% and 100%
levels. No incentive award based on Financial Goals will be paid if the
Performance Level Is below 50%, and no additional incentive award will be paid
for any financial results which exceed the 100% Performance Level.
Personal Goals
An additional incentive award of up to 25% of your individual
percentage award may be made to you based upon successful achievement, as
determined by the company, of your Personal Goals for fiscal year 1995. A copy
of your Personal Goals is attached.
The general guidelines of the plan for fiscal 1995 are as follows:
<PAGE> 2
Jack Altherr
November 18, 1994
Page 2
1. Operating earnings (EBDLIT) will be defined as reported in the
Company's financial statements.
2. Your actual incentive award will be paid on an annual basis,
with payment to be made as soon as practical after the fiscal
year audit is completed.
3. No Incentive award will be paid if you are not in the employ
of the Company on the last day of the fiscal year (effective
date of severance must be on or after fiscal year end).
4. In the event you are reassigned or given a now position and
responsibilities during the fiscal year (promotion or
demotion), payment of the incentive award will be determined
on a case-by-case basis. The Company reserves the right to
deny payment or to reduce the incentive award in the case of
demotions.
Please indicate your understanding of the plan, the performance goals
and your potential incentive award by signing and returning this letter to me.
A copy is provided for your personal files.
/s/ Richard Monk
------------------------
Richard Monk
RHMJr/cas
Acknowledged: /s/ Jack R. Altherr, Jr.
------------------------
Date: 11/22/94
--------------------------------
<PAGE> 3
CORPORATE
FISCAL 1995 PERSONAL GOALS
JACK ALTHERR
1. Corporate S G & A expenses not to exceed budget.
2. Satisfactory performance of corporate financial management (financial
statements and reports, budgets, projections, cash flow, working
capital, etc.).
3. Maintenance of satisfactory relationships with banks and other
financial institutions.
4. Reorganization and transfer of various associate benefits duties
(medical plan, profit sharing, investment management, etc.) and
implementation of desired executive plans.
5. Pursuit of acquisition and joint venture opportunities.
<PAGE> 1
EXHIBIT 10.16
November 18, 1994
TO: Richard H. Monk, Jr.
FROM: Richard H. Monk, Jr.
I am pleased to inform you that you have been approved to participate
in the management incentive plan for fiscal 1995. You will participate in the
plan based on an individual percentage award of 50%.
For fiscal 1995, the amount of your actual incentive award will be
based on two factors: (1) Financial Goals, and (2) Personal Goals, as set
forth below.
Financial Goals
The Financial Goals for your fiscal 1995 award are as follows:
<TABLE>
<CAPTION>
Corporate
Operating Earnings
Performance (Thousands of Dollars)
Level (EBDLIT)
----- --------
<S> <C>
50% $50,000
100% 60,000
</TABLE>
The portion of your actual incentive award based on Financial Goals
will be determined by multiplying your total base salary paid in fiscal 1995
times your individual percentage award times the Performance Level achieved as
set forth above and will be calculated by the Company. Any such award will be
prorated when the Performance Level achieved falls between the 50% and 100%
levels. No incentive award based on Financial Goals will be paid if the
Performance Level in below 50%, and no additional incentive award will be paid
for any financial results which exceed the 100% Performance Level.
Personal Goals
An additional incentive award of up to 25% of your individual
percentage award may be made to you based upon successful achievement, as
determined by the Company, of your Personal Goals for fiscal year 1995. A copy
of your Personal Goals is attached.
The general guidelines of the plan for fiscal 1995 are as follows:
<PAGE> 2
Richard H. Monk, Jr.
November 18, 1994
Page 2
1. Operating earnings (EBDLIT) will be defined as reported in the
Company's financial statements.
2. Your actual incentive award will be paid on an annual basis,
with payment to be made as soon as practical after the fiscal
year audit is completed.
3. No incentive award will be paid if you are not in the employ
of the Company on the last day of the fiscal year (effective
date of severance must be on or after fiscal year end).
4. In the event you are reassigned or given a new position and
responsibilities during the fiscal year (promotion or
demotion), payment of the incentive award will be determined
on a case-by-case basis. The company reserves the right to
deny payment or to reduce the incentive award in the case of
demotions.
Please indicate your understanding of the plan, the performance goals
and your potential incentive award by signing and returning this letter to me.
A copy is provided for your personal files.
/s/ Richard Monk
-----------------------
Richard Monk
RHMJr/cas
Acknowledged: /s/ Richard H. Monk, Jr.
------------------------
Date: November 24, 1994
--------------------------------
<PAGE> 3
CORPORATE
FISCAL 1995 PERSONAL GOALS
Richard H. Monk, Jr.
1. Meet budgeted expenses for all cost centers reporting to me.
2. Implement system for controlling non-production hourly positions.
3. Prepare and submit for final approval a strategy for succession
planning for the Company.
4. Organize salary administration program and submit recommendations for
1996 incentive plan, sales incentive plans and personal goals by
September 15, 1995.
5. Determine qualifications of and recruit an associate for Pakistani
joint venture who is qualified to and will go to Pakistan as needed.
<PAGE> 1
EXHIBIT 10.17
November 18, 1994
TO: Wayne Spraggins
FROM: Richard H. Monk, Jr.
I am pleased to inform you that you have been approved to participate
in the management incentive plan for fiscal 1995. You will participate in the
plan based on an individual percentage award of 50%.
For fiscal 1995, the amount of your actual incentive award will be
based on two factors: (1) Financial Goals, and (2) Personal Goals, as set forth
below.
Financial Goals
The Financial Goals for your fiscal 1995 award are as follows:
<TABLE>
<CAPTION>
Corporate
Operating Earnings
Performance (Thousands of Dollars)
Level (EBDLIT)
----- --------
<S> <C>
50% $50,000
100% 60,000
</TABLE>
The portion of your actual incentive award based on Financial Goals
will be determined by multiplying your total base salary paid in fiscal 1995
times your individual percentage award times the Performance Level achieved as
set forth above and will be calculated by the Company. Any such award will be
prorated when the Performance Level achieved falls between the 50% and 100%
levels. No incentive award based on Financial Goals will be paid if the
Performance Level is below 50%, and no additional incentive award will be paid
for any financial results which exceed the 100% Performance Level.
Personal Goals
An additional incentive award of up to 25% of your individual
percentage award may be made to you based upon successful achievement, as
determined by the Company, of your Personal Goals for fiscal year 1995. A copy
of your Personal Goals in attached.
The general guidelines of the plan for fiscal 1995 are as follows:
<PAGE> 2
Wayne Spraggins
November 18, 1994
Page 2
1. Operating earnings (EBDLIT) will be defined as reported in the
Company's financial statements.
2. Your actual incentive award will be paid on an annual basis,
with payment to be made as soon as practical after the fiscal
year audit is completed.
3. No incentive award will be paid if you are not in the employ
of the Company on the last day of the fiscal year (effective
date of severance must be on or after fiscal year end).
4. In the event you are reassigned or given a new position and
responsibilities during the fiscal year (promotion or
demotion), payment of the incentive award will be determined
on a case-by-case basis. The Company reserves the right to
deny payment or to reduce the incentive award in the case of
demotions.
Please indicate your understanding of the plan, the performance goals
and your potential incentive award by signing and returning this letter to me. A
copy is provided for your personal files.
/s/ Richard Monk
----------------------
Richard Monk
RHMJr/cas
Acknowledged: /s/ Wayne Spraggins
-------------------
Date: 11-21-94
---------------------------
<PAGE> 3
CORPORATE
FISCAL 1995 PERSONAL GOALS
Wayne Spraggins
1. All reporting cost centers to operate at or below budget.
2. Fully implement new trucking cost reporting system to better isolate
operating results of trucking department by business segment; i.e.,
Avondale, non-Avondale, intermill, etc.
3. Devise a system that monitors raw material cost optimization.
4. Meet budgeted Division raw material recovery goals as follows:
a. Avondale Fabrics 94.7 %
b. Avondale Yarns 93.55%
C. Walton Fabrics 94.1 %
5. Meet safety goals of 0 lost time and 0 recordable injuries for both
the Cotton and the Purchasing Departments.
<PAGE> 1
EXHIBIT 10.18
November 18, 1994
TO: Mike Billingsley
FROM: Richard H. Monk, Jr.
I am pleased to inform you that you have been approved to participate
in the management incentive plan for fiscal 1995. You will participate in the
plan based on an individual percentage award of 50%.
For fiscal 1995, the amount of your actual incentive award will be
based on two factors: (1) Financial Goals, and (2) Personal Goals, as set forth
below.
Financial Goals
The Financial Goals for your fiscal 1995 award are as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars)
Corporate
Performance Avondale Yarns Operating Earnings
Level Division Income (EBDLIT)
----- --------------- --------
<S> <C> <C>
50% $19,400 $50,000
100% 24,150 60,000
</TABLE>
The portion of your actual incentive award related to Financial Goals
will be based 50% on Avondale Yarns Division Income and 50% on Corporate
Operating Earnings (EBDLIT). This portion of your actual incentive award will
be determined by multiplying your total base salary paid in fiscal 1995 times
your individual percentage award times the sum of 50% of the Performance Level
achieved for Avondale Yarns Division Income and 50% of the Performance Level
achieved for Corporate Operating Earnings (EBDLIT) as set forth above and will
be calculated by the Company. The Performance Levels will be prorated when
final financial results fall between the 50% and 100% levels. No incentive
award based on Financial Goals will be paid if the applicable Performance Level
is below 50%, and no additional incentive award will be paid for any financial
results which exceed the 100% Performance Level.
Personal Goals
An additional incentive award of up to 25% of your individual
percentage award may be made to you based upon successful achievement, as
determined by the company, of your Personal Goals for fiscal year 1995. A copy
of your Personal Goals in attached.
The general guidelines of the plan for fiscal 1995 are as follows:
<PAGE> 2
Mike Billingsley
November 18, 1994
Page 2
1. Corporate Operating Earnings (EBDLIT) and Avondale Yarns Division
Income will be defined as reported in the Company's financial
statements.
2. Your actual incentive award will be paid on an annual basis, with
payment to be made as soon as practical after the fiscal year audit is
completed.
3. No incentive award will be paid if you are not in the employ of the
Company on the last day of the fiscal year (effective date of
severance must be on or after fiscal year and).
4. In the event you are reassigned or given a now position and
responsibilities during the fiscal year (promotion or demotion),
payment of the incentive award will be determined on a case-by-case
basis. The Company reserves the right to deny payment or to reduce the
incentive award in the case of demotions.
Please indicate your understanding of the plan, the performance goals
and your potential incentive award by signing and returning this letter to me.
A copy in provided for your personal files.
/s/ Richard Monk
-------------------
Richard Monk
RHMJr/cas
Acknowledged: /s/ Mike Billingsley
--------------------
Date: 11/23/94
----------------------------
<PAGE> 3
AVONDALE YARNS DIVISION
FISCAL 1995 PERSONAL GOALS
Mike Billingsley, President
1. Meet budgeted conversion costs of $.4161
2. Meet budgeted expenses in division of $6,198,000 -- SG & A, Mill
Indirects (821 Acct.)
3. Meet budgeted recovery of 93.55%.
4. Improve the number of complaints to 133 and claim dollar loss to
$550,000.
5. Effective January 1, 1995, F.O.B. West Coast sales to be within $.03
of East Coast sales on comparable products and time frame.
<PAGE> 1
EXHIBIT 10.19
AVONDALE MILLS, INC.
[LOGO] P.0. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
December 6, 1994
Mr. G. Stephen Felker
800 Belle Mead Road
Monroe, Georgia 30655
Dear Stephen:
When the phantom stock program was adopted in fiscal 1990, the
objective of the Board of Directors was to provide long term incentives to
management which parallel the economic interests of Avondale's shareholders.
Although the phantom stock units do not represent actual shares of equity in
Avondale, their grant does represent a significant financial commitment by the
shareholders to allow key members of management an opportunity to participate
in the growth of the Company.
In my letters granting the phantom stock units, the value of a phantom
stock unit was defined to be 0.002% of Avondale's equity value, as determined
by a specific formula (five times annualized EBDLIT for the past ten fiscal
quarters plus cash minus debt). Since this approach uses a fixed percentage of
calculated equity instead of an equivalent number of phantom shares,
substantial dilution or accretion in the value of a phantom stock unit may be
created by stock-related transactions while the value of a share of common
stock may not be affected similarly. As an example of the potential dilution,
the March 1994 leveraged purchase of common stock shares from CS First Boston
and Metropolitan Life Insurance Company produced a nearly 40% decline in the
calculated value of a phantom stock unit (see Schedule A).
To ensure that the original objective of the phantom stock program is
achieved, the Board of Directors has approved an amendment to the provisions of
the program such that the value of a phantom stock unit will be determined
using phantom shares. The number of phantom shares per phantom stock unit will
be defined as 0.002% of the total number of shares of common stock of Avondale
(AM Acquisition, Inc.) outstanding at September 1, 1989, including the phantom
shares. The number of phantom shares so calculated at September 1, 1989 will
be adjusted for any subsequent stock splits or stock dividends, such as the
August 27, 1993 merger and stock dividend (see Schedule B). As a result, this
approach begins with the same value established at September 1, 1989 using
0.002% of calculated equity but allows the value per phantom stock unit to
"float" with the actual number of shares outstanding and eliminates the
undesired dilution or accretion
<PAGE> 2
Mr. G. Stephen Felker
December 6, 1994
Page 2
in value. Again as an example, the dilution caused by the leveraged stock
purchase is virtually eliminated by using the phantom share calculation (see
Schedule C).
All 150 phantom stock units awarded to you are subject to the terms and
conditions set forth in my letters of March 15, 1990 and July 20, 1992, copies
of which are enclosed for your reference. To execute the amendment described
above, Section 2 of the terms and conditions set forth in my letter of March
15, 1990 is hereby restated and replaced in its entirety with the following:
2. VALUE OF PHANTOM STOCK UNITS
The value of each phantom stock unit on any date (the
"valuation date") will be equal to the "Equity Value of the Company
Per Share" multiplied by 398.606 phantom shares. The "Equity Value of
the Company Per Share", as determined by Avondale, shall be equal to
the sum of "EBDLIT" times five, plus "Balance Sheet Adjustments",
divided by the sum of the total number of shares of Avondale
Incorporated Class A and Class B common stock outstanding on the
valuation date plus 398,606 phantom shares.
Avondale defines EBDLIT as the consolidated earnings of
Avondale and its subsidiaries before depreciation, amortization, LIFO
inventory adjustments, interest and income taxes, for the ten fiscal
quarters immediately preceding such date, divided by 2.5. Avondale
defines Balance Sheet Adjustments as an amount, which may be positive
or negative, equal to the consolidated cash, cash equivalents and
short term investments of Avondale and its subsidiaries minus the
consolidated debt of Avondale and its subsidiaries, determined as of
the final day of the last fiscal period for which financial statements
were prepared and that immediately precedes the valuation date.
All other terms and conditions contained in my letters granting your
150 phantom stock units remain in full force and effect.
<PAGE> 3
Mr. G. Stephen Felker
December 6, 1994
Page 3
If you have any questions regarding this amendment, please direct them
to Jack Altherr or me. As noted in previous correspondence, due to the
relatively few key associates participating in the program, we ask that you
recognize the need for confidentiality.
Please indicate your understanding and acceptance of the above
amendment by signing and returning the enclosed copy of this letter to me.
Very truly yours,
/s/ Stephen
-----------
Stephen
Acknowledged and accepted:
/s/ G. Stephen Felker
- ----------------------------------
G. Stephen Felker
Date: 12-12-94
-----------------------------
<PAGE> 4
AVONDALE MILLS, INC. Schedule A
VALUE OF PHANTOM STOCK UNIT
(Using two percent of calculated equity value)
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter
FY 1994 FY 1994
----------- -----------
<S> <C> <C>
Annualized cash flow - EBDLIT $88,024,754 $ 86,433,972
(past 10 fiscal quarters)
Valuation multiple 5.00 5.00
----------- ------------
440,123,770 432,169,860
Cash 372,287 1,411,191
Debt (42,950,000) (204,330,590)
----------- ------------
Calculated equity value 397,546,057 229,250,461
(per formula)
% equity per phantom stock unit 0.0020% 0.0020%
----------- ------------
Value of phantom stock unit $ 7,951 $ 4,585
=========== ============
</TABLE>
<PAGE> 5
AVONDALE MILLS, INC. Schedule B
CALCULATION OF PHANTOM SHARES
<TABLE>
<CAPTION>
Shares % Shares
------------ --------
<S> <C> <C>
Shares outstanding at 9/l/89
(AM Acquisition, Inc.)
First Boston 185.7200 15.73%
Metropolitan Life 368.2800 31.19%
John Maypole 4.0000 0.34%
Walton Monroe 501.0000 42.43%
Stephen Felker 58.0000 4.91%
Class B 40.2083 3.41%
------------ ------
1,157.2083 98.00%
Calculated phantom shares
(AM Acquisition, Inc.) 23.6165 2.00%
------------ ------
1,180.8248 100.00%
============ ======
Calculated phantom shares
(AM Acquisition, Inc.) 23.6165
Factor for merger with Walton Monroe 67.5131
------------
1,594.4240
Factor for stock dividend 250.0000
------------
Phantom shares 398,605.9976
============
Avondale Incorporated - August 1, 1994
Class A shares outstanding 10,089,811 87.99%
Class B shares outstanding 978,939 8.54%
------------ ------
Total common shares 11,068,750 96.52%
Phantom shares 398,606 3.48%
(whole shares) ------------ ------
11,467,356 100.00%
============ ======
</TABLE>
<PAGE> 6
AVONDALE MILLS, INC. Schedule C
VALUE OF PHANTOM STOCK UNIT
(Using calculated equity value per phantom share)
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter
FY 1994 FY 1994
----------- -----------
<S> <C> <C>
Annualized cash flow - EBDLIT $ 88,024,754 $ 86,433,972
(past 10 fiscal quarters)
Valuation multiple 5.00 5.00
------------ ------------
440,123,770 432,169,860
Cash 372,287 1,411,191
Debt (42,950,000) (204,330,590)
------------ ------------
Calculated equity value 397,546,057 229,250,461
(per formula)
Total number of shares 20,880,436 11,467,356
(including phantom shares) ------------ ------------
Calculated equity value per share $ 19.04 $ 19.99
Phantom shares per unit 398,606 398,606
------------ ------------
$ 7,589 $ 7,969
============ ============
</TABLE>
<PAGE> 7
AVONDALE MILLS, INC.
[LOGO] P.0. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
July 20, 1992
Mr. G. Stephen Felker
800 Belle Meade Road
Monroe, Georgia 30655
Dear Stephen:
This letter amends the grant of phantom stock units awarded to you by my
letter of March 15, 1990, a copy of which is attached for your reference.
Effective this date, your grant is increased by 50 phantom stock units,
bringing your total award to 150 phantom stock units.
All 150 phantom stock units awarded to you are subject to the terms and
conditions set forth in my March 15, 1990 letter. Accordingly, your interest
in your 150 phantom stock units will vest at five percent per year for each
full and uninterrupted year that you continue to work for Avondale after August
31, 1989. Should you remain so employed, you will become fully vested on
August 31, 2009. Payment in the form of ten annual installments will begin
upon your 65th birthday assuming you retire at that time.
In addition, your interest in your 150 phantom stock units will become fully
vested in the event you die before your employment with Avondale terminates.
Your vested value will be computed as of the date of your death and paid to
your beneficiary in a single lump sum.
If you should have any questions regarding the terms of the grant, please
direct them to Richard Monk, Jack Altherr or me. Because relatively few key
associates participate in the program, I request that you recognize the need
for confidentiality.
Very truly yours,
/s/ Stephen Felker
------------------
Stephen Felker
GSF/lj
<PAGE> 8
AVONDALE MILLS,INC.
[LOGO] P.0. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
March 15, 1990
Mr. G. Stephen Felker
800 Belle Meade Road
Monroe, Georgia 30655
Dear Stephen:
Avondale's continued success depends upon the superior performance of
all of its associates working together as a team. To make the relationship
mutually beneficial, there is a system of rewards in place, including
compensation, profit sharing and other benefits as well as attractive and safe
working environments and, at certain management levels, performance incentives.
An additional opportunity for reward is now being offered to you and a
few key associates. The program involves the grant of phantom stock units
which effectively provides equity participation in the growth of the company.
The program will not replace or detract from existing benefits.
While the phantom stock units do not represent actual shares of equity
in Avondale and therefore do not carry voting and other rights associated with
stock ownership, their grant nonetheless represents substantial financial
recognition by the company's shareholders of the importance and role played by
key associates.
Please review carefully the following terms and conditions of your
grant of phantom stock units. As questions arise, please direct them to John
Hudson, Jack Altherr or me. Because relatively few key associates will
participate in the program, I request that you recognize the need for
confidentiality.
<PAGE> 9
1. GRANT OF PHANTOM STOCK UNITS
Your participation in the program will take the form of a
grant, effective September 1, 1989, of 100 "phantom stock units". A phantom
stock unit is simply a bookkeeping measure which represents your vested and
nonvested interest in the value of the company (as defined in section 2).
2. VALUE OF PHANTOM STOCK UNITS
The value of each phantom stock unit on any date will be
0.002% of an amount, which shall be determined by Avondale, equal to "EBDLIT"
times five, plus "Balance Sheet Adjustments". Avondale defines EBDLIT as the
consolidated earnings of Avondale and its subsidiaries before depreciation,
amortization, LIFO inventory adjustments, interest and income taxes, for the
ten fiscal quarters immediately preceding such date, divided by 2.5. Avondale
defines Balance Sheet Adjustments as an amount, which may be positive or
negative, equal to the consolidated cash, cash equivalents and short term
investments of Avondale and its subsidiaries minus the consolidated debt of
Avondale and its subsidiaries, determined as of the final day of the last
fiscal period for which financial statements were prepared and that immediately
precedes the date such amount is determined.
3. VESTING OF PHANTOM STOCK UNITS
Your vested interest in your phantom stock units will increase
(subject to section 7) at the rate of five percent per year for each full and
uninterrupted year that you continue to work for Avondale after August 31,
1989.
You also will (subject to section 7) become fully vested in your
phantom stock units if you die before your employment by Avondale terminates.
Finally, you will forfeit your entire interest in your phantom stock
units (whether or not vested under this section 3) if you engage in any actions
described under section 7.
4. PAYMENT AT RETIREMENT
Avondale will compute and pay the value of your vested interest in your
phantom stock units to you in cash beginning as of your "Normal Payment Date",
which will be the date you reach age 65 or, if later, the date your employment
by Avondale terminates. Your payment will be made with interest in ten equal
annual installments, calculated as an annuity payable on your Normal Payment
Date and on the first nine anniversaries of your Normal Payment Date using an
interest rate equal to the one year Treasury Bill rate which Avondale deems in
effect on your Normal Payment Date.
<PAGE> 10
5. TERMINATION OF EMPLOYMENT
If your employment with Avondale terminates (for any reason whatsoever
except death) before your Normal Payment Date, further vesting will cease and
Avondale will compute the value of your vested interest in your phantom stock
units as of your termination date. The value of your vested interest in your
phantom stock units, as so determined and without further increase, shall be
paid to you beginning on your Normal Payment Date; that is, no further
appreciation or depreciation in the value of the phantom stock units nor any
crediting of interest will occur after your employment terminates. Beginning
with your Normal Payment Date, payment will be made in ten equal annual
installments, as if you retired, in accordance with section 4 using the value of
your vested interest in your phantom stock units as calculated at termination
and the one year Treasury Bill rate which Avondale deems in effect on your
Normal Payment Date.
6. DEATH BENEFIT
If you die before your employment with Avondale terminates, you will
become fully vested in your phantom stock units in accordance with section 3.
Avondale will compute the value of your phantom stock units as of the date of
your death in accordance with section 2 and pay such amount to your
beneficiary.
If you die after your employment with Avondale terminates but before
your Normal Payment Date, Avondale will pay to your beneficiary the value of
your vested interest in your phantom stock units as calculated under section 5.
If you die after your Normal Payment Date, Avondale will calculate the
present value (discounted to the date of your death using the one year Treasury
Bill rate which Avondale deems in effect on your Normal Payment Date) of any
unpaid annual installments established under section 4 and pay such amount to
your beneficiary.
Any death benefit payment to your beneficiary under this section 6
will be made in lump sum in cash within 90 days after the date of your death.
Please complete and return the attached beneficiary designation form
to the corporate secretary. If you fail to designate a beneficiary for your
interest in your phantom stock units (or your beneficiary fails to survive you),
Avondale will treat your estate as your beneficiary for your interest in your
phantom stock units. You can change your beneficiary at any time by returning a
new beneficiary designation form to the corporate secretary, and such change
will be effective on the date the new beneficiary designation form is received
by the corporate secretary.
<PAGE> 11
7. FORFEITURE OF BENEFITS
If, in Avondale's opinion, you either (a) compete directly or
indirectly with Avondale or (b) engage in any actions or make any statements
which are detrimental to Avondale's best interests, at any time while you are
employed by Avondale or before the end of the five year period following your
termination of employment with Avondale, you will forfeit your entire vested
and nonvested interest in your phantom stock units.
8. AMENDMENT/TERMINATION
This letter sets forth the terms and conditions of this program in
their entirety. Avondale reserves the right to amend the terms and conditions
of this program from time to time or to terminate this program at any time and
for any reason whatsoever. However, Avondale will not amend retroactively the
formula outlined in section 2 for valuing phantom stock units or the rate at
which you vest in such units under section 3 (other than the forfeiture
conditions).
No action to amend or terminate this program shall be effective unless
such action is set forth in writing and signed by me or my successor as Chief
Executive Officer of Avondale.
If this program is terminated, Avondale will compute and pay your
vested interest in your phantom stock units in accordance with section 5 as if
your employment by Avondale had terminated on the date Avondale terminated this
program.
9. NOT A CONTRACT OF EMPLOYMENT
You are an employee at will and you may terminate your
employment, or your employment may be terminated by Avondale, at any time
without notice. Nothing in this grant of phantom stock units shall give you
any right to continue your employment with Avondale or shall limit in any way
Avondale's right to terminate your employment, or your right to terminate your
employment, at any time, without regard to the effect of such termination on
this grant.
10. NON-TRANSFERABILITY/CONSTRUCTION
You may not alienate, assign, transfer or otherwise encumber
your interest in your phantom stock units and any action to do so shall be
treated as a violation of your grant and shall not be binding on Avondale or
this program. The terms and conditions of this program shall be construed in
accordance with the laws of Alabama to the extent such laws are not preempted
by ERISA.
<PAGE> 12
11. SOURCE OF BENEFITS
All benefits payable to you pursuant to this grant of phantom stock
units will be paid from the general assets of Avondale, and the status of your
claim for benefits shall be the same as the status of a claim against Avondale
by any general and unsecured creditor. No assets of Avondale whatsoever shall
be earmarked or otherwise set aside or encumbered in any manner whatsoever to
pay any benefit payable to you pursuant to this grant. Further, you shall have
no right to look to any officer, director, employee or agent of Avondale in his
individual capacity for payment of any such benefits whatsoever.
Very truly yours,
/s/ Stephen Felker
------------------
Stephen Felker
GSF/lj
<PAGE> 13
AVONDALE MILLS, INC.
ASSOCIATE: FELKER, STEPHEN
PHANTOM STOCK UNITS: 150
ESTIMATED VALUE ON SEPTEMBER 1, 1992: $754,500
================================================================================
VESTING AND POTENTIAL VALUE:
<TABLE>
<CAPTION>
----------------------------
VALUE OF UNITS
------------------------------------------------------------------------------
FISCAL AGE % IF 5% IF 10%
YEAR 9/1 VESTED GROWTH GROWTH
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1992 40 15.0% 754,500 754,500
1993 41 20.0% 792,225 829,950
1994 42 25.0% 831,836 912,945
1995 43 30.0% 873,428 1,004,240
1996 44 35.0% 917,099 1,104,663
1997 45 40.0% 962,954 1,215,130
1998 46 45.0% 1,011,102 1,336,643
1999 47 50.0% 1,061,657 1,470,307
2000 48 55.0% 1,114,740 1,617,338
2001 49 60.0% 1,170,477 1,779,072
2002 50 65.0% 1,229,001 1,956,979
2003 51 70.0% 1,290,451 2,152,677
2004 52 75.0% 1,354,974 2,367,944
2005 53 80.0% 1,422,722 2,604,739
2006 54 85.0% 1,493,858 2,865,212
2007 55 90.0% 1,568,551 3,151,734
2008 56 95.0% 1,646,979 3,466,907
2009 57 100.0% 1,729,328 3,813,598
2010 58 100.0% 1,815,794 4,194,958
2011 59 100.0% 1,906,584 4,614,453
2012 60 100.0% 2,001,913 5,075,899
2013 61 100.0% 2,102,009 5,583,489
2014 62 100.0% 2,207,109 6,141,837
2015 63 100.0% 2,317,465 6,756,021
2016 64 100.0% 2,433,338 7,431,623
ANNUAL PAYMENT:
10 YEAR ANNUITY @ 8.5% 341,806 1,043,905
</TABLE>
================================================================================
NOTES: The purpose of this schedule is to show the potential value of your
phantom stock units for the years shown above assuming you continue to work for
Avondale for each year shown and assuming Avondale grows at a 5% or 10% rate
per year. However, the actual value of your phantom stock units will depend on
the actual growth rate achieved by Avondale and the date your employment by
Avondale terminates.
The annual payment shown in the example above has been calculated as a ten year
annuity assuming (a) your employment by Avondale terminates at age 65, (b)
Avondale grows at a 5% or 10% rate per year and (c) the one year Treasury Bill
rate in effect at the time you reach age 65 is 8.5%.
<PAGE> 14
PROJECTED VALUE
OF PHANTOM STOCK UNIT
AT SEPTEMBER 1, 1992
<TABLE>
<S> <C> <C>
EBDLIT: FY 1992 - PROJECTED $ 88,615,469
FY 1991 27,572,548
3rd qtr '90 17,492,754
4th qtr '90 12,876,433
------------
Ten quarters ended 8/28/92 146,557,204
Annualizing Factor 2.50
------------
Average Annual EBDLIT 58,622,882
Phantom Stock Multiple 5.00
------------
293,114,408
Plus Cash (at May 29, 1992) 8,208,214
Less Debt (at May 29, 1992) (49,800,000)
------------
Phantom Stock Base 251,522,622
% of Base per Unit 0.002%
------------
Estimated Value of Phantom Stock Unit $ 5,030
============
</TABLE>
<PAGE> 15
AVONDALE MILLS, INC.
ASSOCIATE: FELKER, STEPHEN
PHANTOM STOCK UNITS: 100
ESTIMATED VALUE ON SEPTEMBER 1, 1989: $484,470
================================================================================
VESTING AND POTENTIAL VALUE:
<TABLE>
<CAPTION>
VALUE OF UNITS
-----------------------------
% IF 5% IF 10%
YEAR AGE VESTED GROWTH GROWTH
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1990 39 0% 484,470 484,470
1991 40 5% 508,694 532,917
1992 41 10% 534,128 586,209
1993 42 15% 560,835 644,830
1994 43 20% 588,876 709,313
1995 44 25% 618,320 780,244
1996 45 30% 649,236 858,268
1997 46 35% 681,698 944,095
1998 47 40% 715,783 1,038,505
1999 48 45% 751,572 1,142,355
2000 49 50% 789,151 1,256,591
2001 50 55% 828,608 1,382,250
2002 51 60% 870,039 1,520,475
2003 52 65% 913,541 1,672,522
2004 53 70% 959,218 1,839,774
2005 54 75% 11007,179 2,023,752
2006 55 80% 1,057,537 2,226,127
2007 56 85% 1,110,414 2,448,740
2008 57 90% 1,165,935 2,693,614
2009 58 95% 1,224,232 2,962,975
2010 59 100% 1,285,443 3,259,273
2011 60 100% 1,349,716 3,585,200
2012 61 100% 1,417,201 3,943,720
2013 62 100% 1,488,061 4,338,092
2014 63 100% 1,562,464 4,771,901
2015 64 100% 1,640,588 5,249,091
2016 65 100% 1,722,617 5,774,000
ANNUAL PAYMENT:
10 YEAR ANNUITY 0 8.5% 241,972 811,062
</TABLE>
================================================================================
NOTES: The purpose of this schedule is to show the potential value of your
phantom stock units for the years shown above assuming you continue to work for
Avondale for each year shown and assuming Avondale grows at a 5% or 10% rate
per year. However, the actual value of your phantom stock units will depend on
the actual growth rate achieved by Avondale and the date your employment by
Avondale terminates.
The annual payment shown in the example above has been calculated as a ten year
annuity assuming (a) your employment by Avondale terminates at age 65, (b)
Avondale grows at a 5% or 10% rate per year and (c) the one year Treasury
Bill rate in effect at the time you reach age 65 is 8.5%.
<PAGE> 16
ESTIMATED VALUE
OF PHANTOM STOCK UNIT
AT SEPTEMBER 1, 1989
<TABLE>
<S> <C>
EBDLIT:
FY 1987 (3rd & 4th qtr) $ 41,769,030
FY 1988 72,449,443
FY 1989 58,200,711
------------
Total - 10 qtrs 172,419,154
Annualizing Factor 2.5
------------
Annualized EBDLIT 68,967,674
Valuation Multiple 5
------------
EBDLIT X 5 344,838,370
Balance Sheet Adjustments
Cash 2,321,691
Debt (104,925,000)
------------
Estimated Company Value 242,235,061
% Company Value Per Unit 0.002%
------------
Estimated Value of Phantom Stock Unit $ 4,845
============
</TABLE>
<PAGE> 1
EXHIBIT 10.20
AVONDALE MILLS, INC.
[LOGO] P.O. BOX 1109
MONROE, GEORGIA 30655
JACK R. ALTHERR, JR.
Vice President and
Chief Financial Officer
November 15, 1995
Mr. Richard H. Monk, Jr.
3 Walnut Road
Sylacauga, Alabama 35150
Dear Richard:
Enclosed is a computation, as of the date of your resignation, November 2,
1995, of the value of your vested interest in the 110 phantom stock units
previously granted to you (75 on June 1, 1990 and 35 on July 20, 1992). In
accordance with the terms of the grants, your vested value of $273,729 is
payable in ten annual installments beginning on August 25, 2004, the date you
reach age 65, or in a single lump sum payment to your beneficiary in the event
of your earlier death. We estimate the annual installment payments will be
approximately $37,000. However, the exact amount will depend upon the one year
Treasury Bill rate in effect on August 25, 2004.
Please note that no further appreciation or depreciation in your vested
value will occur. Interest will not accrue until you reach 65 years of age on
August 25, 2004.
If you have any questions regarding the computation of your vested value or
the terms of the grant, please contact me.
Sincerely,
/s/ Jack R. Altherr
-------------------------
Jack R. Altherr
Enclosure
JRAjr/la
ZERO DEFECTS OUR GOAL
404/267-2226
<PAGE> 2
RICHARD H. MONK, JR.
Value of Vested Interest in Phantom Stock Units at November 2, 1995
Date of Birth: August 25, 1939
Normal Payment Date: August 25, 2004
<TABLE>
<CAPTION>
EBDLITA:
<S> <C>
Ten Quarter ended August 25, 1995 173,724,367
Annualizing Factor 2.50
------------
Average Annual EBDLIT 69,489,747
Phantom Stock Multiple 5.00
------------
347,448,734
Balance Sheet Adjustments at 8/25/95:
Cash 1,334,583
Debt (169,918,035)
------------
Phantom Stock Base 178,865,282
Total Number of Shares (including Phantom Shares) 11,467,356
------------
Value per Share $ 15.60
Shares per Phantom Unit 398,606
------------
Value of Phantom Stock Unit $ 6,218
Number of Units Granted 110
------------
Total Award Value $ 683,980
Vesting as of November 2, 1995 40.02%
------------
Value of Vested Interest $ 273,729
============
Estimated Annual Installment Payment for 10 years beginning
August 25, 2004 assuming a 6% Treasury Bill Rate $ 37,191
============
</TABLE>
<PAGE> 3
AVONDALE MILLS,INC.
[LOGO] P.0. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
December 6, 1994
Mr. Richard H. Monk, Jr.
3 Walnut Road
Sylacauga, Alabama 35150
Dear Richard:
When the phantom stock program was adopted in fiscal 1990, the objective of
the Board of Directors was to provide long term incentives to management which
parallel the economic interests of Avondale's shareholders. Although the
phantom stock units do not represent actual shares of equity in Avondale, their
grant does represent a significant financial commitment by the shareholders to
allow key members of management an opportunity to participate in the growth of
the Company.
In my letters granting the phantom stock units, the value of a phantom
stock unit was defined to be 0.002% of Avondale's equity value, as determined
by a specific formula (five times annualized EBDLIT for the past ten fiscal
quarters plus cash minus debt). Since this approach uses a fixed percentage of
calculated equity instead of an equivalent number of phantom shares,
substantial dilution or accretion in the value of a phantom stock unit may be
created by stock-related transactions while the value of a share of common
stock may not be affected similarly. As an example of the potential dilution,
the March 1994 leveraged purchase of common stock shares from CS First Boston
and Metropolitan Life Insurance Company produced a nearly 40% decline in the
calculated value of a phantom stock unit (see Schedule A).
To ensure that the original objective of the phantom stock program is
achieved, the Board of Directors has approved an amendment to the provisions of
the program such that the value of a phantom stock unit will be determined
using phantom shares. The number of phantom shares per phantom stock unit will
be defined as 0.002% of the total number of shares of common stock of Avondale
(AM Acquisition, Inc.) outstanding at September 1, 1989, including the phantom
shares. The number of phantom shares so calculated at September 1, 1989 will
be adjusted for any subsequent stock splits or stock dividends, such as the
August 27, 1993 merger and stock dividend (see Schedule B). As a result, this
approach begins with the same value established at September 1, 1989 using
0.002% of calculated equity but allows the value per phantom stock unit to
"float" with the actual number of shares outstanding and eliminates the
undesired dilution or accretion
<PAGE> 4
Mr. Richard H. Monk, Jr.
December 6, 1994
Page 2
in value. Again as an example, the dilution caused by the leveraged stock
purchase is virtually eliminated by using the phantom share calculation (see
Schedule C).
All 110 phantom stock units awarded to you are subject to the terms
and conditions set forth in my letters of June 1, 1990 and July 20, 1992,
copies of which are enclosed for your reference. To execute the amendment
described above, Section 2 of the terms and conditions set forth in my letter
of June 1, 1990 is hereby restated and replaced in its entirety with the
following:
2. VALUE OF PHANTOM STOCK UNITS
The value of each phantom stock unit on any date (the "valuation
date") will be equal to the "Equity Value of the Company Per Share"
multiplied by 398.606 phantom shares. The "Equity Value of the
Company Per Share", as determined by Avondale, shall be equal to the
sum of "EBDLIT" times five, plus "Balance Sheet Adjustments", divided
by the sum of the total number of shares of Avondale Incorporated
Class A and Class B common stock outstanding on the valuation date
plus 398,606 phantom shares.
Avondale defines EBDLIT as the consolidated earnings of
Avondale and its subsidiaries before depreciation, amortization, LIFO
inventory adjustments, interest and income taxes, for the ten fiscal
quarters immediately preceding such date, divided by 2.5. Avondale
defines Balance Sheet Adjustments as an amount, which may be positive
or negative, equal to the consolidated cash, cash equivalents and short
term investments of Avondale and its subsidiaries minus the
consolidated debt of Avondale and its subsidiaries, determined as of
the final day of the last fiscal period for which financial statements
were prepared and that immediately precedes the valuation date.
All other terms and conditions contained in my letters granting your
110 phantom stock units remain in full force and effect.
<PAGE> 5
Mr. Richard H. Monk, Jr.
December 6, 1994
Page 3
If you have any questions regarding this amendment, please direct them
to Jack Altherr or me. As noted in previous correspondence, due to the
relatively few key associates participating in the program, we ask that you
recognize the need for confidentiality.
Please indicate your understanding and acceptance of the above
amendment by signing and returning the enclosed copy of this letter to me.
Very truly yours,
/s/ Stephen Felker
---------------------
Stephen Felker
Acknowledged and accepted:
/s/ Richard H. Monk, Jr.
- ----------------------------------
Date: January 3, 1995
----------------------------
<PAGE> 6
AVONDALE MILLS, INC. SCHEDULE A
VALUE OF PHANTOM STOCK UNIT
(USING TWO PERCENT OF CALCULATED EQUITY VALUE)
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter
FY 1994 FY 1994
----------- -----------
<S> <C> <C>
Annualized cash flow - EBDLIT $88,024,754 $ 86,433,972
(past 10 fiscal quarters)
Valuation multiple 5.00 5.00
----------- ------------
440,123,770 432,169,860
Cash 372,287 1,411,191
Debt (42,950,000) (204,330,590)
----------- ------------
Calculated equity value 397,546,057 229,250,461
(per formula)
% equity per phantom stock unit 0.0020% 0.0020%
----------- ------------
Value of phantom stock unit $ 7,951 $ 4,585
=========== ============
</TABLE>
<PAGE> 7
AVONDALE MILLS, INC. SCHEDULE B
CALCULATION OF PHANTOM SHARES
<TABLE>
<CAPTION>
Shares % Shares
-------- ---------
<S> <C> <C>
Shares outstanding at 9/l/89
(AM Acquisition, Inc.)
First Boston 185.7200 15.73%
Metropolitan Life 368.2800 31.19%
John Maypole 4.0000 0.34%
Walton Monroe 501.0000 42.43%
Stephen Felker 58.0000 4.91%
Class B 40.2083 3.41%
------------ --------
1,157.2083 98.00%
Calculated phantom shares
(AM Acquisition, Inc.) 23.6165 2.00%
------------ --------
1,180.8248 100.00%
============ ========
Calculated phantom shares
(AM Acquisition, Inc.) 23.6165
Factor for merger with Walton Monroe 67.5131
------------
1,594.4240
Factor for stock dividend 250.0000
------------
Phantom shares 398,605.9976
============
Avondale Incorporated - August 1, 1994
Class A shares outstanding 10,089,811 87.99%
Class B shares outstanding 978,939 8.54%
------------ --------
Total common shares 11,068,750 96.52%
Phantom shares 398,606 3.48%
(whole shares) ------------ --------
11,467,356 100.00%
============ ========
</TABLE>
<PAGE> 8
AVONDALE MILLS, INC. SCHEDULE C
VALUE OF PHANTOM STOCK UNIT
(USING CALCULATED EQUITY VALUE PER PHANTOM SHARE)
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter
FY 1994 FY 1994
------------ ------------
<S> <C> <C>
Annualized cash flow - EBDLIT $ 88,024,754 $ 86,433,972
(past 10 fiscal quarters)
Valuation multiple 5.00 5.00
------------ ------------
440,123,770 432,169,860
Cash 372,287 1,411,191
Debt (42,950,000) (204,330,590)
------------ ------------
Calculated equity value 397,546,057 229,250,461
(per formula)
Total number of shares 20,880,436 11,467,356
(including phantom shares) ------------ ------------
Calculated equity value per share $ 19.04 $ 19.99
Phantom shares per unit 398.606 398,606
------------ ------------
$ 7,589 $ 7,969
============ ============
</TABLE>
<PAGE> 9
AVONDALE MILLS, INC.
[LOGO] P.O. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
July 20, 1992
Mr. Richard H. Monk, Jr.
3 Walnut Road
Sylacauga, Alabama 35150
Dear Richard:
This letter amends the grant of phantom stock units awarded to you by my
letter of June 1, 1990, a copy of which is attached for your reference.
Effective this date, your grant is increased by 35 phantom stock units,
bringing your total award to 110 phantom stock units.
All 110 phantom stock units awarded to you are subject to the terms and
conditions set forth in my June 1, 1990 letter. Accordingly, your interest in
your 110 phantom stock units will vest at six and two thirds percent per year
for each full and uninterrupted year that you continue to work for Avondale
after August 31, 1989. Should you remain so employed, you will be 93.33%
vested on August 25, 2004, when you reach age 65. If you remain employed after
reaching age 65, you will become fully vested on August 31, 2004. Payment in
the form of ten annual installments will begin upon your 65th birthday assuming
you retire at that time.
In addition, your interest in your 110 phantom stock units will become
fully vested in the event you die before your employment with Avondale
terminates. Your vested value will be computed as of the date of your death
and paid to your beneficiary in a single lump sum.
If you should have any questions regarding the terms of the grant, please
direct them to Jack Altherr or me. Because relatively few key associates
participate in the program, I request that you recognize the need for
confidentiality.
Very truly yours,
/s/ Stephen Felker
-----------------------
Stephen Felker
<PAGE> 10
AVONDALE MILLS, INC.
[LOGO] P.O. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
June 1, 1990
Mr. Richard H. Monk, Jr.
P.O. Box 329
West Point, Georgia 31833
Dear Richard:
Avondale's continued success depends upon the superior performance of
all of its associates working together as a team. To make the relationship
mutually beneficial, there is a system of rewards in place, including
compensation, profit sharing and other benefits as well as attractive and safe
working environments and, at certain management levels, performance incentives.
An additional opportunity for reward is now being offered to you and a
few key associates. The program involves the grant of phantom stock units
which effectively provides equity participation in the growth of the company.
The program will not replace or detract from existing benefits.
While the phantom stock units do not represent actual shares of equity
in Avondale and therefore do not carry voting and other rights associated with
stock ownership, their grant nonetheless represents substantial financial
recognition by the company's shareholders of the importance and role played by
key associates.
Please review carefully the following terms and conditions of your
grant of phantom stock units. As questions arise, please direct them to John
Hudson, Jack Altherr or me. Because relatively few key associates will
participate in the program, I request that you recognize the need for
confidentiality.
<PAGE> 11
1. GRANT OF PHANTOM STOCK UNITS
Your participation in the program will take the form of a
grant, effective September 1, 1989, of 75 "phantom stock units". A phantom
stock unit is simply a bookkeeping measure which represents your vested and
nonvested interest in the value of the company (as defined in section 2).
2. VALUE OF PHANTOM STOCK UNITS
The value of each phantom stock unit on any date will be
0.002% of an amount, which shall be determined by Avondale, equal to "EBDLIT"
times five, plus "Balance Sheet Adjustments". Avondale defines EBDLIT as the
consolidated earnings of Avondale and its subsidiaries before depreciation,
amortization, LIFO inventory adjustments, interest and income taxes, for the
ten fiscal quarters immediately preceding such date, divided by 2.5. Avondale
defines Balance Sheet Adjustments as an amount, which may be positive or
negative, equal to the consolidated cash, cash equivalents and short term
investments of Avondale and its subsidiaries minus the consolidated debt of
Avondale and its subsidiaries, determined as of the final day of the last
fiscal period for which financial statements were prepared and that immediately
precedes the date such amount is determined.
3. VESTING OF PHANTOM STOCK UNITS
Your vested interest in your phantom stock units will increase
(subject to section 7) at the rate of six and two thirds percent per year for
each full and uninterrupted year that you continue to work for Avondale after
August 31, 1989.
You also will (subject to section 7) become fully vested in your
phantom stock units if you die before your employment by Avondale terminates.
Finally, you will forfeit your entire interest in your phantom stock
units (whether or not vested under this section 3) if you engage in any actions
described under section 7.
4. PAYMENT AT RETIREMENT
Avondale will compute and pay the value of your vested
interest in your phantom stock units to you in cash beginning as of your
"Normal Payment Date", which will be the date you reach age 65 or, If later,
the date your employment by Avondale terminates. Your payment will be made
with interest in ten equal annual installments, calculated as an annuity
payable on your Normal Payment Date and on the first nine anniversaries of
your Normal Payment Date using an interest rate equal to the one year Treasury
Bill rate which Avondale deems in effect on your Normal Payment Date.
<PAGE> 12
5. TERMINATION OF EMPLOYMENT
If your employment with Avondale terminates (for any reason whatsoever
except death) before your Normal Payment Date, further vesting will cease and
Avondale will compute the value of your vested interest in your phantom
stock units as of your termination date. The value of your vested
interest in your phantom stock units, as so determined and without
further increase, shall be paid to you beginning on your Normal Payment
Date; that is, no further appreciation or depreciation in the value of the
phantom stock units nor any crediting of interest will occur after your
employment terminates. Beginning with your Normal Payment Date, payment will be
made in ten equal annual installments, as if you retired, in accordance with
section 4 using the value of your vested interest in your phantom stock units
as calculated at termination and the one year Treasury Bill rate which Avondale
deems in effect on your Normal Payment Date.
6. DEATH BENEFIT
If you die before your employment with Avondale terminates, you will
become fully vested in your phantom stock units in accordance with section 3.
Avondale will compute the value of your phantom stock units as of the date of
your death in accordance with section 2 and pay such amount to your
beneficiary.
If you die after your employment with Avondale terminates but before
your Normal Payment Date, Avondale will pay to your beneficiary the value of
your vested interest in your phantom stock units as calculated under section 5.
If you die after your Normal Payment Date, Avondale will calculate the
present value (discounted to the date of your death using the one year Treasury
Bill rate which Avondale deems in effect on your Normal Payment Date) of any
unpaid annual installments established under section 4 and pay such amount to
your beneficiary.
Any death benefit payment to your beneficiary under this section 6
will be made in lump sum in cash within 90 days after the date of your death.
Please complete and return the attached beneficiary designation form
to the corporate secretary. If you fail to designate a beneficiary for your
interest in your phantom stock units (or your beneficiary fails to survive you),
Avondale will treat your estate as your beneficiary for your interest in your
phantom stock units. You can change your beneficiary at any time by returning a
new beneficiary designation form to the corporate secretary, and such change
will be effective on the date the new beneficiary designation form is received
by the corporate secretary.
<PAGE> 13
7. FORFEITURE OF BENEFITS
If, in Avondale's opinion, you either (a) compete directly or
indirectly with Avondale or (b) engage in any actions or make any statements
which are detrimental to Avondale's best interests, at any time while you are
employed by Avondale or before the end of the five year period following your
termination of employment with Avondale, you will forfeit your entire vested
and nonvested interest in your phantom stock units.
8. AMENDMENT/TERMINATION
This letter sets forth the terms and conditions of this program in
their entirety. Avondale reserves the right to amend the terms and conditions
of this program from time to time or to terminate this program at any time and
for any reason whatsoever. However, Avondale will not amend retroactively the
formula outlined in section 2 for valuing phantom stock units or the rate at
which you vest in such units under section 3 (other than the forfeiture
conditions).
No action to amend or terminate this program shall be effective unless
such action is set forth in writing and signed by me or my successor as Chief
Executive Officer of Avondale.
If this program is terminated, Avondale will compute and pay your
vested interest in your phantom stock units in accordance with section 5 as if
your employment by Avondale had terminated on the date Avondale terminated this
program.
9. NOT A CONTRACT OF EMPLOYMENT
You are an employee at will and you may terminate your
employment, or your employment may be terminated by Avondale, at any time
without notice. Nothing in this grant of phantom stock units shall give you
any right to continue your employment with Avondale or shall limit in any way
Avondale's right to terminate your employment, or your right to terminate
your employment, at any time, without regard to the effect of such
termination on this grant.
10. NON-TRANSFERABILITY/CONSTRUCTION
You may not alienate, assign, transfer or otherwise encumber
your interest in your phantom stock units and any action to do so shall be
treated as a violation of your grant and shall not be binding on Avondale or
this program. The terms and conditions of this program shall be construed in
accordance with the laws of Alabama to the extent such laws are not preempted
by ERISA.
<PAGE> 14
11. SOURCE OF BENEFITS
All benefits payable to you pursuant to this grant of phantom
stock units will be paid from the general assets of Avondale, and the status of
your claim for benefits shall be the same as the status of a claim against
Avondale by any general and unsecured creditor. No assets of Avondale
whatsoever shall be earmarked or otherwise set aside or encumbered in any
manner whatsoever to pay any benefit payable to you pursuant to this grant.
Further, you shall have no right to look to any officer, director, employee or
agent of Avondale in his individual capacity for payment of any such benefits
whatsoever.
Very truly yours,
/s/ Stephen Felker
----------------------
Stephen Felker
GSF/lj
<PAGE> 15
AVONDALE MILLS, INC
ASSOCIATE: MONK, JR., RICHARD H.
PHANTOM STOCK UNITS: 110
ESTIMATED VALUE ON SEPTEMBER 1, 1992: $553,300
================================================================================
VESTING AND POTENTIAL VALUE:
<TABLE>
<CAPTION>
---------------------------
VALUE OF UNITS
---------------------------
FISCAL AGE % IF 5% IF 10%
YEAR 9/1 VESTED GROWTH GROWTH
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
1992 53 20.0% 553,300 $ 53,300
1993 54 26.7% 580,965 608,630
1994 55 33.3% 610,013 669,493
1995 56 40.0% 640,514 736,442
1996 57 46.6% 672,540 810,087
1997 58 53.3% 706,167 891,095
1998 59 60.0% 741,475 980,205
1999 60 66.6% 778,549 1,078,225
2000 61 73.3% 817,476 1,186,048
2001 62 79.9% 858,350 1,304,652
2002 63 86.6% 901,267 1,435,118
2003 64 93.3% 946,331 1,578,629
ANNUAL PAYMENT:
10 YEAR ANNUITY @ 8.5% 123,970 206,801
</TABLE>
================================================================================
NOTES: The purpose of this schedule is to show the potential value
of your phantom stock units for the years shown above assuming you continue to
work for Avondale for each year shown and assuming Avondale grows at a 5% or
10% rate per year. However, the actual value of your phantom stock units will
depend on the actual growth rate achieved by Avondale and the date your
employment by Avondale terminates.
The annual payment shown in the example above has been calculated as a ten year
annuity assuming (a) your employment by Avondale terminates at age 65, (b)
Avondale grows at a 5% or 10% rate per year and (c) the one year Treasury Bill
rate in effect at the time you reach age 65 is 8.5%.
<PAGE> 16
PROJECTED VALUE
OF PHANTOM STOCK UNIT
AT SEPTEMBER 1, 1992
<TABLE>
<S> <C> <C>
EBDLIT: FY 1992 PROJECTED $ 88,615,469
FY 1991 27,572,548
3rd qtr '90 17,492,754
4th qtr '90 12,876,433
------------
Ten quarters ended 8/28/92 146,557,204
Annualizing Factor 2.50
------------
Average Annual EBDLIT 58,622,882
Phantom Stock Multiple 5.00
------------
293,114,408
Plus Cash (at May 29, 1992) 8,208,214
Less Debt (at May 29, 1992) (49,800,000)
------------
Phantom Stock Base 251,522,622
% of Base per Unit 0.002%
------------
Estimated Value of Phantom Stock Unit $ 5,030
============
</TABLE>
<PAGE> 17
AVONDALE MILLS, INC.
ASSOCIATE: MONK, JR., RICHARD H.
PHANTOM STOCK UNITS: 75
ESTIMATED VALUE ON SEPTEMBER 1, 1989: $363,353
================================================================================
VESTING AND POTENTIAL VALUE:
<TABLE>
<CAPTION>
-------------------------------
VALUE OF UNITS
------------------------------------------------------------------
% IF 5% IF 10%
YEAR AGE VESTED GROWTH GROWTH
------------------------------------------------------------------
<S> <C> <C> <C> <C>
1990 50 0.0% 363,353 363,353
1991 51 6.7% 381,520 399,688
1992 52 13.3% 400,596 439,657
1993 53 20.0% 420,626 483,622
1994 54 26.6% 441,657 531,985
1995 55 33.3% 463,740 585,183
1996 56 40.0% 486,927 643,701
1997 57 46.6% 511,274 708,071
1998 58 53.3% 536,837 778,879
1999 59 59.9% 563,679 856,766
2000 60 66.6% 591,863 942,443
2001 61 73.3% 621,456 1,036,687
2002 62 79.9% 652,529 1,140,356
2003 63 86.6% 685,155 1,254,392
2004 64 93.2% 719,413 1,379,831
2005 65 99.9% 755,384 1,517,814
ANNUAL PAYMENT:
10 YEAR ANNUITY @ 8.5% 106,001 212,991
</TABLE>
================================================================================
NOTES: The purpose of this schedule is to show the potential value of your
phantom stock units for the years shown above assuming you continue to work for
Avondale for each year shown and assuming Avondale grows at a 50% or 10%
rate per year. However, the actual value of your phantom stock units will
depend on the actual growth rate achieved by Avondale and the date your
employment by Avondale terminates.
The annual payment shown in the example above has been calculated as a ten year
annuity assuming (a) your employment by Avondale terminates at age 65, (b)
Avondale grows at a 5% or 10% rate per year and (c) the one year Treasury
Bill rate in effect at the time you reach age 65 is 8.5%.
<PAGE> 18
ESTIMATED VALUE
OF PHANTOM STOCK UNIT
AT SEPTEMBER 1, 1989
<TABLE>
<S> <C>
EBDLIT:
FY 1987 (3rd & 4th qtr) $ 41,769,030
FY 1988 72,449,443
FY 1989 58,200,711
-----------
Total - 10 qtrs 172,419,154
Annualizing Factor 2.5
-----------
Annualized EBDLIT 68,967,674
Valuation Multiple 5
-----------
EBDLIT X 5 344,838,370
Balance Sheet Adjustments
Cash 2,321,691
Debt (104,925,000)
Estimated Company Value 242,235,061
% Company Value Per Unit 0.002%
-----------
Estimated Value of Phantom Stock Unit $ 4,845
===========
</TABLE>
<PAGE> 1
EXHIBIT 10.21
AVONDALE MILLS, INC,
[AVONDALE LOGO] P.0. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
December 6, 1994
Mr. Jack R. Altherr, Jr.
642 Kings Ridge Drive
Monroe, Georgia 30655
Dear Jack:
When the phantom stock program was adopted in fiscal 1990, the objective of
the Board of Directors was to provide long term incentives to management which
parallel the economic interests of Avondale's shareholders. Although the
phantom stock units do not represent actual shares of equity in Avondale, their
grant does represent a significant financial commitment by the shareholders to
allow key members of management an opportunity to participate in the growth of
the Company.
In my letters granting the phantom stock units, the value of a phantom stock
unit was defined to be 0.002% of Avondale's equity value, as determined by a
specific formula (five times annualized EBDLIT for the past ten fiscal quarters
plus cash minus debt). Since this approach uses a fixed percentage of
calculated equity instead of an equivalent number of phantom shares,
substantial dilution or accretion in the value of a phantom stock unit may be
created by stock-related transactions while the value of a share of common
stock may not be affected similarly. As an example of the potential dilution,
the March 1994 leveraged purchase of common stock shares from CS First Boston
and Metropolitan Life Insurance Company produced a nearly 40% decline in the
calculated value of a phantom stock unit (see Schedule A).
To ensure that the original objective of the phantom stock program is
achieved, the Board of Directors has approved an amendment to the provisions of
the program such that the value of a phantom stock unit will be determined
using phantom shares. The number of phantom shares per phantom stock unit will
be defined as 0.002% of the total number of shares of common stock of Avondale
(AM Acquisition, Inc.) outstanding at September 1, 1989, including the phantom
shares. The number of phantom shares so calculated at September 1, 1989 will
be adjusted for any subsequent stock splits or stock dividends, such as the
August 27, 1993 merger and stock dividend (see Schedule B). As a result, this
approach begins with the same value established at September 1, 1989 using
0.002% of calculated equity but allows the value per phantom stock unit to
"float" with the actual number of shares outstanding and eliminates the
undesired dilution or accretion
<PAGE> 2
Mr. Jack R. Altherr, Jr.
December 6, 1994
Page 2
in value. Again as an example, the dilution caused by the leveraged stock
purchase is virtually eliminated by using the phantom share calculation (see
Schedule C).
All 90 phantom stock units awarded to you are subject to the terms and
conditions set forth in my letters of March 15, 1990 and July 20, 1992, copies
of which are enclosed for your reference. To execute the amendment described
above, Section 2 of the terms and conditions set forth in my letter of March
15, 1990 is hereby restated and replaced in its entirety with the following:
2. VALUE OF PHANTOM STOCK UNITS
The value of each phantom stock unit on any date (the "valuation
date") will be equal to the "Equity Value of the Company Per Share"
multiplied by 398.606 phantom shares. The "Equity Value of the
Company Per Share", as determined by Avondale, shall be equal to the
sum of "EBDLIT" times five, plus "Balance Sheet Adjustments", divided
by the sum of the total number of shares of Avondale Incorporated
Class A and Class B common stock outstanding on the valuation date
plus 398,606 phantom shares.
Avondale defines EBDLIT as the consolidated earnings of
Avondale and its subsidiaries before depreciation, amortization, LIFO
inventory adjustments, interest and income taxes, for the ten fiscal
quarters immediately preceding such date, divided by 2.5. Avondale
defines Balance Sheet Adjustments as an amount, which may be positive
or negative, equal to the consolidated cash, cash equivalents and
short term investments of Avondale and its subsidiaries minus the
consolidated debt of Avondale and its subsidiaries, determined as of
the final day of the last fiscal period for which financial
statements were prepared and that immediately precedes the valuation
date.
All other terms and conditions contained in my letters granting your
90 phantom stock units remain in full force and effect.
<PAGE> 3
Mr. Jack R. Altherr, Jr.
December 6, 1994
Page 3
If you have any questions regarding this amendment, please direct them
to Jack Altherr or me. As noted in previous correspondence, due to the
relatively few key associates participating in the program, we ask that you
recognize the need for confidentiality.
Please indicate your understanding and acceptance of the above
amendment by signing and returning the enclosed copy of this letter to me.
Very truly yours,
/s/ Stephen
-----------------
Stephen
Acknowledged and accepted:
/s/ Jack R. Altherr, Jr.
- --------------------------
Jack R. Altherr, Jr.
Date: 12/12/94
---------------------
<PAGE> 4
AVONDALE MILLS, INC. SCHEDULE A
VALUE OF PHANTOM STOCK UNIT
(USING TWO PERCENT OF CALCULATED EQUITY VALUE)
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter
FY 1994 FY 1994
------------- -------------
<C> <C>
Annualized cash FLOW - EBDLIT $ 88,024,754 $ 86,433,972
(past 10 fiscal quarters)
Valuation multiple 5.00 5.00
------------- -------------
440,123,770 432,169,860
Cash 372,287 1,411,191
Debt (42,950,000) (204,330,590)
------------- -------------
Calculated equity value 397,546,057 229,250,461
(per formula)
% equity per phantom stock unit 0.0020% 0.0020%
------------- -------------
Value of phantom stock unit $ 7,951 $ 4,585
</TABLE>
<PAGE> 5
AVONDALE MILLS, INC. SCHEDULE B
CALCULATION OF PHANTOM SHARES
<TABLE>
<CAPTION>
Shares % Shares
---------- -----------
<S> <C> <C>
Shares outstanding at 9/l/89
(AM Acquisition, Inc.)
First Boston 185.7200 15.73%
Metropolitan Life 368.2800 31.19%
John Maypole 4.0000 0.34%
Walton Monroe 501.0000 42.43%
Stephen Felker 58.0000 4.91%
Class B 40.2083 3.41%
----------- ----------
1,157.2083 98.00%
Calculated phantom shares
(AM Acquisition, Inc.) 23.6165 2.00%
----------- -----------
1,180.8248 100.00%
Calculated phantom shares
(AM Acquisition, Inc.) 23.6165
Factor for merger with Walton Monroe 67.5131
-----------
1,594.4240
Factor for stock dividend 250.0000
------------
Phantom shares 398,605.9976
Avondale Incorporated - August 1, 1994
Class A shares outstanding 10,089,811 87.99%
Class B shares outstanding 978,939 8.54%
----------- ----------
Total common shares 11,068,750 96.52%
Phantom shares 398,606 3.480/0
(whole shares) ----------- ----------
11,467,356 100.00%
=========== ==========
</TABLE>
<PAGE> 6
AVONDALE MILLS, INC. SCHEDULE C
VALUE OF PHANTOM STOCK UNIT
(USING CALCULATED EQUITY VALUE PER PHANTOM SHARE)
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter
FY 1994 FY 1994
------------- -------------
<S> <C> <C>
Annualized cash flow - EBDLIT $ 88,024,754 $ 86,433,972
(past 10 fiscal quarters)
Valuation multiple 5.00 5.00
------------- -------------
440,123,770 432,169,860
Cash 372,287 1,411,191
Debt (42,950,000) (204,330,590)
------------- -------------
Calculated equity value 397,546,057 229,250,461
(per formula)
Total number of shares 20,880,436 11,467,356
(including phantom shares) ------------- -------------
Calculated equity value per share $ 19.04 $ 19.99
Phantom shares per unit 398,606 398,606
------------- -------------
$ 7,589 $ 7,969
============= =============
</TABLE>
<PAGE> 7
AVONDALE MILLS, INC.
[AVONDALE LOGO] P.0. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
July 20, 1992
Mr. Jack R. Altherr, Jr.
642 Kings Ridge Drive
Monroe, Georgia 30655
Dear Jack:
This letter amends the grant of phantom stock units awarded to you by my
letter of March 15, 1990, a copy of which is attached for your reference.
Effective this date, your grant is increased by 30 phantom stock units,
bringing your total award to 90 phantom stock units.
All 90 phantom stock units awarded to you are subject to the terms and
conditions set forth in my March 15, 1990 letter. Accordingly, your interest
in your 90 phantom stock units will vest at five percent per year for each full
and uninterrupted year that you continue to work for Avondale after August 31,
1989. Should you remain so employed, you will become fully vested on August
31, 2009. Payment in the form of ten annual installments will begin upon your
65th birthday assuming you retire at that time.
In addition, your interest in your 90 phantom stock units will become fully
vested in the event you die before your employment with Avondale terminates.
Your vested value will be computed as of the date of your death and paid to
your beneficiary in a single lump sum.
If you should have any questions regarding the terms of the grant, please
direct them to Richard Monk, or me. Because relatively few key associates
participate in the program, I request that you recognize the need for
confidentiality.
Very truly yours,
/s/ Stephen Felker
------------------
Stephen Felker
GSF/lj
<PAGE> 8
AVONDALE MILLS, INC.
[AVONDALE LOGO] P.0. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
March 15, 1990
Mr. Jack R. Altherr, Jr.
642 Kings Ridge Road
Monroe, Georgia 30655
Dear Jack:
Avondale's continued success depends upon the superior performance of
all of its associates working together as a team. To make the relationship
mutually beneficial, there is a system of rewards in place, including
compensation, profit sharing and other benefits as well as attractive and safe
working environments and, at certain management levels, performance incentives.
An additional opportunity for reward is now being offered to you and a
few key associates. The program involves the grant of phantom stock units
which effectively provides equity participation in the growth of the company.
The program will not replace or detract from existing benefits.
While the phantom stock units do not represent actual shares of equity
in Avondale and therefore do not carry voting and other rights associated with
stock ownership, their grant nonetheless represents substantial financial
recognition by the company's shareholders of the importance and role played by
key associates.
Please review carefully the following terms and conditions of your grant
of phantom stock units. As questions arise, please direct them to John Hudson,
Jack Altherr or me. Because relatively few key associates will participate in
the program, I request that you recognize the need for confidentiality.
<PAGE> 9
1. GRANT OF PHANTOM STOCK UNITS
Your participation in the program will take the form of a grant,
effective September 1, 1989, of 60 "phantom stock units". A phantom stock
unit is simply a bookkeeping measure which represents your vested and nonvested
interest in the value of the company (as defined in section 2).
2. VALUE OF PHANTOM STOCK UNITS
The value of each phantom stock unit on any date will be
0.002% of an amount, which shall be determined by Avondale, equal to "EBDLIT"
times five, plus "Balance Sheet Adjustments". Avondale defines EBDLIT as the
consolidated earnings of Avondale and its subsidiaries before depreciation,
amortization, LIFO inventory adjustments, interest and income taxes, for the
ten fiscal quarters immediately preceding such date, divided by 2.5. Avondale
defines Balance Sheet Adjustments as an amount, which may be positive or
negative, equal to the consolidated cash, cash equivalents and short term
investments of Avondale and its subsidiaries minus the consolidated debt of
Avondale and its subsidiaries, determined as of the final day of the last
fiscal period for which financial statements were prepared and that immediately
precedes the date such amount is determined.
3. VESTING OF PHANTOM STOCK UNITS
Your vested interest in your phantom stock units will increase
(subject to section 7) at the rate of five percent per year for each full and
uninterrupted year that you continue to work for Avondale after August 31,
1989.
You also will (subject to section 7) become fully vested in your
phantom stock units if you die before your employment by Avondale terminates.
Finally, you will forfeit your entire interest in your phantom stock
units (whether or not vested under this section 3) if you engage in any actions
described under section 7.
4. PAYMENT AT RETIREMENT
Avondale will compute and pay the value of your vested
interest in your phantom stock units to you in cash beginning as of your
"Normal Payment Date", which will be the date you reach age 65 or, if later,
the date your employment by Avondale terminates. Your payment will be made
with interest in ten equal annual installments, calculated as an annuity
payable on your Normal Payment Date and on the first nine anniversaries of your
Normal Payment Date using an interest rate equal to the one year Treasury Bill
rate which Avondale deems in effect on your Normal Payment Date.
<PAGE> 10
5. TERMINATION OF EMPLOYMENT
If your employment with Avondale terminates (for any reason whatsoever
except death) before your Normal Payment Date, further vesting will cease and
Avondale will compute the value of your vested interest in your phantom stock
units as of your termination date. The value of your vested interest in your
phantom stock units, as so determined and without further increase, shall be
paid to you beginning on your Normal Payment Date; that is, no further
appreciation or depreciation in the value of the phantom stock units nor any
crediting of interest will occur after your employment terminates. Beginning
with your Normal Payment Date, payment will be made in ten equal annual
installments, as if you retired, in accordance with section 4 using the value of
your vested interest in your phantom stock units as calculated at termination
and the one year Treasury Bill rate which Avondale deems in effect on your
Normal Payment Date.
6. DEATH BENEFIT
If you die before your employment with Avondale terminates, you will
become fully vested in your phantom stock units in accordance with section 3.
Avondale will compute the value of your phantom stock units as of the date of
your death in accordance with section 2 and pay such amount to your beneficiary.
If you die after your employment with Avondale terminates but before
your Normal Payment Date, Avondale will pay to your beneficiary the value of
your vested interest in your phantom stock units as calculated under section 5.
If you die after your Normal Payment Date, Avondale will calculate the
present value (discounted to the date of your death using the one year Treasury
Bill rate which Avondale deems in effect on your Normal Payment Date) of any
unpaid annual installments established under section 4 and pay such amount to
your beneficiary.
Any death benefit payment to your beneficiary under this section 6
will be made in lump sum in cash within 90 days after the date of your death.
Please complete and return the attached beneficiary designation form
to the corporate secretary. If you fail to designate a beneficiary for your
interest in your phantom stock units (or your beneficiary falls to survive
you), Avondale will treat your estate as your beneficiary for your interest in
your phantom stock units. You can change your beneficiary at any time by
returning a new beneficiary designation form to the corporate secretary, and
such change will be effective on the date the new beneficiary designation form
is received by the corporate secretary.
<PAGE> 11
7. FORFEITURE OF BENEFITS
If, in Avondale's opinion, you either (a) compete directly or
indirectly with Avondale or (b) engage in any actions or make any statements
which are detrimental to Avondale's best interests, at any time while you are
employed by Avondale or before the end of the five year period following your
termination of employment with Avondale, you will forfeit your entire vested
and nonvested interest in your phantom stock units.
8. AMENDMENT/TERMINATION
This letter sets forth the terms and conditions of this
program in their entirety. Avondale reserves the right to amend the terms and
conditions of this program from time to time or to terminate this program at
any time and for any reason whatsoever. However, Avondale will not amend
retroactively the formula outlined in section 2 for valuing phantom stock units
or the rate at which you vest in such units under section 3 (other than the
forfeiture conditions).
No action to amend or terminate this program shall be effective unless
such action is set forth in writing and signed by me or my successor as Chief
Executive Officer of Avondale.
If this program is terminated, Avondale will compute and pay your
vested interest in your phantom stock units in accordance with section 5 as if
your employment by Avondale had terminated on the date Avondale terminated this
program.
9. NOT A CONTRACT OF EMPLOYMENT
You are an employee at will and you may terminate your
employment, or your employment may be terminated by Avondale, at any time
without notice. Nothing in this grant of phantom stock units shall give you
any right to continue your employment with Avondale or shall limit in any way
Avondale's right to terminate your employment, or your right to terminate your
employment, at any time, without regard to the effect of such termination on
this grant.
10. NON-TRANSFERABILITY/CONSTRUCTION
You may not alienate, assign, transfer or otherwise encumber
your interest in your phantom stock units and any action to do so shall be
treated as a violation of your grant and shall not be binding on Avondale or
this program. The terms and conditions of this program shall be construed in
accordance with the laws of Alabama to the extent such laws are not preempted
by ERISA.
<PAGE> 12
11. SOURCE OF BENEFITS
All benefits payable to you pursuant to this grant of phantom
stock units will be paid from the general assets of Avondale, and the status of
your claim for benefits shall be the same as the status of a claim against
Avondale by any general and unsecured creditor. No assets of Avondale
whatsoever shall be earmarked or otherwise set aside or encumbered in any
manner whatsoever to pay any benefit payable to you pursuant to this grant.
Further, you shall have no right to look to any officer, director, employee or
agent of Avondale in his individual capacity for payment of any such benefits
whatsoever.
Very truly yours,
/s/ Stephen Felker
------------------
Stephen Felker
GSF/lj
<PAGE> 13
AVONDALE MILLS, INC.
ASSOCIATE: ALTHERR, JACK
PHANTOM STOCK UNITS: 90
ESTIMATED VALUE ON SEPTEMBER 1, 1992: $452,700
================================================================================
VESTING AND POTENTIAL VALUE:
<TABLE>
<CAPTION>
--------------------------------
VALUE OF UNITS
------------------------------------------------------------------------------
FISCAL AGE % IF 5% IF 10%
YEAR 9/1 VESTED GROWTH GROWTH
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1992 43 15.0% 452,700 452,700
1993 44 20.0% 475,335 497,970
1994 45 25.0% 499,102 547,767
1995 46 30.0% 524,057 602,544
1996 47 35.0% 550,260 662,798
1997 48 40.0% 577,773 729,078
1998 49 45.0% 606,661 801,986
1999 50 50.0% 636,994 882,184
2000 51 55.0% 668,844 970,403
2001 52 60.0% 702,286 1,067,443
2002 53 65.0% 737,401 1,174,187
2003 54 70.0% 774,271 1,291,606
2004 55 75.0% 812,984 1,420,767
2005 56 80.0% 853,633 1,562,843
2006 57 85.0% 896,315 1,719,127
2007 58 90.0% 941,131 1,891,040
2008 59 95.0% 988,187 2,080,144
2009 60 100.0% 1,037,597 2,288,159
2010 61 100.0% 1,089,477 2,516,975
2011 62 100.0% 1,143,950 2,768,672
2012 63 100.0% 1,201,148 3,045,539
2013 64 100.0% 1,261,205 3,350,093
ANNUAL PAYMENT:
10 YEAR ANNUITY @ 8.5% 177,159 470,581
</TABLE>
================================================================================
NOTES: The purpose of this schedule is to show the potential value of your
phantom stock units for the years shown above assuming you continue to work for
Avondale for each year shown and assuming Avondale grows at a 5% or 10% rate
per year. However, the actual value of your phantom stock units will depend on
the actual growth rate achieved by Avondale and the date your employment by
Avondale terminates.
The annual payment shown in the example above has been calculated as a ten year
annuity assuming (a) your employment by Avondale terminates at age 65, (b)
Avondale grows at a 5% or 10% rate per year and (c) the one year Treasury Bill
rate in effect at the time you reach age 65 is 8.5%.
<PAGE> 14
PROJECTED VALUE
OF PHANTOM STOCK UNIT
AT SEPTEMBER 1, 1992
<TABLE>
<CAPTION>
<S> <C> <C>
EBDLIT: FY 1992 - PROJECTED $ 88,615,469
FY 1991 27,572,548
3rd qtr '90 17,492,754
4th qtr '90 12,876,433
------------
Ten quarters ended 8/28/92 146,557,204
Annualizing Factor 2.50
------------
Average Annual EBDLIT 58,622,882
Phantom Stock Multiple 5.00
------------
293,114,408
Plus Cash (at May 29,1992) 8,208,214
Less Debt (at May 29, 1992) (49,800,000)
------------
Phantom Stock Base 251,522,622
% of Base per Unit 0.002%
------------
Estimated Value of Phantom Stock Unit $ 5,030
============
</TABLE>
<PAGE> 15
AVONDALE MILLS, INC.
ASSOCIATE: ALTHERR, JACK
PHANTOM STOCK UNITS: 90
ESTIMATED VALUE ON SEPTEMBER 1, 1992: $452,700
================================================================================
VESTING AND POTENTIAL VALUE:
<TABLE>
<CAPTION>
--------------------------------
VALUE OF UNITS
------------------------------------------------------------------------------
% IF 5% IF 10%
YEAR AGE VESTED GROWTH GROWTH
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1990 41 0% 290,682 290,682
1991 42 5% 305,216 319,750
1992 43 10% 320,477 351,725
1993 44 15% 336,501 386,898
1994 45 20% 353,326 425,588
1995 46 25% 370,992 468,146
1996 47 30% 389,542 514,961
1997 48 35% 409,019 566,457
1998 49 40% 429,470 623,103
1999 50 45% 450,943 685,413
2000 51 50% 473,490 753,954
2001 52 55% 497,165 829,350
2002 53 60% 522,023 912,285
2003 54 65% 548,124 1,003,513
2004 55 70% 575,531 1,103,865
2005 56 75% 604,307 1,214,251
2006 57 80% 634,522 1,335,676
2007 58 85% 666,249 1,469,244
2008 59 90% 699,561 1,616,168
2009 60 95% 734,539 1,777,785
2010 61 100% 771,266 1,955,564
2011 62 100% 809,829 2,151,120
2012 63 100% 850,321 2,366,232
2013 64 100% 892,837 2,602,855
2014 65 100% 937,479 2,863,141
ANNUAL PAYMENT:
10 YEAR ANNUITY @ 8.5% 131,686 402,179
</TABLE>
===============================================================================
NOTES: The purpose of this schedule is to show the potential value of your
phantom stock units for the years shown above assuming you continue to work for
Avondale for each year shown and assuming Avondale grows at a 5% or 10% rate
per year. However, the actual value of your phantom stock units will depend on
the actual growth rate achieved by Avondale and the date your employment by
Avondale terminates.
The annual payment shown in the example above has been calculated as a ten year
annuity assuming (a) your employment by Avondale terminates at age 65, (b)
Avondale grows at a 5% or 10% rate per year and (c) the one year Treasury Bill
rate in effect at the time you reach age 65 is 8.5%.
<PAGE> 16
ESTIMATED VALUE
OF PHANTOM STOCK UNIT
AT SEPTEMBER 1, 1989
<TABLE>
<S> <C>
EBDLIT:
FY 1987 (3rd & 4th qtr) $ 41,769,030
FY 1988 72,449,443
FY 1989 58,200,711
--------------
Total - 10 qtrs 172,419,154
Annualizing Factor 2.5
--------------
Annualized EBDLIT 68,967,674
Valuation Multiple 5
--------------
EBDLIT X 5 344,838,370
Balance sheet Adjustments
Cash 2,321,691
Debt (104,925,000)
--------------
Estimated Company Value 242,235,061
% Company Value Per Unit 0.002%
--------------
Estimated Value of Phantom Stock Unit $ 4,845
==============
</TABLE>
<PAGE> 1
EXHIBIT 10.22
[LOGO] AVONDALE MILLS,INC.
P.O. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
December 6, 1994
Mr. Mike Billingsley
1407 Stone Hill Road
Sylacauga, Alabama 35150
Dear Mike:
When the phantom stock program was adopted in fiscal 1990, the objective
of the Board of Directors was to provide long term incentives to management
which parallel the economic interests of Avondale's shareholders. Although the
phantom stock units do not represent actual shares of equity in Avondale, their
grant does represent a significant financial commitment by the shareholders to
allow key members of management an opportunity to participate in the growth of
the Company.
In my letters granting the phantom stock units, the value of a phantom
stock unit was defined to be 0.002% of Avondale's equity value, as determined by
a specific formula (five times annualized EBDLIT for the past ten fiscal
quarters plus cash minus debt). Since this approach uses a fixed percentage of
calculated equity instead of an equivalent number of phantom shares, substantial
dilution or accretion in the value of a phantom stock unit may be created by
stock-related transactions while the value of a share of common stock may not be
affected similarly. As an example of the potential dilution, the March 1994
leveraged purchase of common stock shares from CS First Boston and Metropolitan
Life Insurance Company produced a nearly 40% decline in the calculated value of
a phantom stock unit (see Schedule A).
To ensure that the original objective of the phantom stock program is
achieved, the Board of Directors has approved an amendment to the provisions of
the program such that the value of a phantom stock unit will be determined using
phantom shares. The number of phantom shares per phantom stock unit will be
defined as 0.002% of the total number of shares of common stock of Avondale (AM
Acquisition, Inc.) outstanding at September 1, 1989, including the phantom
shares. The number of phantom shares so calculated at September 1, 1989 will be
adjusted for any subsequent stock splits or stock dividends, such as the August
27, 1993 merger and stock dividend (see Schedule B). As a result, this approach
begins with the same value established at September 1, 1989 using 0.002% of
calculated equity but allows the value per phantom stock unit to "float" with
the actual number of shares outstanding and eliminates the undesired dilution or
accretion
<PAGE> 2
Mr. Mike Billingsley
December 6, 1994
Page 2
in value. Again as an example, the dilution caused by the leveraged stock
purchase is virtually eliminated by using the phantom share calculation (see
Schedule C).
All 90 phantom stock units awarded to you are subject to the terms and
conditions set forth in my letters of March 15, 1990 and July 20, 1992, copies
of which are enclosed for your reference. To execute the amendment described
above, Section 2 of the terms and conditions set forth in my letter of March 15,
1990 is hereby restated and replaced in its entirety with the following:
2. VALUE OF PHANTOM STOCK UNITS
The value of each phantom stock unit on any date (the "valuation
date") will be equal to the "Equity Value of the Company Per Share"
multiplied by 398.606 phantom shares. The "Equity Value of the
Company Per Share", as determined by Avondale, shall be equal to the
sum of "EBDLIT" times five, plus "Balance Sheet Adjustments", divided
by the sum of the total number of shares of Avondale Incorporated
Class A and Class B common stock outstanding on the valuation date
plus 398,606 phantom shares.
Avondale defines EBDLIT as the consolidated earnings of
Avondale and its subsidiaries before depreciation, amortization, LIFO
inventory adjustments, interest and income taxes, for the ten fiscal
quarters immediately preceding such date, divided by 2.5. Avondale
defines Balance Sheet Adjustments as an amount, which may be positive
or negative, equal to the consolidated cash, cash equivalents and
short term investments of Avondale and its subsidiaries minus the
consolidated debt of Avondale and its subsidiaries, determined as of
the final day of the last fiscal period for which financial
statements were prepared and that immediately precedes the valuation
date.
All other terms and conditions contained in my letters granting your 90
phantom stock units remain in full force and effect.
<PAGE> 3
Mr. Mike Billingsley
December 6, 1994
Page 3
If you have any questions regarding this amendment, please direct them
to Jack Altherr or me. As noted in previous correspondence, due to the
relatively few key associates participating in the program, we ask that you
recognize the need for confidentiality.
Please indicate your understanding and acceptance of the above amendment
by signing and returning the enclosed copy of this letter to me.
Very truly yours,
/s/ Stephen Felker
------------------------
Stephen Felker
Acknowledged and accepted:
/s/ Mike Billinsley
- ------------------------------
Date: 12/15/94
------------------------
<PAGE> 4
AVONDALE MILLS, INC. SCHEDULE A
VALUE OF PHANTOM STOCK UNIT
(USING TWO PERCENT OF CALCULATED EQUITY VALUE)
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter
FY 1994 FY 1994
----------- -------------
<S> <C> <C>
Annualized cash flow - EBDLIT $ 88,024,754 $ 86,433,972
(past 10 fiscal quarters)
Valuation multiple 5.00 5.00
------------ -------------
440,123,770 432,169,860
Cash 372,287 1,411,191
Debt (42,950,000) (204,330,590)
------------ -------------
Calculated equity value 397,546,057 229,250,461
(per formula)
% equity per phantom stock unit 0.0020% 0.0020%
------------ -------------
Value of phantom stock unit $ 7,951 $ 4,585
============ =============
</TABLE>
<PAGE> 5
AVONDALE MILLS, INC. SCHEDULE B
CALCULATION OF PHANTOM SHARES
<TABLE>
<CAPTION>
Shares % Shares
------------ ----------
<S> <C> <C>
Shares outstanding at 9/l/89
(AM Acquisition, Inc.)
First Boston 185.7200 15.73%
Metropolitan Life 368.2800 31.19%
John Maypole 4.0000 0.34%
Walton Monroe 501.0000 42.43%
Stephen Felker 58.0000 4.91%
Class B 40.2083 3.41%
------------ ----------
1,157.2083 98.00%
Calculated phantom shares
(AM Acquisition, Inc.) 23.6165 2.00%
------------ ----------
1,180.8248 100.00%
============ ==========
Calculated phantom shares
(AM Acquisition, Inc.) 23.6165
Factor for merger with Walton Monroe 67.5131
------------
1,594.4240
Factor for stock dividend 250.0000
------------
Phantom shares 398,605.9976
============
Avondale Incorporated - August 1, 1994
Class A shares outstanding 10,089,811 87.99%
Class B shares outstanding 978,939 8.54%
------------ ----------
Total common shares 11,068,750 96.52%
Phantom shares
(whole shares) 398,606 3.48%
------------ ----------
11,467,356 100.00%
============ ==========
</TABLE>
<PAGE> 6
AVONDALE MILLS, INC. SCHEDULE C
VALUE OF PHANTOM STOCK UNIT
(USING CALCULATED EQUITY VALUE PER PHANTOM SHARE)
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter
FY 1994 FY 1994
------------ -------------
<S> <C> <C>
Annualized cash flow - EBDLIT $ 88,024,754 $ 86,433,972
(past 10 fiscal quarters)
Valuation multiple 5.00 5.00
------------ -------------
440,123,770 432,169,860
Cash 372,287 1,411,191
Debt (42,950,000) (204,330,590)
------------ ------------
Calculated equity value 397,546,057 229,250,461
(per formula)
Total number of shares
(including phantom shares) 20,880,436 11,467,356
------------ -------------
Calculated equity value per share $ 19.04 $ 19.99
Phantom shares per unit 398,606 398,606
------------ -------------
$ 7,589 $ 7,969
============ =============
</TABLE>
<PAGE> 7
[LOGO] AVONDALE MILLS, INC.
P.O. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
July 20, 1992
Mr. C. Michael Billingsley
1407 Stone Hill Road
Sylacauga, Alabama 35150
Dear Mike:
This letter amends the grant of phantom stock units awarded to you by my
letter of March 15, 1990, a copy of which is attached for your reference.
Effective this date, your grant is increased by 40 phantom stock units, bringing
your total award to 90 phantom stock units.
All 90 phantom stock units awarded to you are subject to the terms and
conditions set forth in my March 15, 1990 letter. Accordingly, your interest
in your 90 phantom stock units will vest at five percent per year for each full
and uninterrupted year that you continue to work for Avondale after August 31,
1989. Should you remain so employed, you will become fully vested on August
31, 2009. Payment in the form of ten annual installments will begin upon your
65th birthday assuming you retire at that time.
In addition, your interest in your 90 phantom stock units will become
fully vested in the event you die before your employment with Avondale
terminates. Your vested value will be computed as of the date of your death and
paid to your beneficiary in a single lump sum.
If you should have any questions regarding the terms of the grant,
please direct them to Richard Monk, Jack Altherr or me. Because relatively few
key associates participate in the program, I request that you recognize the need
for confidentiality.
Very truly yours,
/s/ Stephen Felker
--------------------------
Stephen Felker
GSF/lj
<PAGE> 8
[LOGO] AVONDALE MILLS,INC.
P. O. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
March 15, 1990
Mr. Mike Billingsley
1407 Stone Hill Road
Sylacauga, AL 35150
Dear Mike:
Avondale's continued success depends upon the superior performance of
all of its associates working together as a team. To make the relationship
mutually beneficial, there is a system of rewards in place, including
compensation, profit sharing and other benefits as well as attractive and safe
working environments and, at certain management levels, performance incentives.
An additional opportunity for reward is now being offered to you and a
few key associates. The program involves the grant of phantom stock units which
effectively provides equity participation in the growth of the company. The
program will not replace or detract from existing benefits.
While the phantom stock units do not represent actual shares of equity
in Avondale and therefore do not carry voting and other rights associated with
stock ownership, their grant nonetheless represents substantial financial
recognition by the company's shareholders of the importance and role played by
key associates.
Please review carefully the following terms and conditions of your grant
of phantom stock units. As questions arise, please direct them to John Hudson,
Jack Altherr or me. Because relatively few key associates will participate in
the program, I request that you recognize the need for confidentiality.
<PAGE> 9
1. GRANT OF PHANTOM STOCK UNITS
Your participation in the program will take the form of a grant,
effective September 1, 1989, of 50 "phantom stock units". A phantom stock unit
is simply a bookkeeping measure which represents your vested and nonvested
interest in the value of the company (as defined in section 2).
2. VALUE OF PHANTOM STOCK UNITS
The value of each phantom stock unit on any date will be 0.002% of an
amount, which shall be determined by Avondale, equal to "EBDLIT" times five,
plus "Balance sheet Adjustments". Avondale defines EBDLIT as the consolidated
earnings of Avondale and its subsidiaries before depreciation, amortization,
LIFO inventory adjustments, interest and income taxes, for the ten fiscal
quarters immediately preceding such date, divided by 2.5. Avondale defines
Balance sheet Adjustments as an amount, which may be positive or negative, equal
to the consolidated cash, cash equivalents and short term investments of
Avondale and its subsidiaries minus the consolidated debt of Avondale and its
subsidiaries, determined as of the final day of the last fiscal period for which
financial statements were prepared and that immediately precedes the date such
amount is determined.
3. VESTING OF PHANTOM STOCK UNITS
Your vested interest in your phantom stock units will increase (subject
to section 7) at the rate of five percent per year for each full and
uninterrupted year that you continue to work for Avondale after August 31, 1989.
You also will (subject to section 7) become fully vested in your phantom
stock units if you die before your employment by Avondale terminates.
Finally, you will forfeit your entire interest in your phantom stock
units (whether or not vested under this section 3) if you engage in any actions
described under section 7.
4. PAYMENT AT RETIREMENT
Avondale will compute and pay the value of your vested interest in your
phantom stock units to you in cash beginning as of your "Normal Payment Date",
which will be the date you reach age 65 or, if later, the date your employment
by Avondale terminates. Your payment will be made with interest in ten equal
annual installments, calculated as an annuity payable on your Normal Payment
Date and on the first nine anniversaries of your Normal Payment Date using an
interest rate equal to the one year Treasury Bill rate which Avondale deems in
effect on your Normal Payment Date.
<PAGE> 10
5. TERMINATION OF EMPLOYMENT
If your employment with Avondale terminates (for any reason whatsoever
except death) before your Normal Payment Date, further vesting will cease and
Avondale will compute the value of your vested interest in your phantom stock
units as of your termination date. The value of your vested interest in your
phantom stock units, as so determined and without further increase, shall be
paid to you beginning on your Normal Payment Date; that is, no further
appreciation or depreciation in the value of the phantom stock units nor any
crediting of interest will occur after your employment terminates. Beginning
with your Normal Payment Date, payment will be made in ten equal annual
installments, as if you retired, in accordance with section 4 using the value of
your vested interest in your phantom stock units as calculated at termination
and the one year Treasury Bill rate which Avondale deems in effect on your
Normal Payment Date.
6. DEATH BENEFIT
If you die before your employment with Avondale terminates, you will
become fully vested in your phantom stock units in accordance with section 3.
Avondale will compute the value of your phantom stock units as of the date of
your death in accordance with section 2 and pay such amount to your beneficiary.
If you die after your employment with Avondale terminates but before
your Normal Payment Date, Avondale will pay to your beneficiary the value of
your vested interest in your phantom stock units as calculated under section 5.
If you die after your Normal Payment Date, Avondale will calculate the
present value (discounted to the date of your death using the one year Treasury
Bill rate which Avondale deems in effect on your Normal Payment Date) of any
unpaid annual installments established under section 4 and pay such amount to
your beneficiary.
Any death benefit payment to your beneficiary under this section 6 will
be made in lump sum in cash within 90 days after the date of your death.
Please complete and return the attached beneficiary designation form to
the corporate secretary. if you fail to designate a beneficiary for your
interest in your phantom stock units (or your beneficiary fails to survive you),
Avondale will treat your estate as your beneficiary for your interest in your
phantom stock units. You can change your beneficiary at any time by returning a
new beneficiary designation form to the corporate secretary, and such change
will be effective on the date the new beneficiary designation form is received
by the corporate secretary.
<PAGE> 11
7. FORFEITURE OF BENEFITS
If, in Avondale's opinion, you either (a) compete directly or
indirectly with Avondale or (b) engage in any actions or make any statements
which are detrimental to Avondale's best interests, at any time while you are
employed by Avondale or before the end of the five year period following your
termination of employment with Avondale, you will forfeit your entire vested
and nonvested interest in your phantom stock units.
8. AMENDMENT/TERMINATION
This letter sets forth the terms and conditions of this program in
their entirety. Avondale reserves the right to amend the terms and conditions
of this program from time to time or to terminate this program at any time and
for any reason whatsoever. However, Avondale will not amend retroactively the
formula outlined in section 2 for valuing phantom stock units or the rate at
which you vest in such units under section 3 (other than the forfeiture
conditions).
No action to amend or terminate this program shall be effective unless
such action is set forth in writing and signed by me or my successor as Chief
Executive officer of Avondale.
If this program is terminated, Avondale will compute and pay your
vested interest in your phantom stock units in accordance with section 5 as if
your employment by Avondale had terminated on the date Avondale terminated this
program.
9. NOT A CONTRACT OF EMPLOYMENT
You are an employee at will and you may terminate your employment, or
your employment may be terminated by Avondale, at any time without notice.
Nothing in this grant of phantom stock units shall give you any right to
continue your employment with Avondale or shall limit in any way Avondale's
right to terminate your employment, or your right to terminate your employment,
at any time, without regard to the effect of such termination on this grant.
10. NON-TRANSFERABILITY/CONSTRUCTION
You may not alienate, assign, transfer or otherwise encumber your
interest in your phantom stock units and any action to do so shall be treated as
a violation of your grant and shall not be binding on Avondale or this program.
The terms and conditions of this program shall be construed in accordance with
the laws of Alabama to the extent such laws are not preempted by ERISA.
<PAGE> 12
11. SOURCE OF BENEFITS
All benefits payable to you pursuant to this grant of phantom stock
units will be paid from the general assets of Avondale, and the status of your
claim for benefits shall be the same as the status of a claim against Avondale
by any general and unsecured creditor. No assets of Avondale whatsoever shall
be earmarked or otherwise set aside or encumbered in any manner whatsoever to
pay any benefit payable to you pursuant to this grant. Further, you shall have
no right to look to any officer, director, employee or agent of Avondale in his
individual capacity for payment of any such benefits whatsoever.
Very truly yours,
/s/ Stephen Felker
----------------------
Stephen Felker
GSF/lj
<PAGE> 13
AVONDALE MILLS, IMC.
ASSOCIATE: BILLINGSLEY, MIKE
PHANTOM STOCK UNITS: 90
ESTIMATED VALUE ON SEPTEMBER 1, 1992: $452,700
================================================================================
VESTOMG AND POTENTIAL VALUE:
<TABLE>
<CAPTION> ---------------------
VALUE OF UNITS
-------------------------------------------------------
FISCAL AGE % IF 5% IF 10%
YEAR 9/1 VESTED GROWTH GROWTH
-------------------------------------------------------
<C> <C> <C> <C>
1992 40 452,700 452,700
1993 41 475,335 497,970
1994 42 499,102 547,767
1995 4 524,057 602,544
1996 44 550,260 662,798
1997 45 577,773 729,078
1998 46 606,661 801,986
1999 47 636,994 882,184
2000 48 668,844 970,403
2001 49 702,286 1,067,443
2002 50 737,401 1,174,187
2003 51 774,271 1,291,606
2004 52 812,984 1,420,767
2005 53 853,633 1,562,843
2006 54 896,315 1,719,127
2007 55 941,131 1,891,040
2008 56 988,187 2,080,144
2009 57 1,037,597 2,288,159
2010 58 1,089,477 2,516,975
2011 59 1,143,950 2,768,672
2012 60 1,201,148 3,045,539
2013 61 1,261,205 3,350,093
2014 62 1,324,266 3,685,102
2015 63 1,390,479 4,053,613
2016 64 1,460,003 4,458,974
ANNUAL PAYMENT:
10 YEAR ANNUITY AT 8.5% 205,084 626,343
</TABLE>
================================================================================
NOTES: The purpose of this schedule is to show the potential value of your
phantom stock units for the years shown above assuming you continue to work for
Avondale for each year shown and assuming Avondale grows at a 5% or l0% rate per
year. However, the actual value of your phantom stock units will depend on the
actual growth rate achieved by Avondale and the date your employment by
Avondale terminates.
The annual payment shown in the example above has been calculated as a ten year
annuity assuming (a) your employment by Avondale terminates at age 65, (b)
Avondale grows at a 5% or 10% rate per year and (c) the one year Treasury Bill
rate in effect at the time you reach age 66 is 8.5%.
<PAGE> 14
PROJECTED VALUE
OF PHANTOM STOCK UNIT
AT SEPTEMBER 1, 1992
<TABLE>
<S> <C>
EBDLIT: FY 1992 - PROJECTED $ 88,615,469
FY 1991 27,572,548
3rd qtr'90 17,492,754
4th qtr '90 12,876,433
-------------
Ten quarters ended 8/28/92 146,557,204
Annualizing Factor 2.50
-------------
Average Annual EBDLIT 58,622,882
Phantom Stock Multiple 5.00
-------------
293,114,408
Plus Cash (at May 29,1992) 8,208,214
Less Debt (at May 29,1992) (49,800,000)
-------------
Phantom Stock Base 251,522,622
% of Base per Unit 0.002%
-------------
Estimated Value of Phantom Stock Unit $ 5,030
=============
</TABLE>
<PAGE> 15
AVONDALE MILLS, INC.
ASSOCIATE:
PHANTOM STOCK UNITS: BILLINGSLEY, MIKE
ESTIMATED VALUE ON SEPTEMBER 1, 1989: 50
$242,235
================================================================================
<TABLE>
<CAPTION> -----------------------------
VALUE OF UNITS
-------------------------------------------------------------
% IF 5% IF 10%
YEAR AGE VESTED GROWTH GROWTH
-------------------------------------------------------------
<S> <C> <C> <C> <C>
1990 39 0% 242,235 242,235
1991 40 5% 254,347 266,459
1992 41 10% 267,064 293,104
1993 42 15% 280,417 322,415
1994 43 20% 294,438 354,656
1995 44 25% 309,160 390,122
1996 45 30% 324,618 429,134
1997 46 35% 340,849 472,048
1998 47 40% 357,891 519,252
1999 48 45% 375,786 571,178
2000 49 50% 394,575 628,295
2001 50 55% 414,304 691,125
2002 51 60% 435,019 760,237
2003 52 65% 456,770 836,261
2004 53 70% 479,609 919,887
2005 54 75% 503,589 1,011,876
2006 55 80% 528,769 1,113,064
2007 56 85% 555,207 1,224,370
2008 57 90% 582,968 1,346,807
2009 58 95% 612,116 1,481,488
2010 59 100% 642,722 1,629,636
2011 60 100% 674,858 1,792,600
2012 61 100% 708,601 1,971,860
2013 62 100% 744,031 2,169,046
2014 63 100% 781,232 2,385,950
2015 64 100% 820,294 2,624,546
2016 65 100% 861,309 2,887,000
ANNUAL PAYMENT:
10 YEAR ANNUITY @ 8.5% 120,986 405,531
</TABLE>
================================================================================
NOTES: The purpose of this schedule is to show the potential value of your
phantom stock units for the years shown above assuming you continue to work for
Avondale for each year shown and assuming Avondale grows at a 50% or 10% rate
per year. However, the actual value of your phantom stock units will depend on
the actual growth rate achieved by Avondale and the date your employment by
Avondale terminates.
The annual payment shown in the example above has been calculated as a ten year
annuity assuming (a) your employment by Avondale terminates at age 65, (b)
Avondale grows at a 5% or 10% rate per year and (c) the one year Treasury Bill
rate in effect at the time you reach age 65 is 8.5%.
<PAGE> 16
ESTIMATED VALUE
OF PHANTOM STOCK UNIT
AT SEPTEMBER 1, 1989
<TABLE>
<S> <C>
EBDLIT:
FY 1987 (3rd & 4th qtr) $ 41,769,030
FY 1988 72,449,443
FY 1989 58,200,711
------------
Total - 10 qtrs 172,419,154
Annualizing Factor 2.5
------------
Annualized EBDLIT 68,967,674
Valuation Multiple 5
------------
EBDLIT X 5 344,838,370
Balance Sheet Adjustments
Cash 2,321,691
Debt (104,925,000)
------------
Estimated Company Value 242,235,061
% Company Value Per Unit 0.002%
------------
Estimated Value of Phantom Stock Unit $ 4,845
============
</TABLE>
<PAGE> 1
EXHIBIT 10.23
[AVONDALE AVONDALE MILLS,INC.
LOGO] P.0. BOX 1109
MONROE, GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive Officer
December 6, 1994
Mr. Wayne Spraggins
705 Lang Road
Sylacauga, Alabama 35150
Dear Wayne:
When the phantom stock program was adopted in fiscal 1990, the objective of
the Board of Directors was to provide long term incentives to management which
parallel the economic interests of Avondale's shareholders. Although the
phantom stock units do not represent actual shares of equity in Avondale, their
grant does represent a significant financial commitment by the shareholders to
allow key members of management an opportunity to participate in the growth of
the Company.
In my letters granting the phantom stock units, the value of a phantom stock
unit was defined to be 0.002% of Avondale's equity value, as determined by a
specific formula (five times annualized EBDLIT for the past ten fiscal quarters
plus cash minus debt). Since this approach uses a fixed percentage of
calculated equity instead of an equivalent number of phantom shares,
substantial dilution or accretion in the value of a phantom stock unit may be
created by stock-related transactions while the value of a share of common
stock may not be affected similarly. As an example of the potential dilution,
the March 1994 leveraged purchase of common stock shares from CS First Boston
and Metropolitan Life Insurance Company produced a nearly 40% decline in the
calculated value of a phantom stock unit (see Schedule A).
To ensure that the original objective of the phantom stock program is
achieved, the Board of Directors has approved an amendment to the provisions of
the program such that the value of a phantom stock unit will be determined
using phantom shares. The number of phantom shares per phantom stock unit will
be defined as 0.002% of the total number of shares of common stock of
Avondale (AM Acquisition, Inc.) outstanding at September 1, 1989, including the
phantom shares. The number of phantom shares so calculated at September 1,
1989 will be adjusted for any subsequent stock splits or stock dividends, such
as the August 27, 1993 merger and stock dividend (see Schedule B). As a
result, this approach begins with the same value established at September 1,
1989 using 0.002% of calculated equity but allows the value per phantom stock
unit to "float" with the actual number of shares outstanding and eliminates the
undesired dilution or accretion
<PAGE> 2
Mr. Wayne Spraggins
December 6, 1994
Page 2
in value. Again as an example, the dilution caused by the leveraged stock
purchase is virtually eliminated by using the phantom share calculation (see
Schedule C).
All 50 phantom stock units awarded to you are subject to the terms
and conditions set forth in my letter of March 15, 1990, a copy of which is
enclosed for your reference. To execute the amendment described above, Section
2 of the terms and conditions set forth in my letter noted above is hereby
restated and replaced in its entirety with the following:
2. VALUE OF PHANTOM STOCK UNITS
The value of each phantom stock unit on any date (the
"valuation date") will be equal to the "Equity Value of the Company
Per Share" multiplied by 398.606 phantom shares. The "Equity Value of
the Company Per Share", as determined by Avondale, shall be equal to
the sum of "EBDLIT" times five, plus "Balance Sheet Adjustments",
divided by the sum of the total number of shares of Avondale
Incorporated Class A and Class B common stock outstanding on the
valuation date plus 398,606 phantom shares.
Avondale defines EBDLIT as the consolidated earnings of
Avondale and its subsidiaries before depreciation, amortization, LIFO
inventory adjustments, interest and income taxes, for the ten fiscal
quarters immediately preceding such date, divided by 2.5. Avondale
defines Balance Sheet Adjustments as an amount, which may be positive
or negative, equal to the consolidated cash, cash equivalents and
short term investments of Avondale and its subsidiaries minus the
consolidated debt of Avondale and its subsidiaries, determined as of
the final day of the last fiscal period for which financial
statements were prepared and that immediately precedes the valuation
date.
All other terms and conditions contained in my letter granting your 50
phantom stock units remain in full force and effect.
<PAGE> 3
Mr. Wayne Spraggins
December 6, 1994
Page 3
If you have any questions regarding this amendment, please direct them
to Jack Altherr or me. As noted in previous correspondence, due to the
relatively few key associates participating in the program, we ask that you
recognize the need for confidentiality.
Please indicate your understanding and acceptance of the above amendment
by signing and returning the enclosed copy of this letter to me.
Very truly yours,
/s/ Stephen Felker
--------------------
Stephen Felker
Acknowledged and accepted:
/s/ Wayne Spraggins
- ----------------------------
Date: 1-5-95
----------------------
<PAGE> 4
AVONDALE MILLS, INC. SCHEDULE A
A VALUE OF PHANTOM STOCK UNIT
(USING TWO PERCENT OF CALCULATED EQUITY VALUE)
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter
FY 1994 FY 1994
------------- ------------
<S> <C> <C>
Annualized cash flow - EBDLIT $88,024,754 $86,433,972
(past 10 fiscal quarters)
Valuation multiple 5.00 5.00
------------ ------------
440,123,770 432,169,860
Cash 372,287 1,411,191
Debt (42,950,000) (204,330,590)
------------ ------------
Calculated equity value 397,546,057 229,250,461
(per formula)
% equity per phantom stock unit 0.0020% 0.0020%
------------ ------------
Value of phantom stock unit $7,951 $4,585
</TABLE>
<PAGE> 5
AVONDALE MILLS, INC. SCHEDULE B
CALCULATION OF PHANTOM SHARES
<TABLE>
<CAPTION>
Shares % Shares
----------- ----------
<S> <C> <C>
Shares outstanding at 9/l/89
(AM Acquisition, Inc.)
First Boston 185.7200 15.73%
Metropolitan Life 368.2800 31.19%
John Maypole 4.0000 0.34%
Walton Monroe 501.0000 42.43%
Stephen Felker 58.0000 4.91%
Class B 40.2083 3.41%
----------- ----------
1,157.2083 98.00%
Calculated phantom shares
(AM Acquisition, Inc.) 23.6165 2.00%
----------- ----------
1,180.8248 100.00%
Calculated phantom shares
(AM Acquisition, Inc.) 23.6165
Factor for merger with Walton Monroe 67.5131
-----------
1,594.4240
Factor for stock dividend 250.0000
-----------
Phantom shares 398,605.9976
Avondale Incorporated - August 1, 1994
Class A shares outstanding 10,089,811 87.99%
Class B shares outstanding 978,939 8.54%
----------- ----------
Total common shares 11,068,750 96.52%
Phantom shares 398,606 3.48%
(whole shares) ----------- ----------
11,467,356 11,100.00%
</TABLE>
<PAGE> 6
AVONDALE MILLS, INC. Schedule C
VALUE OF PHANTOM STOCK UNIT
(USING CALCULATED EQUITY VALUE PER PHANTOM SHARE)
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter
FY 1994 FY 1994
------------- -------------
<S> <C> <C>
Annualized cash flow - EBDLIT $ 88,024,754 $ 86,433,972
(past 10 fiscal quarters)
Valuation multiple 5.00 5.00
------------- -------------
440,123,770 432,169,860
Cash 372,287 1,411,191
Debt (42,950,000) (204,330,590)
------------- -------------
Calculated equity value 397,546,057 229,250,461
(per formula)
Total number of shares 20,880,436 11,467,356
(including phantom shares) ------------- -------------
Calculated equity value per share $ 19.04 $ 19.99
Phantom shares per unit 398.606 398.606
------------- -------------
$ 7,589 $ 7,969
============= =============
</TABLE>
<PAGE> 7
[AVONDALE AVONDALE MILLS,INC.
LOGO] P.O. BOX 1109
MONROE,GEORGIA 30655
404-267-2226
G. STEPHEN FELKER
Chairman and
Chief Executive officer
March 15, 1990
Mr. Wayne Spraggins
705 Lang Road
Sylacauga, AL 35150
Dear Wayne:
Avondale's continued success depends upon the superior performance of
all of its associates working together as a team. To make the relationship
mutually beneficial, there is a system of rewards in place, including
compensation, profit sharing and other benefits as well as attractive and safe
working environments and, at certain management levels, performance incentives.
An additional opportunity for reward is now being offered to you and a
few key associates. The program involves the grant of phantom stock units
which effectively provides equity participation in the growth of the company.
The program will not replace or detract from existing benefits.
While the phantom stock units do not represent actual shares of equity
in Avondale and therefore do not carry voting and other rights associated with
stock ownership, their grant nonetheless represents substantial financial
recognition by the company's shareholders of the importance and role played by
key associates.
Please review carefully the following terms and conditions of your
grant of phantom stock units. As questions arise, please direct them to John
Hudson, Jack Altherr or me. Because relatively few key associates will
participate in the program, I request that you recognize the need for
confidentiality.
<PAGE> 8
1. GRANT OF PHANTOM STOCK UNITS
Your participation in the program will take the form of a
grant, effective September 1, 1989, of 50 "phantom stock units". A phantom
stock unit is simply a bookkeeping measure which represents your vested and
nonvested interest in the value of the company (as defined in section 2).
2. VALUE OF PHANTOM STOCK UNITS
The value of each phantom stock unit on any date will be 0.002% of an
amount, which shall be determined by Avondale, equal to "EBDLIT" times five,
plus "Balance Sheet Adjustments". Avondale defines EBDLIT as the consolidated
earnings of Avondale and its subsidiaries before depreciation, amortization,
LIFO inventory adjustments, interest and income taxes, for the ten fiscal
quarters immediately preceding such date, divided by 2.5. Avondale defines
Balance Sheet Adjustments as an amount, which may be positive or negative,
equal to the consolidated cash, cash equivalents and short term investments of
Avondale and its subsidiaries minus the consolidated debt of Avondale and its
subsidiaries, determined as of the final day of the last fiscal period for
which financial statements were prepared and that immediately precedes the date
such amount is determined.
3. VESTING OF PHANTOM STOCK UNITS
Your vested interest in your phantom stock units will increase
(subject to section 7) at the rate of five percent per year for each full and
uninterrupted year that you continue to work for Avondale after August 31,
1989.
You also will (subject to section 7) become fully vested in your
phantom stock units if you die before your employment by Avondale terminates.
Finally, you will forfeit your entire interest in your phantom stock
units (whether or not vested under this section 3) if you engage in any actions
described under section 7.
4. PAYMENT AT RETIREMENT
Avondale will compute and pay the value of your vested interest in
your phantom stock units to you in cash beginning as of your "Normal Payment
Date", which will be the date you reach age 65 or, if later, the date your
employment by Avondale terminates. Your payment will be made with interest in
ten equal annual installments, calculated as an annuity payable on your Normal
Payment Date and on the first nine anniversaries of your Normal Payment Date
using an interest rate equal to the one year Treasury Bill rate which Avondale
deems in effect on your Normal Payment Date.
<PAGE> 9
5. TERMINATION OF EMPLOYMENT
If your employment with Avondale terminates (for any reason
whatsoever except death) before your Normal Payment Date, further vesting will
cease and Avondale will compute the value of your vested interest in your
phantom stock units as of your termination date. The value of your vested
interest in your phantom stock units, as so determined and without further
increase, shall be paid to you beginning on your Normal Payment Date; that is,
no further appreciation or depreciation in the value of the phantom stock units
nor any crediting of interest will occur after your employment terminates.
Beginning with your Normal Payment Date, payment will be made in ten equal
annual installments, as if you retired, in accordance with section 4 using the
value of your vested interest in your phantom stock units as calculated at
termination and the one year Treasury Bill rate which Avondale deems in effect
on your Normal Payment Date.
6. DEATH BENEFIT
If you die before your employment with Avondale terminates, you will
become fully vested in your phantom stock units in accordance with section 3.
Avondale will compute the value of your phantom stock units as of the date of
your death in accordance with section 2 and pay such amount to your beneficiary.
If you die after your employment with Avondale terminates but before
your Normal Payment Date, Avondale will pay to your beneficiary the value of
your vested interest in your phantom stock units as calculated under section 5.
If you die after your Normal Payment Date, Avondale will calculate the
present value (discounted to the date of your death using the one year
Treasury Bill rate which Avondale deems in effect on your Normal Payment Date)
of any unpaid annual installments established under section 4 and pay such
amount to your beneficiary.
Any death benefit payment to your beneficiary under this section 6
will be made in lump sum in cash within 90 days after the date of your death.
Please complete and return the attached beneficiary designation form
to the corporate secretary. If you fail to designate a beneficiary for your
interest in your phantom stock units (or your beneficiary fails to survive
you), Avondale will treat your estate as your beneficiary for your interest in
your phantom stock units. You can change your beneficiary at any time by
returning a new beneficiary designation form to the corporate secretary, and
such change will be effective on the date the new beneficiary designation form
is received by the corporate secretary.
<PAGE> 10
7. FORFEITURE OF BENEFITS
If, in Avondale's opinion, you either (a) compete directly or
indirectly with Avondale or (b) engage in any actions or make any statements
which are detrimental to Avondale's best interests, at any time while you are
employed by Avondale or before the end of the five year period following your
termination of employment with Avondale, you will forfeit your entire vested
and nonvested interest in your phantom stock units.
8. AMENDMENT/TERMINATION
This letter sets forth the terms and conditions of this
program in their entirety. Avondale reserves the right to amend the terms and
conditions of this program from time to time or to terminate this program at
any time and for any reason whatsoever. However, Avondale will not amend
retroactively the formula outlined in section 2 for valuing phantom stock units
or the rate at which you vest in such units under section 3 (other than the
forfeiture conditions).
No action to amend or terminate this program shall be effective unless
such action is set forth in writing and signed by me or my successor as Chief
Executive officer of Avondale.
If this program is terminated, Avondale will compute and pay your
vested interest in your phantom stock units in accordance with section 5 as if
your employment by Avondale had terminated on the date Avondale terminated this
program.
9. NOT A CONTRACT OF EMPLOYMENT
You are an employee at will and you may terminate your employment, or
your employment may be terminated by Avondale, at any time without notice.
Nothing in this grant of phantom stock units shall give you any right to
continue your employment with Avondale or shall limit in any way Avondale's
right to terminate your employment, or your right to terminate your employment,
at any time, without regard to the effect of such termination on this grant.
10. NON-TRANSFERABILITY/CONSTRUCTION
You may not alienate, assign, transfer or otherwise encumber
your interest in your phantom stock units and any action to do so shall be
treated as a violation of your grant and shall not be binding on Avondale or
this program. The terms and conditions of this program shall be construed in
accordance with the laws of Alabama to the extent such laws are not preempted
by ERISA.
<PAGE> 11
11. SOURCE OF BENEFITS
All benefits payable to you pursuant to this grant of phantom
stock units will be paid from the general assets of Avondale, and the status of
your claim for benefits shall be the same as the status of a claim against
Avondale by any general and unsecured creditor. No assets of Avondale
whatsoever shall be earmarked or otherwise set aside or encumbered in any
manner whatsoever to pay any benefit payable to you pursuant to this grant.
Further, you shall have no right to look to any officer, director, employee or
agent of Avondale in his individual capacity for payment of any such benefits
whatsoever.
Very truly yours,
/s/ Stephen Felker
-------------------
Stephen Felker
GSF/lj
<PAGE> 12
AVONDALE MILLS, INC.
ASSOCIATE: SPRAGGINS, WAYNE
PHANTOM STOCK UNITS: 50
ESTIMATED VALUE ON SEPTEMBER 1, 1989: $242,235
================================================================================
VESTING AND POTENTIAL VALUE:
<TABLE>
<CAPTION>
--------------------
VALUE OF UNITS
-----------------------------------------------------
% IF 5% IF 10%
YEAR AGE VESTED GROWTH GROWTH
-----------------------------------------------------
<S> <C> <C> <C> <C>
1990 53 O% 242,235 242,235
1991 54 5% 254,347 266,459
1992 55 10% 267,064 293,104
1993 56 15% 280,417 322,415
1994 57 20% 294,438 354,656
1995 58 25% 309,160 390,122
1996 59 30% 324,618 429,134
1997 60 35% 340,849 472,048
1998 61 40% 357,891 519,252
1999 62 45% 375,786 571,178
2000 63 50% 394,575 628,295
2001 64 55% 414,304 691,125
2002 65 60% 435,019 760,237
ANNUAL PAYMENT:
10 YEAR ANNUITY AT 8.5% 36,664 64,073
</TABLE>
NOTES: The purpose of this schedule is to show the potential value of your
phantom stock units for the years shown above assuming you continue to work for
Avondale for each year shown and assuming Avondale grows at a 5% or 10% rate
per year. However, the actual value of your phantom stock units will depend on
the actual growth rate achieved by Avondale and the date your employment by
Avondale terminates.
The annual payment shown in the example above has been calculated as a ten year
annuity assuming (a) your employment by Avondale terminates at age 65, (b)
Avondale grows at a 5% or 10% rate per year and (c) the one year Treasury
Bill rate in effect at the time you reach age 65 is 8.5%.
<PAGE> 13
ESTIMATED VALUE
OF PHANTOM STOCK UNIT
AT SEPTEMBER 1, 1989
<TABLE>
EBDLIT:
<S> <C>
FY 1987 (3rd & 4th qtr) $ 41,769,030
FY 1988 72,449,443
FY 1989 58,200,711
------------
Total - 10 qtrs 172,419,154
Annualizing Factor 2.5
------------
Annualized EBDLIT 68,967,674
Valuation Multiple 5
------------
EBDLIT X 5 334,838,370
Balance sheet Adjustments
Cash 2,321,691
Debt (104,925,000)
------------
242,235,061
Estimated Company Value
% Company Value Per Unit 0.002%
------------
Estimated Value of Phantom Stock Unit $ 4,845
============
</TABLE>
<PAGE> 1
EXHIBIT 12.1
AVONDALE INCORPORATED
STATEMENT REGARDING COMPUTATION OF RATIO
OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Consolidated income (loss)
before income taxes and
extraordinary item $ (3,655) $ 81,509 $ 74,186 $ 22,576 $ 34,039
Amortization of capitalized
interest 70 69 63 33 8
Interest 9,755 4,433 1,933 6,212 13,615
Net amortization of debt
issuance expense 76 88 118 329 718
-------- -------- -------- -------- --------
Earnings $ 6,246 $ 86,099 $ 76,300 $ 29,150 $ 48,380
======== ======== ======== ======== ========
Interest $ 9,755 $ 4,433 $ 1,933 $ 6,212 $ 13,615
Net amortization of debt
issuance expense 76 88 118 329 718
-------- -------- -------- -------- --------
Fixed charges $ 9,831 $ 4,521 $ 2,051 $ 6,541 $ 14,333
======== ======== ======== ======== ========
Ratio of earnings to
fixed charges N/A (a) 19.04 37.20 4.46 3.38
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
------------------------------
February 24, February 24,
1995 1995
-------------- -------------
<S> <C> <C>
Consolidated income (loss)
before income taxes and
extraordinary item $ 17,234 $ 6,536
Amortization of capitalized
interest 4 4
Interest 6,979 5,670
Net amortization of debt
issuance expense 354 366
--------- --------
Earnings $ 24,571 $ 12,576
========= ========
Interest $ 6,979 $ 5,670
Net amortization of debt
issuance expense 354 366
--------- --------
Fixed charges $ 7,333 $ 6,036
========= ========
Ratio of earnings to
fixed charges 3.35 2.08
========= ========
</TABLE>
(a) In fiscal 1991, earnings were insufficient to cover fixed charges
as fixed charges exceeded earnings by $3.6 million.
Page 1
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated September 22, 1995, in the Registration Statement (Form
S-4) and related Prospectus of Avondale Incorporated and Avondale Mills, Inc.
for the registration of $125,000,000 principal amount of senior subordinated
notes and the guarantee of such notes.
Our audits also included the financial statement schedule of Avondale
Incorporated listed in Item 21(b). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Birmingham, Alabama
June 6, 1996
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Avondale Mills, Inc. on
Form S-4 of our report dated March 22, 1996 on the financial statements of the
Textile Business of Graniteville Company, appearing in the Prospectus, which is
part of this Registration Statement, and to the reference to us under the
heading "Experts" in such prospectus.
Deloitte & Touche LLP
Greenville, South Carolina
June 7, 1996
<PAGE> 1
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
--------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------
AVONDALE MILLS, INC.
(Exact name of obligor as specified in its charter)
Alabama 63-0936782
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
506 South Broad Street
Monroe, Georgia 30655
(Address of principal executive offices) (Zip code)
---------------------
AVONDALE INCORPORATED
(Exact name of obligor as specified in its charter)
Georgia 58-0477150
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
506 South Broad Street
Monroe, Georgia 30655
(Address of principal executive offices) (Zip code)
10 1/4% Senior Subordinated Notes Due 2006
(Title of the indenture securities)
================================================================================
<PAGE> 2
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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New
York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE
24 OF THE COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 3 -
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 3rd day of June, 1996.
THE BANK OF NEW YORK
By: /s/ ROBERT F. MCINTYRE
---------------------------
Name: ROBERT F. MCINTYRE
Title: VICE PRESIDENT
- 4 -
<PAGE> 5
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic
Subsidiaries, a member of the Federal Reserve System, at the close of business
December 31, 1995, published in accordance with a call made by the Federal
Reserve Bank of this District pursuant to the provisions of the Federal
Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................ $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................. 4,166,720
Securities purchased under agreements
to resell.......................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing .......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition 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 Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot }
Thomas A. Renyi } Directors
Alan R. Griffith }
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99.1
AVONDALE MILLS, INC.
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 1/4% SENIOR SUBORDINATED NOTES DUE 2006
FOR
10 1/4% SENIOR SUBORDINATED NOTES DUE 2006
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1996 UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed, and submitted to the Exchange Agent:
<TABLE>
<S> <C>
By Overnight Carrier or by Hand: By Registered or Certified Mail:
The Bank of New York The Bank of New York
Corporate Trust Services Window, 101 Barclay Street -- 7E
Ground Level New York, New York 10286
101 Barclay Street -- 7E Attn: Ms. Jodi Smith
New York, New York 10286
</TABLE>
By Facsimile (for Eligible Institutions only):
(212) 815-6339
Attn: Ms. Jodi Smith
Confirmation by telephone at (212) 815-2791
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (212)
815-2791 (ATTN: MS. JODI SMITH), OR BY FACSIMILE AT (212) 815-6339.
<PAGE> 2
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1996 (the "Prospectus") of Avondale Mills, Inc., an Alabama
corporation (the "Company"), and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its 10 1/4% Senior
Subordinated Notes due 2006 (the "New Notes") that have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), for each $1,000
in principal amount of its outstanding 10 1/4% Senior Subordinated Notes due
2006 (the "Old Notes"), of which $125,000,000 aggregate principal amount is
outstanding. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from April 29, 1996. Accordingly, registered holders of New Notes on
the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from April 29, 1996. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Old Notes whose Old Notes are accepted for exchange will not receive any
payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer.
This letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in "The Exchange Offer -- Book-Entry
Transfer" section of this Prospectus. Holders of Old Notes whose certificates
are not immediately available, or who are unable to deliver their certificates
or conformation of the book-entry tender of their Old Notes into the Exchange
Agent's account at DTC (a "Book-Entry Confirmation") Expiration Date, must
tender their Old Notes according to the guaranteed delivery procedures set forth
in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus. See Instruction 2. Delivery of documents to DTC does not constitute
delivery to the Exchange Agent.
The undersigned hereby tenders the Old Notes described in Box 1 below
pursuant to the terms and conditions described in the Prospectus and this Letter
of Transmittal. The undersigned is the registered owner of all the tendered Old
Notes and the undersigned represents that it has received from each beneficial
owner of the tendered Old Notes (collectively, the "Beneficial Owners") a duly
completed and executed form of "Instruction to Registered Hold and/or Book-Entry
Transfer Facility Participant from Beneficial Owner" accompanying this Letter of
Transmittal, instructing the undersigned to take the action described in this
Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the tendered
Old Notes, the undersigned hereby exchanges, assigns and transfers to, or upon
the order of, the Company, all right, title, and interest in, to, and under such
Old Notes.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney-in-fact of the undersigned with
respect to the tendered Old Notes, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (i) deliver the tendered Old Notes to the Company or cause ownership of the
tendered Old Notes to be transferred to, or upon the order of, the Company, on
the books of the registrar for the Old Notes and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company
upon receipt by the Exchange Agent, as the undersigned's agent, of the New Notes
to which the undersigned is entitled upon acceptance by the Company of the
tendered Old Notes pursuant to the Exchange Offer, and (i) receive all benefits
and otherwise exercise all rights of beneficial ownership of the tendered Old
Notes, all in accordance with the terms of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions" below (Box
2), please issue the New Notes exchanged for tendered Old Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificates for the New Notes (and accompanying documents, as appropriate) to
the undersigned at the address shown below in Box 1.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer-Withdrawal of
Tenders of Old Notes." All authority herein conferred or agreed to be conferred
shall survive the death, bankruptcy or incapacity of the undersigned and any
Beneficial Owner(s), and every obligation of the undersigned or any Beneficial
Owners hereunder shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned and such Beneficial Owner(s).
<PAGE> 3
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
being tendered and to acquire the New Notes issuable upon the exchange of such
tendered Old Notes, and that, when the same are accepted for exchange as
contemplated herein, the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances and
adverse claims. The undersigned and each Beneficial Owner will, upon request,
execute and deliver any additional documents reasonably requested by the Company
or the Exchange Agent as necessary or desirable to complete and give effect to
the transactions contemplated hereby.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the New Notes to be acquired by the undersigned and any
Beneficial Owner(s) pursuant to the Exchange Offer are being acquired by the
undersigned and any Beneficial Owner(s) in the ordinary course of business of
the undersigned and any Beneficial Owner(s), (i) neither the undersigned nor any
Beneficial Owner has an arrangement or understanding with any person to
participate in the distribution of the New Notes, (i) except as otherwise
disclosed in writing herewith, neither the undersigned nor any Beneficial Owner
is an "affiliate," as defined in Rule 405 under the Securities Act, of the
Company or Avondale Incorporated and, if the undersigned or any Beneficial Owner
is such an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (i) if
neither the undersigned nor any Beneficial Owner is a broker-dealer, that
neither the undersigned nor any such Beneficial Owner is engaged in or intends
to engage in the distribution of any New Notes, or (i) if any of the undersigned
or any Beneficial Owner(s) is a broker-dealer, that it will receive New Notes
for its own account in exchange for tendered Old Notes that were acquired as a
result of market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of such New Notes. The
undersigned, by agreeing to so deliver any such prospectus, shall not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED HEREWITH.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
BOX 4 BELOW.
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE BOX 5
BELOW.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
------------------------------------------------------------------------
Address:
---------------------------------------------------------------------
---------------------------------------------------------------------
<PAGE> 4
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE
COMPLETING THE BOXES
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF OLD NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
- -----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S),
EXACTLY AS NAME(S) APPEAR(S) ON NOTE AGGREGATE PRINCIPAL
CERTIFICATE(S) CERTIFICATE NUMBER(S) AMOUNT REPRESENTED BY AGGREGATE PRINCIPAL
(PLEASE FILL IN, IF BLANK) OF OLD NOTES* CERTIFICATE(S) AMOUNT TENDERED**
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
TOTAL
- -----------------------------------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Old Notes. All other tenders must be in
integral multiples of $1,000 of principal amount. Unless otherwise indicated in this column, the
aggregate principal amount of the Old Notes represented by the certificates identified in this Box 1 or
delivered to the Exchange Agent herewith shall be deemed tendered. See Instruction 4.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
BOX 2
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF CERTIFICATES FOR OLD NOTES NOT EXCHANGED AND/OR NEW
NOTES ARE TO BE ISSUED IN THE NAME OF AND SENT TO SOMEONE OTHER THAN THE
UNDERSIGNED OR IF OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER WHICH ARE NOT
ACCEPTED FOR EXCHANGE ARE TO BE RETURNED BY CREDIT TO AN ACCOUNT MAINTAINED AT
DTC OTHER THAN THE ACCOUNT SET FORTH IN BOX 5.
Issue New Note(s) and/or Old Notes to:
Name(s):
----------------------------------------------
(please type or print)
Address:
----------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
(include zip code)
Tax Identification
or Social Security No.:
-------------------------------
/ / Credit unexchanged Old Notes delivered by book-entry transfer to the DTC
account set forth below:
----------------------------------------------------
(DTC account number)
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF CERTIFICATES FOR OLD NOTES NOT EXCHANGED AND/OR NEW
NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail New Note(s) and any untendered Old Notes to:
Name(s):
----------------------------------------------
(please type or print)
Address:
----------------------------------------------
----------------------------------------------
----------------------------------------------
(include zip code)
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF OLD NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered
Holder(s):
--------------------------------------------
- ------------------------------------------------------
Date of Execution of Notice of
Guaranteed Delivery:
----------------------------------
Name of Institution which
Guaranteed Delivery:
----------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF OLD NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering
Institution:
------------------------------------------
Account
Number:
-----------------------------------------------
Transaction Code
Number:
-----------------------------------------------
<PAGE> 6
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- ------------------------------------------------------------------------------------------------------------------------------
Signature Guarantee
X (If required by Instruction 5)
X Authorized Signature
(Signature of Registered Holder(s)
or Authorized Signatory) X
Note: The above lines must be signed by the registered Name:
holder(s) of Old Notes as their name(s) appear(s) on the Old (please type or print)
Notes or by person(s) authorized to become registered Title:
holder(s) (evidence of which authorization must be
transmitted with this Letter of Transmittal). If signature Name of Firm:
is by a trustee, executor, administrator, guardian, (Must be an Eligible Institution
attorney-in-fact, officer, or other person acting in a as defined in Instruction 2)
fiduciary or representative capacity, such person must set
forth his or her full title below. See Instruction 5. Address:
Name(s):
(include zip code)
Capacity: Area Code and Telephone Number:
Street Address:
Dated:
(include zip code)
Area Code and Telephone Number:
Tax Identification or Social Security Number:
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: AVONDALE MILLS, INC.
- ------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Name (if joint names, list first and circle the Part 1--Please provide your taxpayer
name of the person or entity whose number you identification number ("TIN") and certify
FORM W-9 enter in Part 1 below. See Instructions if your by signing and dating below:
name has changed.)
TIN:
------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY Address Part 2--
INTERNAL REVENUE SERVICE TIN applied for: / /
------------------------------------------------
City, State and ZIP Code
------------------------------------------------
List account number(s) here (optional)
------------------------------------------------------------------------------------------
Part 3--Check the box if you are NOT subject to backup withholding under the provisions of
section 3406(a)(1)(C) of the Internal Revenue Code because (i) you have not been notified
that you are subject to backup withholding as a result of failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified you that you are no longer
subject to backup withholding. / /
------------------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED ON
THIS FORM IS TRUE, CORRECT AND COMPLETE.
SIGNATURE DATE
------------------------------ ----------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 8
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. A properly
completed and duly executed copy of this Letter of Transmittal, including
Substitute Form W-9, and any other documents required by this Letter of
Transmittal must be received by the Exchange Agent at its address set forth
herein, and either certificates for tendered Old Notes must be received by the
Exchange Agent at its address set forth herein or such tendered Old Notes must
be transferred pursuant to the procedures for book-entry transfer described in
the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering
Old Notes" (and a confirmation of such transfer received by the Exchange Agent),
in each case prior to 5:00 p.m., New York City time, on the Expiration Date. The
method of delivery of certificates for tendered Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the tendering holder and the delivery will be deemed made
only when actually received by the Exchange Agent. If delivery is by mail,
registered mail with return receipt requested, properly insured, is recommended.
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. No Letter of Transmittal or Old Notes should be sent to
the Company. Neither the Company nor the registrar is under any obligation to
notify any tendering holder of the Company's acceptance of tendered Old Notes
prior to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old
Notes but whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date must tender their Old
Notes according to the guaranteed delivery procedures set forth below, including
completion of Box 4. Pursuant to such procedures: (1) such tender must be made
through a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or an "eligible
guarantor institution" as defined by Rule 17Ad-15 under the Exchange Act (in any
such case, an "Eligible Institution"), (2) prior to the Expiration Date, the
Exchange Agent must have received from an Eligible Institution a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and
Notice of Guaranteed Delivery (by telegram, telex, facsimile, transmission, mail
or hand delivery) setting forth the name and address of the tendering holder,
the certificate number(s) of the tendered Old Notes and the principal amount of
the Old Notes tendered, and stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after the
date of execution of the Notice of Guaranteed Delivery, this Letter of
Transmittal together with the certificate(s) representing the tendered Old Notes
and any other required documents will be deposited by the Eligible Institution
with the Exchange Act; and (3) the certificate(s) representing all tendered Old
Notes in proper form for transfer, or a confirmation of book-entry transfer of
such tendered Old Notes into the Exchange Agent's account at DTC, as the case
may be, and all other documents required by this Letter of Transmittal, must be
received by the Exchange Agent within three New York Stock Exchange trading days
after the date of execution of the Notice of Guaranteed Delivery. 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 within the time period prescribed above. Failure to complete
the guaranteed delivery procedures outlined above will not, of itself, affect
the validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by a holder who attempted to use the guaranteed delivery
process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name tendered Old Notes are registered on the books of the registrar (or
the legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of tendered
Old Notes who is not the registered holder must arrange promptly with the
registered holder to execute and deliver this Letter of Transmittal on his or
her behalf through the execution and delivery to the registered holder of the
Instructions of Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner form accompanying this Letter of Transmittal.
<PAGE> 9
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Old Notes held by the holder is tendered, the tendering holder should
fill in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of Box 1 above. The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes held by the
holder is not tendered, then Old Notes for the principal amount of Old Notes not
tendered and New Notes issued in exchange for any Old Notes tendered and
accepted will be sent to the Holder at his or her registered address, unless a
different address is provided in the appropriate box on this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the tendered Old Notes, the signature must correspond
with the name(s) as written on the face of the tendered Old Notes without any
change whatsoever.
If any of the tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
tendered Old Notes, and New Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Old Notes is to be reissued) in the name
of the registered holder(s), then such registered holder(s) need not and should
not endorse any tendered Old Notes, nor provide a separate bond power. In any
other case, such registered holder(s) must either properly endorse the tendered
Old Notes or transmit a properly completed separate bond power with this Letter
of Transmittal, with the signature(s) on the endorsement or bond power
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any tendered Old Notes, such tendered Old Notes must be
endorsed or accompanied by appropriate bond powers, in each case signed exactly
as the name(s) of the registered holder(s) appear(s) on the tendered Old Notes,
with the signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any tendered Old Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with this Letter of Transmittal.
Endorsements on tendered Old Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the tendered Old Notes are tendered (i) by a registered
holder who has not completed Box 2 set forth herein (entitled "Special Issuance
Instructions" ), (ii) by a registered holder who has not completed Box 3 forth
herein (entitled "Special Delivery Instructions") or (iii) by an Eligible
Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the appropriate box (Box 2 or 3), the name and address to which the
New Notes and/or substitute certificates evidencing Old Notes for principal
amounts not tendered or not accepted for exchange are to be sent, if different
from the name and address of the person signing this Letter of Transmittal. In
the case of issuance in a different name, the taxpayer identification or social
security number of the person name must also be indicated. Holders of Old Notes
tendering Old Notes by book-entry transfer may request that Old Notes not
exchanged be credited to such account maintained at DTC as such Holder may
designate hereon. If no such instructions are given, such Old Notes not
exchanged will be returned to the name or address of the person signing this
Letter of Transmittal.
<PAGE> 10
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of tendered Old Notes pursuant to the Exchange Offer.
If, however, New Notes and/or substitute Old Notes not exchanged or to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Old Notes tendered hereby, or if tendered Old
Notes tendered hereby, or if tendered Old Notes are registered in the name of
any person other than the person signing this Letter of Transmittal, a transfer
tax is imposed for any reason other than the transfer and exchange of tendered
Old Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or on any other person) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the tendered Old Notes listed in this
Letter of Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any tendered Old Notes which are accepted for exchange must provide
the Company (as payor) with its correct taxpayer identification number ("TIN")
which, in the case of a holder who is an individual, is his or her social
security number. If the Company is not provided with the correct TIN, the holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each holder of tendered Old Notes must
provide such holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that such holder
is awaiting a TIN) and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the tendered Old Notes are registered in more than one name or
are not in the name of the actual owner, consult the "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Old Notes will be determined by the Company, which determination will be final
and binding. The Company reserves the absolute right to reject any and all
tenders of Old Notes not in proper form or the acceptance of which for exchange
may, in the opinion of the Company's counsel, be unlawful. The Company also
reserves the absolute right to waive any conditions of the Exchange Offer or any
defect or irregularity in the tender of Old Notes. The interpretation of the
terms and conditions of the Exchange Offer (including this Letter of Transmittal
and the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities to holders of Old Notes
or incur any liability for failure to give such notification. Tenders of Old
Notes will not be deemed to have been made until such defects or irregularities
have been cured or waived. Any Old Notes received by the Exchange Agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived, or if Old Notes are submitted in principal amount greater
than the principal amount of Old Notes being tendered, such unaccepted or
non-exchanged Old Notes will be returned by the Exchange Agent to the tendering
holders, unless otherwise provided in this Letter of Transmittal, as soon as
practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
any of the conditions in the Exchange Offer in the case of any tendered Old
Notes.
<PAGE> 11
11. NO CONDITIONAL TENDERS. No alternative, conditional, irregular, or
contingent tender of Old Notes or transmittal of this Letter of Transmittal will
be accepted.
12. MUTILATED, LOST, STOLE OR DESTROYED OLD NOTES. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address and
telephone number indicated herein. Holders may also contact their broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED OLD NOTES AND ISSUANCE OF OLD NOTES; RETURN OF
OLD NOTES. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Expiration Date and will issue New Notes therefor as soon
as practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Old Notes when, as and if the Company has
given written or oral notice (immediately followed in writing) thereof to the
Exchange Agent. If any tendered Old Notes are not exchanged pursuant to the
Exchange Offer for any reason, such unexchanged Old Notes will be returned,
without expense, to the undersigned at the address shown in Box 1 or at a
different address as may be indicated herein under "Special Delivery
Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer Withdrawal of
Tenders of Old Notes."
<PAGE> 12
AVONDALE MILLS, INC.
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
DTC PARTICIPANT FROM BENEFICIAL OWNER
To Registered Holder and/or DTC Participant:
The undersigned hereby acknowledge receipt of the Prospectus, dated
, 1996 (the "Prospectus) of Avondale Mills, Inc., an Alabama
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange 10 1/4% Senior Subordinated Notes due 2006 (the
"New Notes") that have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for its outstanding 10 1/4% Senior Subordinated
Notes due 2006 (the "Old Notes). Capitalized terms used but not defined herein
have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or DTC participant, as to
action to be taken by you relating to the Exchange Offer with respect to the Old
Notes held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$ of the 10 1/4% Senior Subordinated Notes due 2006;
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
/ / TO TENDER the following aggregate principal amount of Old Notes held
by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT OF
OLD NOTES TO BE TENDERED, IF ANY): $
/ / NOT TO TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instruct you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to make
on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN STATE)
, (ii) the undersigned is acquiring the New Notes in the ordinary
course of business of the undersigned, (iii) the undersigned has no arrangement
or understanding with any person to participate in the distribution of the New
Notes, (iv) except as otherwise disclosed in writing herewith, the undersigned
is not an "affiliate," as defined in Rule 405 under the Securities Act, of the
Company and, if the undersigned is such an affiliate, that it will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable, (v) if the undersigned is not a broker-dealer, that the
undersigned is not engaged in and does not intend to engage in the distribution
of any New Notes, or (vi) if the undersigned is a broker-dealer, that it will
receive New Notes for its own account in exchange for tendered Old Notes that
were acquired as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such New Notes; (b) to agree, on behalf of the undersigned, as set forth in
the
<PAGE> 13
Letter of Transmittal; and (c) to take such other action as necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of such Old
Notes.
- --------------------------------------------------------------------------------
SIGN HERE
Name of beneficial owner(s):
Signature(s):
Name (please print):
Address:
Telephone number:
Taxpayer Identification or Social Security Number:
Date:
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 1/4% SENIOR SUBORDINATED NOTES DUE 2006
OF
AVONDALE MILLS, INC.
PURSUANT TO THE PROSPECTUS DATED DECEMBER , 1995
This form must be used by a holder of 10 1/4% Senior Subordinated Notes due
2006 (the "Notes") of Avondale Mills, Inc., an Alabama corporation (the
"Company"), who wishes to tender Old Notes to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" of the Company's Prospectus, dated , 1996 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Old Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1996 UNLESS EXTENDED (THE "EXPIRATION DATE").
The Bank of New York
(the "Exchange Agent")
<TABLE>
<S> <C>
By Overnight Carrier or by Hand: By Registered or Certified Mail:
The Bank of New York The Bank of New York
Corporate Trust Services Window 101 Barclay Street -- 7E
Ground Level New York, New York 10286
101 Barclay Street -- 7E Attn: Ms. Jodi Smith
New York, New York 10286
</TABLE>
By Facsimile (for Eligible Institutions only):
(212) 815-6339
Attn: Ms. Jodi Smith
Confirmation by telephone at (212) 815-2791
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus
and the related Letter of Transmittal, the undersigned hereby tenders to the
Company, the principal amount of Old Notes set forth below pursuant to the
guaranteed delivery procedures set forth in the Prospectus and in Instruction 2
of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
<S> <C> <C>
AGGREGATE PRINCIPAL
AMOUNT REPRESENTED
CERTIFICATE NUMBER(S) (IF KNOWN) OF OLD BY OLD NOTES AGGREGATE PRINCIPAL
NOTES OR ACCOUNT NUMBER AT THE DTC CERTIFICATE(S) AMOUNT TENDERED
</TABLE>
<PAGE> 3
- --------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Signatures of Registered Holder(s) or
Authorized Signatory: Date: __________________ , 1996
Address:
Name(s) of Registered Holder(s): Area Code and Telephone No.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the holder(s)
exactly as their name(s) appear on certificates for Old Notes or on a security
position listing as the owner of Old Notes, or by person(s) authorized to
become registered holder(s) by endorsements and documents transmitted with
this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information.
Please print name(s) and address(es)
Name(s):
------------------------------------------------------------------------------
Capacity:
------------------------------------------------------------------------------
Address(es):
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 4
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
- --------------------------------------------------------------------------------
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities and
Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent
of the Letter of Transmittal (or facsimile thereof), together with the Old
Notes tendered hereby in proper form for transfer (or confirmation of the
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC
described in the prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures" and in the Letter of Transmittal) and any
other required documents, all by 5:00 p.m., New York City time, on the third
New York Stock Exchange trading day following the date of execution hereof.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name of firm (Authorized Signature)
Address Name
(Please Print)
(Include Zip Code) Title
Area Code and Tel. No. Dated , 1995
</TABLE>
- --------------------------------------------------------------------------------
DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES FOR OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN
EXECUTED LETTER OF TRANSMITTAL.
<PAGE> 5
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
AVONDALE MILLS, INC.
10 1/4% SENIOR SUBORDINATED NOTES DUE 2005
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledge receipt of the Prospectus, dated
December , 1995 (the "Prospectus) of Avondale Mills, Inc., an Alabama
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 10 1/4% Senior Subordinated Notes due 2005 (the
"Notes") held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$ of the 10 1/4% Senior Subordinated Notes due 2005;
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
/ / TO TENDER the following Old Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED, IF
ANY): $
/ / NOT TO TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instruct you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to make
on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN STATE)
, (ii) the undersigned is acquiring the New Notes in the ordinary
course of business of the undersigned, (iii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate in the distribution of the New Notes, (iv) the
undersigned acknowledges 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 of 1933, as amended (the
"Act"), in connection with a secondary resale transaction of the New Notes,
acquiring by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission set forth in no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer --
Resales of the New Notes," and (v) the undersigned is not an "affiliate," as
defined in Rule 405 under the Act, of the Company or Avondale Incorporated; (b)
to agree, on behalf of the undersigned, as set forth in the
<PAGE> 6
Letter of Transmittal; and (c) to take such other action as necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of such Old
Notes.
- --------------------------------------------------------------------------------
SIGN HERE
Name of beneficial owner(s):
Signature(s):
Name (please print):
Address:
Telephone number:
Taxpayer Identification or Social Security Number:
Date:
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99.3
June 7, 1996
The Board of Directors and Shareholders
Avondale Incorporated
We are aware of the inclusion in the Registration Statement (Form S-4) and
related Prospectus of Avondale Incorporated and Avondale Mills, Inc. for the
registration of $125,000,000 principal amount of senior subordinated notes and
the guarantee of such notes of our report dated March 28, 1996 relating to the
unaudited condensed consolidated interim financial statements of Avondale
Incorporated as of and for the twenty-six week periods ended February 23, 1996
and February 24, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
